Pandox : Annual Report 2020 Report

March 25, 2021 at 04:59 am EDT

Annual Report

Introduction

Property portfolio

Hotelism by Pandox 1

Geographical overview 62

This is Pandox 2

Property portfolio 74

The year in brief 4

Change in property value 75

CEO comments 6

Hotel property list 76

The inside view 12

The view from outside 14

Risk

Risk and risk management 84

Strategy & operations

Vision, business concept and strategy 16

The Pandox Method 17

Financial information

Business model 18

Partnerships 20

Content 91 From the CFO and how to read the

ﬁnancial information 92

Operations 22

Property Management 24

Administration Report Financial statements Group

 94

 102

Operator Activities 26

Value creation in practice 28

Financial statements Parent Company Notes

 108

 112

Market and trends

Sustainability notes  146

Pandox in the world 30

Trends and drivers 31

Market and agreement structure 32

Corporate governance

Market overview 34

From the Chairman 157

RevPAR 35

Corporate Governance Report 158

The Pandox share 36

Signing of the Annual Report  164

Auditor's report 165

Sustainability

Pandox's sustainability agenda  41

Pandox's value chain  43

Other

Sustainability targets and strategy  44

Board of Directors and auditor 170

Focus areas  46

Senior executives 172

Environment and climate  46

Multiyear summary 174

Responsible and fair business  52

Quarterly data 175

Guest satisfaction and security  54

Financial deﬁnitions 176

Attractive and equal workplace  58

Other deﬁnitions and terms 177

Living local communities  60

GRI Index 178

TCFD Index 180

This is a linked/clickable pdf. Each line in the table of contents links directly to the page concerned. To return to the contents page, click the home icon at the top of each page.

 The formal audited sections of the annual report can be found on pages 94-145 and page 164.

 Pandox's Sustainability Report can be found on pages 41-61 and 146-156. The Sustainability Report has been prepared in accordance with the GRI Standards and meets the Core level. It also constitutes Pandox's Communication on Progress towards the UN Global Compact and Pandox's statutory Sustainability Report.

This report is a translation of the Swedish original. In the event of discrepancies, the Swedish version shall prevail.

HOTELISM BY PANDOX

Park Centraal, Amsterdam

Hotelism by Pandox

The philosophy of how to create value in hotels in a constantly changing world

Hotelism is the philosophy of how to create and safeguard value in hotel properties through proﬁtable and sustainable hotel operation. Hotelism is based on a pure focus on hotel properties, knowledge advantage through analysis and insights, active ownership together with strong hotel operators, free movement through the hotel value chain, risk management through diversiﬁcation, an industrial and long-term perspective on value creation, as well as a business culture characterised by curiosity and fun.

A leading hotel property company

Pandox owns and leases out hotel properties to leading hotel operators. Since it was founded in 1995 Pandox has purposefully built a pan-European business platform and a property portfolio with a market value of around SEK 60 billion, which is around a hundred times more than when the Company was started. Pandox has an integrated business model and is active throughout the hotel value chain with the goal of oﬀering the most attractive platform for hotel operations.

Canada

Norway Sweden

Finland

Denmark

Ireland

Netherlands

United Kingdom

Germany

Belgium

Switzerland Austria

Scandic Park, Stockholm

High-quality portfolio

Pandox is a pan-European property company special-ising solely in hotel properties. Pandox owns 156 properties that hotel operators lease to operate hotels in. Pandox properties can be found in 90 cities in 15 countries, including Germany and the UK - two of the largest hotel markets in the world.

Pandox has a diversiﬁed portfolio of mainly large hotel properties occupied by high-quality full-service hotels. The hotels have strong locations in their sub-markets and are mainly in the mid-scale to premium segments. This helps to diversify demand and ensure well-balanced revenue.

MSEK 59,542 property valueMSEK 1,850 net operating income

156	35,060	15
hotels	rooms	countries

In recent years Pandox has acquired and invested in hotel properties for signiﬁcant sums in large hotel markets in Europe. The international share of the portfolio's market value has more than doubled over this time and now amounts to around 60 percent. Germany, which is the biggest hotel market in

Europe, accounts for around 25 percent of the portfolio's market value.

Pandox's property portfolio has a good mix of geo-graphical markets, hotel operators, hotel brands and types of demand, which creates stability over the hotel business cycle. Through a world-class network with leading hotel operators and brands, new busi-ness opportunities are being created all the time.

Expertise and active ownership

Pandox is an active owner with in-depth hotel knowl-edge and experience of all operating models that exist in the hotel market. The core model is revenue-based leases where a certain percentage of a hotel's revenue becomes rental income for Pandox. Pandox may also operate hotels itself in properties owned by the Com-pany. This provides more freedom and reduces risk.

A historic year

2020 was a year like no other in the history of the hotel industry. The year was dominated by Covid-19 and the restrictions introduced to stop the spread of the virus, which had a clearly negative impact on demand in the hotel market.

A clear game plan in a diﬃcult situation

Restarting from a strong position

• The ﬁrst quarter started positively, with stable growth in January and February, but ended with a historic collapse in demand in March due to Covid-19 and the extraordinary steps taken by the authorities to reduce the spread of the virus.

• Following a severe downturn in economic activity in all key markets Pandox reported decreases in both revenue and net operating income in the ﬁrst quarter compared with the previous year. The Board's dividend proposal for 2019 was withdrawn to strengthen Pandox's ﬁnancial position.

• Taking a structured approach to this diﬃcult situation, Pandox developed a strategic framework: Respond, Restart,
Reinvent.
• Pandox set out ﬁve priorities: secure good liquidity, balance revenue and costs, keep the hotels open, be ready to act to protect the value of the hotel properties, and practise leader-ship that is open, active and present.

• The second quarter was a historically weak one for the hotel market, bottoming out in April but then recovering in line with Pandox's expectations.
• Pandox's revenue consisted mostly of contractual minimum rents and ﬁxed rents. The Group's costs had simultaneously been reduced to a level on a par with this revenue.

• Pandox's total revenue and net operating income decreased by 59 and 60 percent respectively compared with the corre-sponding period the previous year.
• On 1 April Pandox took over operation of Hotel Mayfair and Hotel Twentyseven in central Copenhagen, two properties that Pandox already owned. These were taken over when the tenant became unable to perform the contract.

MSEK 458

Summary (MSEK)

2020

2019

Change, %

Revenue, Property Management

Net operating income, Property Management Net operating income, Operator Activities

Despite the pandemic's negative eﬀects on the hotel industry, Pandox is reporting a positive result before changes in value.

1) For information on the number of shares see page 38.
2) For more information see page 112.
3) Measured as growth in EPRA NRV at an annual rate with dividend added back. For 2019 issue proceeds have also been deducted. See key ratios on page 112.

Revenue, Property Management	2,399	3,129 -23
Net operating income, Property Management	2,018	2,764 -27
Net operating income, Operator Activities	-168	625 N/A
EBITDA	1,699	3,231 -47
Proﬁt for the year	-1,408	2,700 N/A
Earnings per share, SEK 1)	-7.61	15.91 N/A
Cash earnings	660	2,177 -70
Cash earnings per share, SEK 1)	3.64	12.84 -72
Net interest-bearing debt	29,007	29,191 -1
Loan-to-value ratio, properties, %	48.7	46.0 N/A
Interest coverage ratio, times 2)	2.0	4.1 N/A
Market value, properties	59,542	63,469 -6
EPRA NRV per share, SEK 3)	167.60	186.40 -10

Two steps forward, one step back

Time to think ahead

• In the third quarter the hotel market continued its recovery. The summer season was actually stronger than expected, driven by good domestic demand from the leisure segment in regional cities in all countries.

• Pandox's revenue continued to be made up mostly of con- tractual minimum rents and ﬁxed rents. Revenue from purely revenue-based leases and Operator Activities increased compared with the second quarter, however.
• Pandox's total revenue and net operating income decreased by 54 and 47 percent respectively compared with the corre-sponding period the previous year, but showed sequential growth of 5 and 36 percent respectively.
• Overshadowing all this was the threat of new restrictions by the authorities - and when these began to be reintroduced in many countries towards the end of the quarter, demand slowed once again.

• The hotel market weakened again in the fourth quarter due to increased virus transmission and new restrictions.
• Supported by recurring revenue from contractual minimum rents and ﬁxed rents within Property Management, com-bined with good cost control in Operator Activities, EBITDA and proﬁt before changes in value amounted to MSEK 378 and MSEK 62 respectively.
• Although there are glimmers of light at the end of the tunnel, the hotel market's recovery is entirely dependent on when, and at what pace, restrictions are lifted.

• The positive market trend in Europe during the summer and early autumn of 2020, combined with a clear improvement in many large hotel markets outside Europe, suggests that there is good potential for a strong recovery once restrictions are eased.

Total revenue, MSEK

Total net operating income, MSEK

Total cash earnings, MSEK

3,389

6,000

5,553

3,500

3,057

5,124

5,000

3,000

4,269

3,945

2,376

2,500

4,000

3,178

1,934

2,000

1,850

3,000

1,500

2,500 2,000 1,500 1,000

2,177

1,893

1,660

1,289

2,000

660

1,000

500

1,000

500

002020

2016

2017

2018 2019

2016

2017 2018

2019

2020

2016

2017

2018

2019

2020

Net sales amounted to MSEK 3,178 (5,553). For comparable units net sales decreased by 50 percent, adjusted for currency eﬀects.

Total net operating income amounted to MSEK 1,850 (3,389), a decrease of 45 percent. The decrease is explained in its entirety by low demand as a result of Covid-19.

Cash earnings amounted to MSEK 660 (2,177), a decrease of 70 percent. Pandox's total costs during the year were on a par with revenue from contractual minimum rent and ﬁxed rent.

A clear game plan in a diﬃcult situation

2020 was a historic year in two senses for Pandox. Firstly because we celebrated our 25th birthday, and secondly because 2020 will go down in history as the weakest year ever for the hospitality industry due to Covid-19. Thanks to a well proven business model, extensive crisis experience, clear priorities and an agile organisation, Pandox has succeeded in navigating its way through the storm relatively well.

Going into 2020 there were just a few small clouds on the horizon...

2019 was another in a series of strong years for the global hospitality industry. According to UNWTO, the number of international arrivals increased by around 4 percent to record levels. The hotel industry was looking forward to continued stability in 2020 - albeit with a combination of somewhat lower growth in demand and higher growth in the supply of hotel rooms. And indeed the year began in line with these expectations, with stable growth in January and February.

From peak to trough in 19 days

On 21 February 2020 the Pandox share price reaches a record high of SEK 227.50. Shortly afterwards Covid-19 spreads to Europe, paralysing both society and the capi-tal markets. On 18 March - just 19 trading days after its peak - the Pandox share stands at SEK 50.20, a fall of around 78 percent.

Read more from Liia on page 92.

Corona's second wave strikes and the authorities respond with new restrictions, which have an immedi-ate negative impact on demand for hotel nights.

On 9 November the ﬁrst news of a potential vaccine against Covid-19 is broadcasted. That day, Pandox's share price advances by around 30 percent.

Oct 20

Nov 20

Dec 20

We have taken further steps to integrate sus- tainability eﬀorts into our business and are driving this work within ﬁve focus areas with clear actions and goals. During the year three pilot properties achieved BREEAM certiﬁcation at the Very Good level and our green investment programme within Opera-tor Activities remains in place. These meas-ures reduce the climate impact of the opera-tions and increase our ability to manage climate risk. They also have a positive impact on Pandox's results through invest-ments and new commercial opportunities that drive cash ﬂow.

WORKING CONTINUALLY TO UNDERSTAND CHANGES

The last step in the framework, Reinvent, involves creating insights into how the hotel market may change as a result of Covid-19 in terms of consumption trends, types of agree-ments, business models, distribution and brands. Certain Covid-19-related changes are sure to remain, such as enhanced clean-ing and hygiene routines, more contactlesscheck-in and check-out, and the develop-ment of multifunctional rooms. Read about more trendspotting by my colleague Aldert on page 15.

Our assessment is that domestic travel will continue to lead the recovery in the hotel market, which means possible changes at several levels - including a strengthening of national and regional hotel brands in rela- tion to global brands. Leisure travel will make up a greater proportion of travel and will become even more important for growth in the hotel market in future. Online travel agencies (OTAs) are likely to advance their position since they are not dependent on

-10%

development in EPRA NRV on an annual basis

global brands but can quickly adapt to new trends in the market. As an example, Google is now the most important starting point when searching for travel. Its local search strategy, with hotel suggestions deeply inte-grated into Google Maps, for example, will strengthen the position of local brands in driving local demand.

Leases are likely to change, with fewer ﬁxed leases and more revenue-based leases - in which the operator and property owner share the risk, upside and investments. Pandox is well positioned for this develop-ment, because by far the majority of our leases already have a revenue-based compo-nent and we have extensive hotel industry expertise.

FULL CONCENTRATION THROUGHOUT THE MATCH

We are convinced that people will start trav-elling again once they are allowed to. With a strong and ﬂexible business model in which we can both own and run hotels, a stable

"Hygiene, safety, contactless and new digital solutions!" Read Aldert Schaaphok, SVP Director International Operations at Pandox, on trend-spotting in the hotel industry on page 15.

"The lessons that the hotel industry can learn from the pandemic are like those you learn from a horror movie." Read Robin Rossmann, Managing Director STR International, on the lessons of the pandemic on page 15.

"The hotel industry already has strict hygiene and cleaning protocols - they just need to be adapted for Covid-19. I believe the hotel industry will come out of this crisis well."

Read more from Martin Ingvar, Professor of Cognitive Neuro-physiology, on page 14.

"I believe we will cope with the situation ﬁnancially.

After all, we don't really have a choice. A rescue programme and stimulus plan are absolutely essential if we are to get through this."

Read what Annika Winsth, Chief Economist at Nordea, thinks the future has in store on page 15.

2021

ﬁnancial position, a high quality and well-positioned portfolio, as well as world-class employees who together create a strong corporate culture, we are ready for all future scenarios. Bring it on!

I would like to say thank you to all our "Pandoxers", shareholders, business part-ners and other stakeholders for your support during this historic year. Thanks must also go to our beloved oﬃce dogs - the Pandogs - for their positive attitude, playfulness, good nature and for the insight that there is always something exciting around the corner.

Stockholm, March 2021 Anders Nissen

Six steps for the hotel market's recovery

After a crisis of signiﬁcant magnitude, the recovery basically always takes place in the same way in the hotel market. Domestic travel can be seen to be once again leading the recovery from this crisis.

Hotels open up

Countries and cities open up, restrictions gradually eased

The inside view...

Focus on the right things

Jonas Törner, SVP Business Intelligence

What have been your focus areas during the year?

They have shifted, to say the least. From daily analytics and transactions in January and February, once March came we

were quickly trying to forecast the immediate eﬀects of the pan-demic and government restrictions in all of Pandox's markets and subsegments - up until the point when we realised there was no demand left at all in the short term. In that situation it became more important to focus instead on conceivable recov-

ery scenarios and the eﬀects of substantially reduced proﬁtabil- ity in the industry, taking into account diﬀerent countries' relief packages and how these aﬀect Pandox and our partners. When demand returned in the summer in line with our expectations,

we intensiﬁed our analytics to get a better understanding of the hotel market's various subsegments during a recovery phase -

partly drawing on experience from entirely diﬀerent hotel markets such as China, and partly by gathering and analysing completely new data points.

What are the greatest insights?

The main thing we are taking away from this is how quickly markets and conditions can change - the fact that a pandemic and the subsequent government restrictions can paralyse the whole of society like this was probably not a risk that many com-panies had taken into account. Another lesson associated with

this is how important it is to have a ﬂexible organisation with short decision paths - one that can quickly refocus when required.

What are your tips for keeping up team spirit in times of corona?

Keep calm: be methodical, focus on the right things, make sure your colleagues have good conditions for working from home and look at each individual's situation. Find small victories along the way. We never thought we would be pleased to have 40 percent occupancy...

Adopt, Adapt, Improve

Aldert Schaaphok, SVP Director International Operations What have been your focus areas during the year?

Initially it was damage control, and then we focused on adapting service and cleaning routines in the hotels - driven by require-ments of social distancing and hygiene protocols. In some hotels renovation work was temporarily limited or stopped because of travel restrictions. We adapted the layout inside the hotels and restaurants, while also having to ﬁnd secure solutions that worked for both guests and employees. We chose the certiﬁca-tion company Bureau Veritas (read more on page 77) to certify all our hotels based on their Covid-19 standards, which required training programmes and testing of diﬀerent solutions. We also arranged for most hotels to be able to oﬀer guests and employees rapid tests for Covid-19 that provided results within 10 minutes.

What are the greatest insights?

People are social beings; we need to interact with each other, to read body language and facial expressions. Another insight was the importance of supporting the local economy and of making sure that our consumption behaviour is sustainable.

What are your tips for keeping up team spirit in times of corona?

We increased our motivational and communications eﬀorts, because people are more isolated in their home environments. This meant increased digital communication, giving more atten-tion to individuals who needed it, and a greater focus on giving compliments and showing appreciation. Above all, I did my best to ensure that employees and managers were able to keep things in proportion and not let this crisis aﬀect them personally too much.

Read Aldert's trendspotting insights for the hotel industry on page 15.

"Despite a global pandemic where we were in the eye of the storm, we showed determination during the year in reaching our long-

Organised to accelerate

term goal: to oﬀer sustainable hotel properties to our tenants."

Caroline Tivéus, SVP Director of Sustainable Business

Read Caroline's comments on sustainability on page 42.

...of a year with Covid-19

Think ahead

Anders Berg, SVP Head of Communications & IR What have been your focus areas during the year?

Our ﬁrst step was to create a suitable strategic and communica-tions framework, so that we could take a structured approach to this crisis. We called it Respond, Restart, Reinvent. We're an active company with lots of contact with investors even in a nor-mal year, but it's probably not an exaggeration to call 2020 extreme. The Pandox share price fell from an all-time high to an all-time low in the space of 19 days in February/March and this movement generated massive interest from both institutions and private investors, so there were lots of meetings and other points of contact. In times of uncertainty internal communication also becomes vitally important, of course, so we had many video-conferences that brought together everyone in the company.

What are the greatest insights?

Mainly the value of a clear game plan, good underlying data and strong analytics capacity so that we can navigate purposefully in the right direction and make well-founded decisions. There is also

great value to be had if you can manage to work on diﬀerent things in parallel, dare to raise your sights and be constructive even in the darkest hour. And of course you learn a great deal from being involved in a crisis of such magnitude - even if naturally I wish it

had never happened. Last but not least, an important insight is that physical meetings work best when it really matters.

What are your tips for keeping up team spirit in times of corona?

Maintain some daily routines and plan in fun breathing space to break up the monotony. We managed to hold both a summer

party and a kick-oﬀ event, which I think helped keep many people's spirits up. Another useful tip, of course, is to be open and available to talk about anything whatsoever. Not all internal communication has to be about business matters. In times of great uncertainty even small things can quickly get out of proportion.

Dare to plan for a brighter future

Lars Häggström, EVP Asset Management & Development What have been your focus areas during the year?

We have mainly focused on analysing and understanding what consequences the pandemic will have for Pandox and for the industry. Covid-19 meant big changes to most of our projects, whether these were planned or in progress. A lot of eﬀort has been put into adapting schedules and renegotiating agreements already entered into.

Despite great practical and contractual challenges, in 2020 we invested the equivalent of around MSEK 900 in investments to drive growth.

In what ways did you have to change how you worked?

We've been able to devote more time to structuring work processes, to documentation and to studying more detailed matters. We've also spent a lot of time on analysing concepts for the future - in other words, how the hotels are to be developed to meet the needs guests will have in both the short and the long term. That know-ledge will be an important part of our strategy for future growth.

What are the greatest insights?

Take nothing for granted. The hotel industry has had many good years with some crises along the way, but nothing to compare with the coronavirus crisis. I also think that environmental awareness will increase and with it the insight that our current way of living cannot work long-term. Another important insight is how important it is for organisations to adapt both themselves and their decisions to the situation that exists.

What are your tips for keeping up team spirit in times of corona?

Simple things, but often underestimated: be positive, look to the future and focus on solutions. Laugh and enjoy yourselves, even when the crisis is stalking the room. Dare to plan for the future and have faith in your established ways of working, methods and processes.

"Our focus in previous years on acquisitions and growth switched rapidly in March to addressing liquidity, ﬁnancial

From attack to active defence

position, minimum rents and government relief programmes."

Liia Nõu, Senior Executive Vice President and CFO

Read Liia's comments from the CFO on page 92.

New trends in a changing hotel world

Pandox held its annual Hotel Market Day on 17 November 2020. This year's theme was "New trends in a changing hotel world", which was explored through contributions from well-known speakers and industry experts. The event was held digitally for the ﬁrst time and has been viewed by more than 2,000 people on Pandox's website.

Your research is mainly into behaviour. What is happening to people now that we are working from home and may also be afraid of the virus?

networks around them the situation has been much harder."

"The amygdala is an area of the brain that is activated when we feel fear. And the fear of being infected during the pandemic has likely resulted in greater activity in that part of the brain, which causes a lot of stress. We also have the job situation. For most people who were active before the pandemic started the situation has generally been uncomfort-able but bearable. For those who are less mobile and perhaps also have smaller social

What is your view of the hotel industry in this crisis?

"I'm normally a keen traveller and I think that hotels in general always do a very good job. They already have strict hygiene and cleaning protocols - they just need to be adapted to the Covid-19 situation. I believe the hotel industry will get itself out of this well."

The brain in a locked down world

Martin Ingvar is a professor of cognitive neurophysiology and one of the world's leading experts on the human brain.

Questions to the audience

During the event attendees were invited to answer a number of questions about their behaviour once the pandemic is over.

Here are the results.

What did you miss most during the pandemic?

When the pandemic is over I'm going to work from home...

When the pandemic is over I'm going to travel...

Travelling

Meeting friends and relatives Events like matches or concerts

... more than before the pandemic ... as much as before the pandemic ... less than before the pandemic

The pandemic as horror movie

In conversation with Vassilis Syropoulos, Vice President RMC at Pandox, Robin Rossmann, Managing Director STR International, maintained that the lessons the hotel industry can learn from the pandemic are like those you learn from a horror movie. Here are his three tips.

1. Don't fall asleep! Don't close your hotel. Hotels that stayed open during the pandemic have a great head start over those that closed.

2. Keep your eyes open! Stay alert so that you spot the new trends in the hotel industry.
3. Be ready to run really fast! Don't sit still when the market is changing quickly. Be prepared to act fast in order to adapt as necessary.

Trends in the hotel market

Aldert Schaaphok, Senior Vice President - Director International Operations at Pandox, talked about new trends that will dominate the hotel industry in the coming years.

1. Hygiene & security - certiﬁcation schemes for cleanliness and adapted housekeeping and hygiene protocols will set a new standard.
What are your thoughts around where we are today?
2. More contactless - eliminate unnecessary administrative inter-action for guests. This means contactless check-in and check-out, and perhaps even making the receptionist a host who answers questions about the city or the local area.
"First and foremost I think we should stress how serious a situation we are in. We should all respect that fact. But on the other hand, the latest vaccine tests are very promising and if we produce eﬀective vaccines we will be in a much better place. If we can start vaccinating the risk groups from the start of 2021, it would mean a great deal for the economy all over the world."
3. New digital solutions - collecting personal information about the visitor in order to provide better service. More technical solutions such as voice controls in hotel rooms.
What is the state of the global economy right now?
"That really depends on where you look. In China, for example, both manufacturing and the service sector are operating at a higher level than they were before the pandemic. And since China is an important engine for world trade, that is of course very signiﬁ-cant. In fact, it is predicted that China's GDP will grow by around two percent in 2020 despite the pandemic."
Where Europe is concerned, Annika Winsth sees a much more stressed situation. But at the same time, Sweden stands out relatively well compared with other countries. Swedish exports and industrial production are back at pre-pandemic levels, mainly because world trade has resumed following the lockdowns last spring.
4. Food & beverage - fewer and smaller buﬀets, more ready- prepared portions. Fewer choices, less waste and improved quality.
5. Sustainability - shorter supply chains and more local sourcing. Vegan and vegetarian will become standard.
Annika Winsth was interviewed on 17 November 2020.
6. Local experiences - the success-ful hotels will be those that are able to invite guests into the local community.

Economic outlook

Annika Winsth is Chief Economist at Nordea and a frequent guest on news programmes and in the ﬁnancial media.

VISION; BUSINESS CONCEPT AND STRATEGY

Well-proven strategy and unique business model

Pandox's business concept is to own and lease hotel properties to strong hotel operators under long-term, revenue-based leases and apply specialist expertise to be an active owner, creating value throughout the hotel value chain. Pandox's vision is to be one of the world's leading hotel property companies.

Only hotel properties

Large hotel properties in strategic locations

Revenue-based leases with shared investments

Pandox's strategy is focused on hotel properties as the only class of asset, where specialisation and knowledge are crucial to achieving results.

Pandox focuses on large hotel properties in the full-service segment that are strategically located in commercially and culturally important cities.

Pandox's core business is signing long-term, revenue-based leases with the best hotel operators and to share investments with them. This lays the foundation for a sustain-able and high quality hotel property portfolio.

Deep hotel expertise

Diversiﬁcation in several dimensionsFlexibility and operating our own hotels reduces risk

Pandox is an active owner with a deep knowledge of the hotel industry and consid-erable experience in all operating models in the hotel market. This, combined with analysis and insight, gives us knowledge advantages in the market.

Pandox's hotel property portfolio is diversi- ﬁed through geographies, demand, brands and hotel products, which balances and evens out the eﬀects of ﬂuctuation over a hotel business cycle.

Pandox is able to move freely throughout the hotel value chain and also operate its own hotels. This reduces risk and at the same time creates new business opportunities.

THE PANDOX METHOD

The Pandox Method

A method where expertise and intelligence create insight and information advantages that help to maximise cash ﬂow and minimise risk in every hotel investment.

Analysis

Strategy

Optimisation

Agreements

Local market analysis is per-formed aimed at assessing the hotel's potential proﬁtability and ability to pay the agreed rent. The local market is deﬁned and analysed with a focus on demand, competition and the current and future product oﬀering.

A strategic plan is established for each hotel property based on the hotel's speciﬁc circum-stances, local market and posi-tion. The hotel property's future operational area and structure are evaluated in the course of preparing the strategic plan.

Since the value of a hotel prop- erty is aﬀected by the proﬁtabil-ity of the hotel, the hotel opera-tor is Pandox's most important partner. Pandox analyses and evaluates the hotel operator's performance on an ongoing basis to ensure the business is developing well so that the hotel property value will increase.

The optimal cash ﬂow from each hotel property is split between the hotel operator, Pandox and other stakeholders through a lease or a franchise or manage-ment agreement. The agreement is drawn up so as to give the par-ties an incentive to constantly improve the hotel property's proﬁtability and thus its value.

Concrete action and activity plan

Value creation through proﬁtable and sustainable operation

Business processes

Pandox works systematically to increase the value of each hotel property by making the right investments in the hotel product and by maximising the hotel's revenue and productivity.

ResultsContribution to society

Total cash earnings, MSEK

Total cash earnings amounted to MSEK 660, a decrease of 70 percent compared with 2019.

2,500 2,000 1,500 1,000

2,177

1,893

1,660

1,289

660

500

2016

2017

2018

2019

2020

EPRA NRV 1), MSEK

EPRA NRV was MSEK 30,813, a decrease of around 10 percent adjusted for dividend and share issue.

40,000

34,270

30,813

30,000

24,211 27,476

19,883

20,000

10,000

1) EPRA NAV for the years 2016-2018.

2016

2017

2018

2019

2020

Loan-to-value ratio, %

The loan-to-value ratio was 48.7 percent.

50.8

47.9

49.7

48.7

46.0

2016

2017

2018

2019

2020

Dividend, MSEK

The Board of Directors proposes that no dividend be paid for the 2020 ﬁnan-cial year.

787

800

737

646

600

400

200

2016

2017

2018

2019

2020

60
50
40
•	Direct and indirect jobs
30	•	Social cohesion and personal development
20	for employees
10	•	Productive environments for meetings
and recreation
0
•	Positive contribution to development of local
environments and communities

Contribution to stakeholders

MSEK

2020

2019

Tenants Rental income Investments

Hotel guests (Pandox-operated hotels)

Net sales

Investments

Employees

Salaries and beneﬁts

Capital owners Dividend

Growth in net asset value, % Interest and fees

Suppliers Payments

Society

Taxes and levies

Government assistance received

1) Growth in EPRA NRV at an annual rate with dividend returned and any issue proceeds deducted.
2) Includes payroll overheads, property tax and reported tax.
3) Of which MSEK -117 which was transferred directly from authorities to Pandox employees in the form of salary support for furloughed personnel.

Contribution to societyPandox's role in society

Through its hotels Pandox is an important part of the infrastructure of the hospitality industry, which in turn fulﬁls an important function in society.

Pandox is therefore in many ways a company that beneﬁts society. But Pandox can only justify its existence if the Company's tenants and hotel guests are willing to pay enough for the services

Pandox oﬀers and the Company can make a proﬁt and its proﬁts are sustainable.

Tenants
Rental income	2,399	3,129
Investments	492	412
Hotel guests (Pandox-operated hotels)
Net sales	779	2,424
Investments	406	257
Employees
Salaries and beneﬁts	539	939
Capital owners
Dividend	-	-
Growth in net asset value, % 1)	-10	17
Interest and fees	902	866
Suppliers
Payments	2,413	2,926
Society
Taxes and levies 2)	319	479
Government assistance received 3)	-249	-

A strong network of partners and brands

Pandox has one of the hotel industry's strongest networks of business partners and brands. This is the result of long-term eﬀorts based on deep hotel knowledge.

The choice of business partner and brand is important for value creation.

03.01.2013

13.0637

PLUMA POSITIVO

CMYK NEGATIVO

PANTONE NEGATIVO

PLUMA NEGATIVO

Crucial to Pandox's success are the partner-ships the Company has with its tenants, which consist of around 30 hotel operators and hotel brands that vary in nature and geographical reach in 15 countries and 90 cities. They include global brands such as Hilton, regional brands such as Scandic and local independent brands such as Park Centraal Amsterdam.

DEEP, BROAD AND LONG-TERM PARTNERSHIPS

Pandox's eﬀorts to create a diversiﬁed property portfolio are not only evident in the spread of hotels between domestic, regional and international cities. Further diversiﬁca- tion is also achieved through diﬀerent hotel types and the business mix. Through its focus on large full-service hotels in good locations, Pandox's hotel properties attract all types of demand. Pandox's largest demand segment is traditionally business travellers and conferences, but the percent- age of leisure travellers has increased signiﬁ-cantly. This is the result of a global increase in leisure travel, but also of joint develop-ment - in cooperation with tenants - of new hotel products with a more attractive leisure proﬁle.

In 2020 domestic leisure travel was the primary driver of the periodic recovery in the hotel market and Pandox expects this pattern to continue once Covid-19 restric-tions are eased again.

PRODUCTIVITY AND PROFITABILITY ALWAYS IN FOCUS

It is important to Pandox that its tenants are hotel operators with a good commercial understanding and a strong focus on pro- ductivity. Productivity creates proﬁtability, which in turn provides the resources for new investments in the hotel product.

DIFFERENT BRANDS, DIFFERENT PROMISES

While the number of brand owners in the hotel market has decreased, the number of hotel brands has increased. One reason is the strong growth in online travel agencies (OTAs), which has driven increased diver-sity on the supply side. More than half of all hotel bookings in the world are now made digitally, and the percentage continues to rise. Digitalisation is creating signiﬁcant opportunities for Pandox as a hotel property owner. An increased range of brands and low barriers for Pandox to create and dis-tribute independent hotel products digitally provides the Company with unique opportu-nities to give newly acquired hotel proper-ties and/or those recently taken over the right identity and position. The relevance and power of the diﬀerent brands depends on the submarket. Scandic and Nordic Choice, which have brand names including Clarion and Quality, are leading actors in the regional hotel market in the Nordics. Jurys Inn is a similar example in the UK. However, none of these brands holds the same attrac-tion for international business travellers and conferences as Hilton or Crowne Plaza. For a hotel property owner like Pandox it is important to understand which brands work where, which type of demand they attract in their respective submarkets and how to position the hotel in order to be as proﬁtable as possible.

INDEPENDENT BRANDS SOMETIMES BETTER

Sometimes a situation arises in which it is better for Pandox to create its own inde-pendent hotel brand. The reasons may be that the current brand does not send the right signals to the market, that it is too expensive relative to the demand that the brand generates or that it is otherwise not suitable for the particular market or hotel. A strategy of independence is particularly relevant when a substantial change in the hotel product is necessary, for example when acquiring an underperforming hotel or taking over a discontinued lease. In such situations it is generally simpler and more eﬀective to change both the product and organisational structure under an independ-ent brand. There is a greater degree of free-dom and the return is often higher.

Some examples of hotels that have under-gone such a change are:

• Urban House Copenhagen (from Omena)
• Hotel Lillehammer (from Radisson Blu)
• The Hub Hotel & Livingroom
(from Mr Chip)
• Hotel BLOOM! (from Mercure)
• The Hotel Brussels (from Hilton)
• Hotel Berlin, Berlin (from Clarion)
• Hotel Hubert Brussels Grand Place (from Scandic)
• Hotel Mayfair (from First Hotel)
• Hotel Twentyseven (from First Hotel)

Leases have been signed for the ﬁrst four of these hotels with new tenants following their repositioning and other active measures within hotel operations.

Pandox's core business involves acquiring, improving and leasing out hotel properties to the best operators in the market

The Midland Manchester

Two segments create more opportunities

Pandox has an integrated business model and is active throughout the hotel value chain. Apart from owning and leasing out hotel properties, Pandox may also operate hotels itself. This reduces risk, creates new business opportunities and promotes a higher return.

Property Management

136

properties

MSEK 50,181

market value, properties

5.44%

valuation yield

Rental income by country 2020

Germany, 28%

Sweden, 23%

UK/Ireland, 20%

Finland, 9%

Norway 1), 6%

Denmark, 5%

Belgium, 2%

Other, 7%

The percentage of rental income outside the Nordics has gradually increased since Pandox was listed in 2015.

1) Includes one-time revenue of MSEK 28.

Operator ActivitiesPandox total

156

MSEK 59,542

Hotel properties

Total market value of portfolio

Pandox's hotel property portfolio consists of 156 properties with an average of 225 rooms. The portfolio is well-diversiﬁed across geographies, countries, cities, types of demand and subsegments.

In 2020 the market value of the total hotel property portfolio decreased by around 6 percent.

Property Management Resilience in tough times

Property Management is a key component of Pandox's operations and involves long revenue-based leases with good guaranteed rent levels and stable earnings. The hotel properties are leased to tenants who operate the hotels under various brands. For 2020 Property Management reported a decrease in net operating income of 27 percent, explained by Covid-19 and extraordinary steps taken by the authorities.

For comparable units the decrease was 31 percent, adjusted for currency eﬀects.

WELL-KNOWN AND STRONG TENANTS

Pandox's tenant base consists of highly rep-utable hotel operators with strong hotel brands. Tenants include regional operators such as Scandic Hotels Group (the largest hotel operator in the Nordics), Fattal Hotels

Group (Leonardo, Jurys Inn), HR Group and Nordic Choice Hotels, as well as global operators such as Hilton, Radisson and NH Hotel Group.

LEASES WITH THE RIGHT INCENTIVES

Pandox's leases are mainly linked to the hotel's revenue and often contain a mini-mum guaranteed rent clause. This makes it possible to achieve increased income in an improved market while also having down-side protection in a weaker market. Pandox prefers revenue-based leases which nor-mally have two rent levels: (1) A higher per-centage rent based on the operator's room revenue and the operator's conference room rental revenue. (2) A lower percentage rent based on other operator revenue, mainly food and beverage revenue. This also includes operator revenue that may be spe- ciﬁc to the hotel's oﬀering, such as parking and spa services.

With revenue-based leases the property owner and operator have a joint incentive to develop the hotel product and create good productivity and proﬁtable growth. Pandox works with its tenants to identify suitable cash ﬂow-driving investments in the prop-erty portfolio. Joint investment projects normally involve an extension of the lease term and an adjustment of the percentage rent. New or renegotiated hotel leases usu-ally have a term of 10-25 years. On 31 December 2020 Pandox's lease portfolio had a weighted average unexpired lease term (WAULT) of 14.6 (15.6) years.

SHARED INVESTMENTS REDUCE RISK

The way maintenance costs and investments are distributed between the tenant and the property owner in hotel leases is an impor-tant factor that distinguishes hotel proper-ties from other real estate segments such as oﬃce properties. The division of responsibil-ity between the parties is regulated in a checklist. Hotel tenants in the Nordic coun-tries are normally responsible for mainte-nance of hotel rooms, restaurants, lobbies and other public spaces, including furniture, ﬁxtures and equipment. The property owner

Net operating income

-27%

is typically responsible for technical invest-ments and installations in the property, technical maintenance and usually for bathrooms as well. In general the tenants' responsibility is greater outside the Nordic region.

Investments raise the standard of the hotel and make it more competitive, which means increased revenues and greater prof-itability for the operator and thereby higher revenue-based rent for Pandox. The long lease terms, combined with the tenant's responsibility for maintenance and cash ﬂow-driving investments, mean that Pandox - as the hotel property owner - has less

ﬁnancial responsibility for investments compared to the owner of a typical oﬃce building. Pandox estimates that tenants con- tribute a signiﬁcant portion of total invest-ments over time.

PANDOX HELPS OUT IN A DIFFICULT SITUATION 2020 was a diﬃcult year for hotel operators and hotel owners alike. Pandox oﬀered its tenants support, mainly through adjusted payment terms. In cases where leases are fully variable, Pandox helped to carry the costs of the pandemic by signiﬁcantly lowering rents.

NO ACQUISITIONS IN 2020

Due to Covid-19 and signiﬁcant uncertainty in the hotel market, Pandox did not imple-ment any acquisitions or divestments in the Property Management segment during the year. The acquisition of Maritim Hotel Nürnberg, announced in 2019, was com-pleted in January 2020 before the outbreak of the pandemic.

TWO RECLASSIFICATIONS

In April Pandox took over operation of Hotel Twentyseven and Hotel Mayfair in

Copenhagen, which were then reclassiﬁed to Operator Activities.

Brands in Property Management 31 December 2020

By agreement type, number of rooms

By partner, number of rooms

By destination, number of rooms

Revenue-based lease agreements with a minimum rent, 69%

Revenue-based lease agreements without a minimum rent, 24%

Fixed rent, 7%Scandic, 37%

Jurys Inn, 15%

Leonardo, 12%

Nordic Choice, 6%

NH, 6%

Radisson Blu, 5%

Independent, 4%Regional, 48%

Domestic, 45%

International, 7%

Hilton, 4%

Other, 11%

Operator Activities

High productivity and local knowledge

Operating hotels is an important part in Pandox's strategy of being active throughout the value chain and reﬂects the Company's active ownership model. Pandox's expertise and ability to operate hotels itself give the Company strategic ﬂexibility. For 2020 Operator Activities reported a negative net operating income of MSEK 168 due to Covid-19. Net sales amounted to MSEK 779, a decrease of 68 percent.

ACTIVE OWNERSHIP REDUCES RISK

Pandox may choose to operate hotels itself if it is not possible to enter into a lease with a tenant on attractive terms. This allows

Pandox to balance out the eﬀect of changed business models and consolidation in the hotel market. The ability to take over the operation of a hotel reduces the risk when leases expire and/or if the tenant cannot fulﬁl its obligations. It is also useful in situa-tions where hotels need to be completely renovated and it is not currently ﬁnancially attractive to lease to third parties. The goal is, however, to sign new leases at commer-cially attractive levels and develop relation-ships with existing or new tenants. Pandox's deep knowledge of how to operate hotels also makes it possible to eﬃciently monitor tenant performance throughout the port-folio. Operational know-how also creates opportunities to carry out acquisitions of mixed portfolios that include both hotel properties and hotel operations.

FULL OPERATING EXPOSURE

In the Operator Activities segment all of the hotels' revenue and net operating income ﬂow to Pandox. Revenue includes roomrevenue, i.e. the number of hotel rooms sold multiplied by the average room rate, food and beverage revenue, conference room rev-enue and the hotels' other revenue streams. The single largest cost item is employee costs, such as for reception, housekeeping and restaurant staﬀ. Other cost items include consumables and other hotel-related costs. Pandox works actively to develop revenue and distribution strategies for each hotel. The combination of good rev-enue forecasts and sound resource planning creates the conditions for high productivity and good proﬁtability.

EXTERNAL AND OWN BRANDS

Pandox markets the hotels in the Operator Activities segment either under internation-ally known hotel brands, such as Radisson Blu, Hilton or Novotel, or under its own independent hotel brands adapted for speciﬁc market conditions.

On 31 December 2020 a total of 10 hotel properties were being operated within Opera-tor Activities under franchise agreements, six under independent brands owned by Pandox and four under management agreements.

Net sales

-68%

GOVERNMENT RELIEF PROGRAMMES IN 2020

Pandox took advantage of relief programmes within Operator Activities in Belgium, Germany, the Netherlands, Canada, and Finland amounting to the equivalent of around MSEK 97 for full-year 2020. This is recognised as a decrease in costs under "Costs, Operator Activities". In addition, around MSEK 117 for the full year was transferred directly from authorities to Pandox employees in the form of salary support for furloughed personnel. These amounts are therefore not included in Pandox's reported ﬁgures.

"Swimming against the current"

Operating hotels during lockdown

A decision was taken in March at Hilton Garden Inn London Heathrow Airport, which is owned and operated by Pandox, to remain open despite the announce-ment by the British authorities on 23 March on the closure of bars, restaurants and hotels. Richard Lee, General Manager of Hilton Garden Inn, was facing a very unique challenge: the hotel was full of guests waiting to be able to ﬂy home.

Asking the guests to leave - without them having anywhere else to go as all hotels in the area were closing - was not an option. Instead, Richard and his colleagues started looking at ways to keep the hotel open. There were challenges of course - from legal issues, to operational and personnel ones. Could the hotel ask its employees to work despite the country being under lockdown? After considering several critical issues, the decision was taken to keep the hotel open.

Despite the challenges, Richard and his colleagues managed to navigate through the spring thanks to new social distancing routines, new work ﬂows and adapted procedures for guests. The hotel accepted several groups of guests who had been denied accommodation at other hotels close to Heathrow Airport. The hotel was even showing some proﬁtability. More importantly, the hotel helped hundreds of people by providing them with a safe and welcoming environment at a diﬃcult time.

Brands in the Operator Activities segment 31 December 2020

"We practice what we preach"

Take over operation and safeguard value

On 1 April 2020, in the middle of the raging pandemic, Pandox took over the operation of Hotel Mayfair, which has 203 rooms, and Hotel Twentyseven with its 200 rooms; both in hotel properties in central Copenhagen that Pandox has owned for some time. The takeovers were in line with Pandox's business model and strategy to safeguard the long-term value and development poten-tial of the hotel properties. The transfer of operations was eﬃcient and Pandox was quickly able to recruit key talent, implement business systems and estab-lish new business plans for the hotels.

By agreement type, number of rooms

By partner, number of rooms

By destination, number of rooms

Franchise, 50%

Management, 20%

Independent, 30%Independent, 31%

Hilton, 20%

Radisson Blu, 12%

Crowne Plaza, 11%

Holiday Inn, 8%

Novotel, 7%

InterContinental, 6%

Indigo, 5%International, 64%

Domestic, 21%

Regional, 15%

Keys to Pandox's value creation

Hotel properties have certain characteristics that distinguish them from other types of property. What is needed to create value in hotel properties is a deep understanding of the hotel market and its drivers, of productivity and hotel operation, property development, growth-driving investment, brands and concepts, and experience in how to value hotel properties.

Pandox has an active acquisition strategy based on industry know-how, a long-term perspective and the ability to act freely throughout the hotel value chain. Pandox's opportunities for value creation through acquisitions increase when the object to be acquired is underperforming or where the transaction is highly complex, for example in portfolios that include both hotel proper-ties and hotel operations.

A large, well-diversiﬁed portfolio oﬀers good opportunities for value-creation and growth-driving investments. Pandox has an ongoing dialogue with each tenant on joint investment projects to further increase the hotel's revenue and proﬁtability. For example, new beds in existing rooms, new rooms in existing hotel properties or new rooms through extension of existing hotel properties.

Proﬁtable and sustainable operation is the core of Pandox's business, whichever busi-ness model is used. Sometimes Pandox chooses to take on the role of both owner and operator in order to secure the hotel property's long-term value. Operating a hotel may be appropriate if it is in need of a major upgrade and there is no possibility of signing a proﬁtable lease with a long-term partner. The ultimate goal is always to sign a new lease at a commercially attractive level.

Expertise and intelligence provide knowledge advantages

How Pandox monitors and develops the market

Pandox has a strong commercial position in the hotel market by virtue of the

Company working with many diﬀerent hotel brands and being active in many diﬀerent markets and destinations that diﬀer in nature and demand. Pandox constantly monitors and analyses important trends and drivers in the hotel market and this provides input for discussions with tenants.

the hotel property's performance is constantly assessed. Through a combination of knowledge, experience and curiosity, Pandox challenges and inspires its tenants to identify new business and investment opportunities.

Is the hotel correctly positioned? What investments are appropriate? What is the return if we invest? How can risk and return be shared?

Pandox has an individual business plan for each hotel property. This includes deﬁning a peer group - a number of relevant competing hotels - against which

In its toolbox Pandox also has knowledge of how to establish independent hotel brands.

Key issues for a hotel property owner

Choice of operating modelChoice of business partnerAgreement structure

Hotel productRevenue managementBrand & distribution

• Lease
- • Hotel operator
• Operated by Pandox, franchise
- • Revenue-based leases with guarantee
  - • Management and organisation
    - • Drive revenue
    - • Positioning
    - • Segmentation
• Operated by Pandox, independent
- • Revenue-based leases without guarantee
  - • Productivity and proﬁtability
    - • Channels
    - • Brand
- • Fixed leases
• Management agreement

• Special agreements

• Investments and development

Growth-driving investments despite the economic situation

In 2020 Pandox made investments equivalent to around MSEK 900 in the existing portfolio despite the uncertainty and practical limitations brought by the pandemic. The investments, which were aimed at driving future growth, included remodelling and extension, rebranding and repositioning.

Renovations completed in 2020

Clarion Collection Hotel Arcticus (Harstad)Midland Manchester

Hilton Garden Inn London Heathrow Airport

Creation of 37 new rooms with a view over mountains and the ocean, making a total of 112 rooms at the hotel.

Renovation of all rooms and public spaces, including the lobby, restaurants and bars.

Renovation of all rooms, reception, restaurant, bar, gym and three new conference rooms.

New ﬂoor plan with new rooms

Pilot Airport Hotel (Vantaa, Finland)

Skyline Airport Hotel (Vantaa, Finland)

Scandic Copenhagen

Revitalisation through a new brand, remodelling and renovation of all rooms and public spaces.

New brand and renovation of all rooms, public spaces and interiors.

Renovation of the top ﬂoor and creation of 14 new rooms and new conference rooms.

Ongoing renovations

Crowne Plaza Brussels - Le Palace

Scandic Luleå

Hotel Berlin, Berlin

Total renovation of rooms, corridors, public spaces, restaurants, conference rooms and technical systems.

New nine-storey hotel building with 112 new rooms. Renovation of existing hotel building.

Renovation of the lobby and four large conference rooms, and creation of a new conference section.

Development of rooms and public spaces

Mercure Hotel München Neuperlach Süd Renovation of rooms, bathrooms and corridors, and a new gym and relaxation area.

Quality Park Södertälje	Hotel NH Brussels Bloom
Remodelling to add 30 new hotel rooms, expand the	Development of rooms, bathrooms and public spaces
restaurant and add a new gym and relaxation area.	to upgrade to NH's premium brand NHOW.
Pandox Annual Report 2020
29

PANDOX IN THE WORLD

Strong position in domestic markets

Pandox has a well-diversiﬁed portfolio with a presence in 90 cities in 15 countries, including the England, Wales, Northern Ireland and Scotland submarkets. The portfolio has the most exposure - around 84 percent measured in number of rooms - to domestic and regional cities with mainly domestic demand.

International citiesRegional citiesDomestic citiesTotal portfolio

CHARACTERISTICS

• Internationally established destinations
• Highly dynamic
• Hubs for international travel
• Markets with strong purchasing power
• Complete set of demand drivers
• Demand from all guest segments

EXAMPLES IN PANDOX'S PORTFOLIO

London (which is also a megacity), Amsterdam, Montreal, Brussels, Berlin, Vienna and Dublin.

CHARACTERISTICS

• Growing destinations that are "on the way up"
• Some dynamic elements
• Demand is mainly regional and domestic
• Elements of international demand
• Various drivers of demand
• Demand from many diﬀerent guest segments

EXAMPLES IN PANDOX'S PORTFOLIO

Hamburg, Munich, Cologne, Frankfurt,

The Hague, Copenhagen, Stockholm, Oslo, Helsinki, Manchester, Birmingham and Basel.

CHARACTERISTICS

• Domestic demand is a key driver
• Not very dynamic
• No or limited interna-tional demand
• Fewer commercial drivers
• Greater dependence on the public sector
• Mostly purpose-driven travel

EXAMPLES IN PANDOX'S PORTFOLIO

Leeds, Sheﬃeld, Gothen-burg, Jönköping, Örebro, Jyväskylä, Kuopio, Bergen, Bodø, Dortmund, Mönchengladbach and Wolfsburg.

DIVERSIFICATION IN VARIOUS WAYS

• Demand
• Destinations
• Locations
• Brands
• Hotel products

PORTFOLIO APPROACH REDUCES RISK

By combining diﬀerent markets, types of demand and brands, Pandox can balance out ﬂuctuations in individual markets. This increases resilience and reduces risk.

Pandox facts

17 hotels 5,737 rooms

Percentage of total number of rooms

16%

Pandox facts

61 hotels 14,861 rooms

Percentage of total number of rooms

42%

Pandox facts

78 hotels 14,462 rooms

Percentage of total number of rooms

42%

Pandox facts

156 hotels 35,060 rooms 15 countries* 90 cities

* Includes the submarkets England, Wales, Northern Ireland and Scotland.

TRENDS AND DRIVERS

Strong long-term trends

Pandox is active in a dynamic industry with several strong trends and drivers, such as increased prosperity, a growing middle class and a blurred work-life boundary, combined with the possibilities oﬀered by digitalisation. Covid-19 has negatively impacted demand in the hotel market due to the strong link between restrictions and travel. When the restrictions are eased travel will increase again.

Growing middle class

The global population is growing and so is the middle class - a factor that normally leads to increased travel. People are also living longer, which means they are looking for new experiences later in life as well. Domestic leisure travel will be a strong driver in the hotel market when restrictions are eased after Covid-19.

Experiences more important

The new generation of consumers are often more interested in gathering experiences than material possessions. Typically, they are on the hunt for the best destination, the best accommodation and the best food menu. The hotel is no longer just a place to sleep, but part of a lifestyle. Covid-19 has without a doubt create a signiﬁcant pent-up demand for experiences and travel.

Digitalisation is making things easier

Digitalisation is a trend that was further reinforced during the pandemic. Digitalisation has made the world smaller and blurred the lines between work and leisure. It has also accelerated the pace of change and made it easier to book both travel and accommodation. One consequence of Covid-19 is that demand for digitalisation in the physical hotel environment is increasing.

Shorter distances

Most guests will arrive at their hotel by car, bus or train - a trend that strengthened due to Covid-19. Low cost ﬂights - both short and long haul - are also a strong underlying driver for the hotel industry over the long term as they drive demand from more high-paying segments in the hotel market.

Sustainability and values

Demand for sustainable products and services is increasing as knowledge levels among consumers and in society increase. For consumers it is increasingly important for the services they purchase to match their own values. Covid-19 is a catalyst, especially in terms of reinforcing local ties.

A leading hotel property owner in a market with good potential

Pandox has established itself as a leading hotel property owner in Europe with the help of an integrated business model that covers the entire hotel value chain. The hotel property market is fragmented, with good growth opportunities where Covid-19 can be expected to strengthen existing trends.

Good opportunities for Pandox ...

Large and fragmented market	The hotel property market in Europe is fragmented. Pandox, which is one of the largest actors, has a total market share of just under 1 percent, measured in terms of the number of rooms in the markets where the Company is established. Competing hotel property companies are rarely international specialists, but rather tend to be from the ﬁnancial sector or are national property companies with various property types in their portfolio. Overall, there are a handful of competitors in each market, of which only a few are active in multiple markets.
High entry barriers	The entry barriers to the hotel property market are high. Hotel properties have unique characteristics and this requires compre- hensive specialist expertise and substantial capital in order to create a portfolio with an attractive risk and return proﬁle. A well-established hotel property in a strategic location has natural competitive advantages that are diﬃcult to copy. A well-diversiﬁed hotel property portfolio is even harder to recreate as this requires a long-term perspective and an international presence.
The need for operational expertise is increasing	As large hotel chains become more brand-oriented, the need for specialised hotel property owners and strong operators increases. This is because the brand promise conveyed in digital channels has to be turned into a positive guest experience in the physical environment at the hotel. This calls for knowledge of how to create an attractive hotel product through a combination of eﬃcient operation and value-adding investments. Here, skilful operator companies have gradually advanced their positions. This trend has also created opportunities for Pandox to take over operation when the conditions for a proﬁtable lease are not in place.
Flexibility and agility create opportunities	Pandox's pan-European position and ability to work with all the business models creates clear competitive advantages and growth opportunities. Pandox's core business is to own hotel properties and lease them to strong hotel operators under revenue-based leases. This means that Pandox's rental income grows as the operator's sales increase. Pandox moves freely throughout the hotel value chain and may also operate hotels in properties that the Company owns. This reduces risk and creates new business opportunities.

... in a constantly changing hotel market

Changed business models in the hotel market	The international hotel market has gone through an extensive structural transformation. Large international hotel chains have changed their business models, having sold their hotel properties and outsourced hotel operation to other parties. They have then developed diﬀerent types of asset-light strategies that require less capital, above all in distribution (bookings) and brand develop-ment (franchising). The large hotel companies today have relatively little to do with the day-to-day operation of their hotels. This is instead usually handled by specialised, independent operating companies through franchise or management agreements.
Asset-light requires large volumes in order to be proﬁtable	Within an asset-light strategy, revenue is mainly derived from franchise fees and commissions on bookings. This business model requires large volumes in order to be proﬁtable. The main aim is to increase the number of franchisees and room bookings - preferably in their own distribution channels. The business model not only requires substantial marketing investments, but also a continuous increase in the number of rooms in the portfolio. This has resulted in a search for new franchisees and, in some cases, in consolidation. One factor contributing to this trend is online travel agencies (OTAs) that aggregate oﬀerings and match demand using eﬃcient technology and extensive marketing.
Fewer operators but more brands	Consolidation has decreased the number of brand owners, while the number of brands has increased. The reason is that many hotel chains invest substantial resources in diversifying their brand portfolios and attracting customer demand in new segments.

Covid-19 is likely to reinforce existing trends, such as increased interest in revenue-based leases that provide a better balance between return and risk between property owners and tenants than ﬁxed leases. This in turn increases the need for and value of a deeper understanding of hotel operation, which works in Pandox's favour.

The lease is key for Pandox

Leases are the dominant agreement model for Pandox. The lease has clear advantages, both for the property owner and the tenant, since the return, risk and investments can be shared between the parties.

There are four business models in the hotel property market and Pandox uses all of them.

PROPERTY MANAGEMENT 1 Leases

Agreement with many advantages

Pandox uses revenue-based leases, often with a guaranteed minimum rent. This agreement model has several advantages:

• Long-term perspective
• Joint incentives
• Shared investments and shared risk
• Focus on productivity and proﬁtability

How it works

A revenue-based lease is tied to the develop-ment of the hotel business, with a percent-age of the hotel's sales paid to Pandox in the form of rent. When the hotel's sales increase, so does Pandox's rental income - and vice versa. Hotel property owners and hotel operators thus share both the upsides and downsides, and have clear common incen- tives to increase the hotel's proﬁtability and therefore also the hotel property's value. In many leases there are also guaranteed levels below which the rental income cannot fall. They cover Pandox's cost of capital for ﬁnancing the properties. Pandox also has ﬁxed leases in a few individual cases.

Interest in leases increasing

In recent years Pandox has acquired, renewed and signed numerous leases in existing and new markets and has seen increased interest in the lease model. One reason for this is increased specialisation within the hotel market and the emergence of strong regional hotel operators that share Pandox's view of the advantages of leases. For Pandox as a hotel property owner, the lease is a key aspect of value creation in the hotel business since it contributes to shared investments and shared risk, and also makes the underlying asset more liquid.

OPERATOR ACTIVITIES

2 Operated by Pandox under a franchise brand

When a hotel property owner owns both the hotel property and the hotel business,

Four business models in the hotel property market

PROPERTY MANAGEMENT

Lease
Revenue-based with	Revenue-based without
guarantee	guarantee
Percentage of total number of rooms	Percentage of total number of rooms
58%	19%
OPERATOR ACTIVITIES

Operated byproperty owner under a franchise brand

Operated byproperty owner under an independent brand

Management agreement

a franchise agreement with a brand owner may be appropriate. as it allows hotel prop-erty owner to take advantage of the fran-chiser's brand and distribution resources. Normally the franchisee pays revenue-based royalty fees plus additional fees for access to other services. Franchise agreements are common within Operator Activities.

3 Operated by Pandox with an independent brand

In some cases it may be better to give the hotel a proﬁle of its own, using an independ-ent brand; for example, in a local setting where an international brand has a low recognition factor and the costs of rights and distribution cannot be justiﬁed.

4 Management agreement

A management agreement is an agency con-tract where the hotel property owner also owns the hotel business, but assigns a hotel operator to run and manage the hotel on behalf of the hotel property owner. The property owner pays a management fee, often revenue-based, to the operator for the service.

Management agreements are often very long-term, with the operator undertaking to run the hotel in accordance with established brand strategies. Under this type of agree-ment structure, the hotel property owner shoulders all the investments and thus bears ﬁnancial responsibility for both the hotel's operation and the property.

MARKET OVERVIEW

Market overview 2020

A YEAR CHARACTERISED BY COVID-19 In 2020 the hotel market was signiﬁcantly impacted by Covid-19 and the restrictions introduced by authorities in all countries, covering everything from domestic and inter-national travel through guidelines for busi-nesses and conferences to social distancing.

The year began with stable demand and good prospects in the hotel market. When a more extensive spread of infection - which was initially expected to be limited to China - was noted in Europe and the WHO upgraded Covid-19 to a pandemic in March, demand in the hotel market decreased dramatically and rapidly. The hotel market in Europe bot-tomed out in mid-April and then gradually started to recover through the remainder of the second quarter. When the European holi-day season began in July, which coincided with some easing of national and interna- tional travel restrictions, a signiﬁcant increase in demand was noted, primarily driven by domestic leisure travel. The posi-tive trend from the summer continued into October when a new wave of the virus and government restrictions again caused a fall in demand. This resulted in a considerable decrease in occupancy in the hotel market during the ﬁnal months of the year.

RESTRICTIONS DETERMINE DEMAND

The recovery in Europe in the summer months showed that restrictions constitute the main factor suppressing demand in the hotel market, and not changes in behaviour. When restrictions are eased, demand increases and vice versa, mainly driven by increased domes-tic travel. This theory is also supported in hotel markets outside Europe (China, India, Australia and New Zealand), which have seen a relatively fast recovery driven by lower virus transmission and eased restrictions, and

RevPAR growth in key geographical markets

EUROPE (2016-2020)

-69%

-10

-20

-30

-40

-50

-60

-70

-80

2016

2017

2018

2019

2020

Source: STR Global, Benchmarking Alliance, Statistics Finland.

strong domestic demand with certain domestic submarkets reaching occupancy rates almost on a par with the previous year. There is a clear pattern, for example in China, where a large portion of previous domestic international demand (outbound) has been converted into purely domestic demand (inbound) and the domestic seg-ment is now larger than before. For interna-tional destinations, however, the recovery has been slow.

Overall, this trend supports Pandox's theory that the underlying drivers of and the potential for the hotel market's recovery post-Covid-19 are relevant in Europe as well. The demand is domestic and it is economy, mid-scale, resort and apartment hotels in regional hubs and attractive leisure destina-tions - easy to reach by car or train - that are the winners. Premium hotels and large conference hotels with an international proﬁle are mainly those losing out.

Room prices are stable by segment, but average prices are decreasing due to mix eﬀects explained by a lower percentage of international travel, fewer meetings and fewer compression nights 1).

THE HOTEL MARKET IS COMPLEX

The hotel market is complex and demand is driven by a combination of factors. What may at ﬁrst seem simple becomes signiﬁcantly more complicated upon further analysis. The reason is that there are multiple subseg- ments and destination-speciﬁc factors at play.

For Pandox, motels and central hotels in cities with domestic demand have consistently done the best throughout the pandemic, while hotels in international cities have fared the worst, explained by the dominant domestic demand.

COUNTRIES (2020)

-72% -71% -69% -67% -65% -58% -57% -49%

There is basically good underlying demand in the hotel market as well as signiﬁcant pent-up demand for travel among companies and individuals.

Pandox has high exposure to domestic demand, which is expected to lead the recov-ery in the hotel market once restrictions are lifted.

PANDOX'S TRENDSPOTTING

• Markets with dominant local and/or regional demand recover the fastest
• Signiﬁcant potential for increased domes-tic tourism, e.g. in counties like the UK and Germany
• Hotels that are easy to reach by car and train have recovered faster
• Destinations with a strong leisure oﬀering are most attractive in earlier phases, such as coastal towns in the Nordics, Germany and the Netherlands
• Hotels in the economy and mid-scale segments have shown greater resilience and are also the ﬁrst out of the gate in the reopening phase
• Premium hotels and hotels with signiﬁ-cant conference activity that are depend-ent on international demand will have a longer recovery period
• Markets with signiﬁcant new capacity are especially vulnerable in the recovery phase
• Household savings have increased signi- ﬁcantly during the year, which will further increase demand for hotel services once restrictions are reduced
• People who have been subject to various tiers of lockdown will want to travel extensively when they are given the chance to do so

1) When occupancy rate exceeds 90 percent.

KEY MARKETS (2020)

-77% -76% -76% -72%-71%-69% -69% -66%

-10 -10

-20 -20

-30 -30

-40 -40

-50 -50

-60 -60

-70 -70

-80 -80

REVPAR

RevPAR - a key ratio

RevPAR (revenue per available room) is a key indicator in the hotel industry and an important measure for Pandox. RevPAR is a measure of a hotel's - or in aggregate form, a market's - earnings capacity and describes how well it has succeeded in occupying its rooms (demand) and at what price (willing-ness to pay). RevPAR varies with economic activity and demand from various subseg-ments of the travel market as well as struc-tural factors such as country, city, location, transportation, product type and supply in the hotel market. In addition there are various strong market trends that support the hotel market, such as people spending more money on experiences and wanting to travel more often. See the section on trends on pages 31.

MARKETS VARY IN NATURE

Pandox is active in hotel markets that vary in nature and circumstances. This is reﬂected in RevPAR and thus determines what kind of hotel investments can be prof-itably made. The higher the RevPAR, the more scope there is for Pandox to make investments that add value.

HOW REVPAR WORKS

Sweden RevPAR, real*

SEK 500

International destinations such as Lon-don and Amsterdam have a high proportion of international demand and good demand in all subsegments. Regional cities such as Stockholm, Copenhagen, Manchester, Cologne and Hamburg have a smaller inter-national element, but generally good demand from all subsegments. Domestic cities such as Leeds, Linköping and Kuopio are more dependent on domestic demand and individual subsegments. However, these generally experience stable develop-ment over time and are less dependent on major global events.

If the average room price is SEK 1,000 and the occupancy rate is 70 percent, then RevPAR is SEK 700 (1,000 x 0.70 = 700). A hotel with 200 rooms thus has annual room revenue of SEK 51,100,000 (700 x 200 x 365). In addition to this is other revenue such as from food, bever- ages and conferences, which by deﬁnition is not included in the term RevPAR.

FROM REVPAR TO RENTAL INCOME

Pandox's leases are revenue-based, with a certain percentage of the hotel's revenue becoming rent for Pandox. The percentage is normally higher for hotel rooms and conference rooms, and lower for food and beverages and other revenue.

The diﬀerence is due to the fact that proﬁtability, and thus the ability to pay rent, is higher for accommodation than for restaurant operations.

400

Overall, Pandox has a clear demand bal-ance in its portfolio with a good spread of risk between diﬀerent types of markets, countries and destinations. See the section

If the rent in the above case is paid at 35 per-cent of room revenue, then the rental income for Pandox is SEK 17,885,000 (51,100,000 x 0.35). In addition, there will normally be other income that in certain cases may be substantial. This means that Pandox's actual rent growth may be either higher or lower than RevPAR growth in the market.

"Pandox in the world" on page 30.

300

Comments: Net RevPAR takes into account the costs of procuring customers - e.g. distri-bution and marketing - and is a more relevant measure for a hotel operator.

200

00 02 04 06 08 10 12 14 16 18 20

CATEGORIES OF CITIES WITH EXAMPLES SORTED BY REVPAR, SEK

2020

2019

Change, %

Source: Statistics Sweden, Pandox.

*Adjusted for inﬂation (KPI)

RevPAR can be used in various ways:

1. To take the temperature of the hotel sector
International cities London Amsterdam Dublin
337 260 268
1,558 -78
1,284 -79
1,236 -78
2. To measure how well a hotel market is performing
3. As a measure of how well a hotel is performing in its market

DAILY MONITORING AND ANALYSIS

Tracking RevPAR is part of Pandox's busi-ness monitoring process. In the Property Management business segment RevPAR is monitored on an ongoing basis. In the Oper-ator Activities segment it is monitored daily by the hotels and the Pandox Revenue Man-agement Centre in Brussels. The capacity and performance of the individual operator makes a big diﬀerence. Based on systematic business analysis, Pandox discusses various possibilities for supporting the operator in developing and reﬁning the hotel product, thereby increasing proﬁtability for the operator and rental income for Pandox.

Regional cities Copenhagen Hamburg Cologne Stockholm Manchester

260

1,074 -76

314

946 -66

286

938 -68

247

804 -69

208

717 -70

Domestic cities Leeds

206

669 -69

Kuopio Dortmund Sheﬃeld Linköping

313

659 -52

210

652 -67

176

533 -66

281

513 -45

Source: Statistics Finland, STR Global, Benchmarking Alliance.

Pandox and the capital market

FINANCIAL CALENDAR

Annual General Meeting 2021

12 April 2021

Interim Report January-March 2021

27 April 2021

Interim Report April-June 2021

16 July 2021

Interim Report July-September 2021

27 October 2021

Year-End Report 2021

10 February 2022

Contact information

Anders Berg

SVP, Head of Communications & IR +46 760 95 19 40anders.berg@pandox.se

Erik Ax

Communications & IR Manager +46 707 13 77 06erik.ax@pandox.se

ANNUAL GENERAL MEETING

Pandox AB's Annual General Meeting will take place on Mon-day, 12 April 2021. For information about the AGM and how it will be implemented, go towww.pandox.se.

Annual General Meeting calendar

Record date for the Annual General Meeting 31 March 2021

Annual General Meeting

12 April 2021

PROPOSED DIVIDEND

The Board of Directors is proposing to the 2021 AGM that no divided be paid out for the 2020 ﬁnancial year.

TOTAL RETURN ON PANDOX SHARES 18 June 2015-31 December 2020

SEK 350

315

280

245

210

140

105

175

0 Jun	Dec	Jun	Dec	Jun	Dec	Jun	Dec	Jun	Dec	Jun	Dec
2015	15	16	16	17	17	18	18	19	19	20	20

Pandox, BOMX Stockholm GISource: Bloomberg Finance L.P./Nasdaq

Good total return over time

OMX Real Estate GI

The Pandox share's total return in 2020 was -34 percent.

Calculated from the share's ﬁrst trading day on 18 June 2015, the total return at year-end was 53 percent.

THE PANDOX SHARE AND EPRA NRV PER SHARE 18 June 2015-31 December 2020

SEK

350

315

280

35 0

Jun Sep DecMar Jun Sep DecMar Jun Sep DecMar Jun Sep DecMar Jun Sep DecMar Jun Sep Dec 15 16 17 18 19 20

Share price Pandox BEPRA NRV per share ("spot", previous quarter)

Net asset value important in valuation of property companies

The valuation of a property company is normally based on its net asset value, which in simple terms is the diﬀerence between the market value of the property portfolio and net debt. In most property companies there are also derivatives, tax assets and tax liabilities that aﬀect the net asset value. See page 112 for a deﬁnition of Pandox's net asset value according to EPRA NRV. A premium is when market cap is higher than the net asset value and a discount is when market cap is lower than the net asset value.

Why invest in Pandox?

Good growth opportunities

Good potential for strong recovery in the tourism and travel market

Signiﬁcant pent-up demand for travel that will be released when the situation in society is normalised

Low market share in the hotel property market

<1%

Measured as available rooms in Pandox markets

Strong market position

Pan-European position

Countries

Attractive partner in the hotel market

>30

Hotel operators and brands

Balanced risk

Ability to act throughout the value chain

Ability to operate hotels reduces risk and creates opportunities

High exposure to growing segments

84 percent

Of the total number of rooms in the portfolio in cities with predominantly domestic and regional demand

HOTEL PROPERTIES A SMALL PORTION OF THE PROPERTY MARKET

Properties are a large and growing asset class with residential, retail, oﬃce and industry as the dominant segments. At year-end 2020 listed property companies accounted for around 6 percent of the value on Nasdaq Stockholm. Within the EU the corresponding ﬁgure was around 4 percent.

Although hotel properties are growing as an asset class, this is still a small portion of the total property market. The same applies on the stock exchange. Listed specialised hotel property companies make up less than 1 per-cent of EPRA Developed Europe, which is a leading property index.

FEW LISTED SPECIALISTS

Listed specialists in hotel properties in

Europe other than Pandox (Nasdaq Stockholm, PNDX) are PPHE Hotel Group

(London Stock Exchange, PPH) and Covivio

Hotels (Euronext Paris, COVH). Other property companies with signiﬁcant hotel property exposure include Aroundtown (Frankfurt Stock Exchange, AT1) and

Balder (Nasdaq Stockholm, BALD).

HOTEL PROPERTIES ARE A DEMANDING CLASS OF ASSET

Hotel properties are an asset class that requires specialisation, active ownership and an industrial perspective for successful value creation. Time is also a factor that should not be underestimated. Quite simply, it takes a long time to ﬁnd and acquire suitable properties - and even longer to build essen-tial relationships with the hotel operators and business partners needed to develop and realise the hotels' full potential.

REPLICATING LARGE HOTEL PORTFOLIOS IS NOT EASY

It is hard to build large hotel portfolios. Even if there is capital available for acquisitions, systematic and long-term eﬀorts are needed in a tough international environment to create a portfolio with an attractive risk and return proﬁle.

Analysts who follow Pandox

ABG Sundal Collier

Tobias Kaj

Victor Krüeger

Carnegie

Fredric Cyon Erik Granström

Nordea

David Eriksson Flemmich

Staﬀan Bülow

SEB

Stefan E Andersson

Morgan Stanley

Christopher Fremantle

Kepler Chevreux

Albin Sandberg

Handelsbanken

Johan Edberg

Oscar Lindqvist

DNB

Simen Mortensen Niklas Wetterling

The share and ownership structure

LISTED ON NASDAQ STOCKHOLM

Pandox's class B shares have been listed on

Nasdaq Stockholm's Large Cap index since

2015. The class B shares are also traded on several alternative marketplaces. This is the second time that Pandox has been listed.

The ﬁrst time was from 1997 to 2004.

SHARE PRICE DEVELOPMENT AND MARKET CAPITALISATION

On 31 December 2020 the last price paid for the class B shares was SEK 145.20 (212.00) and the visible market cap was MSEK 15,783 (23,076). With the unlisted class A shares included at the same price as the class B shares, the market cap was MSEK 26,658 (38,976).

In 2020 the change in the value of Pandox shares was -34 (45) percent, compared with the OMX Stockholm Benchmark PI Index which increased by 11 (26) percent and OMX Stockholm Real Estate PI Index which decreased by 6 (59) percent.

Calculated from the date of listing,

18 June 2015, the value of Pandox shares at year-end 2020 had increased by 30 percent compared to 131 percent for the OMX Stock-holm Real Estate PI Index and 38 percent for the OMX Stockholm Benchmark PI Index. The total return on Pandox shares over the same period was 53 percent.

LARGEST SHAREHOLDERS AS OF 31 DECEMBER 2020

TRADING AND LIQUIDITY

Trading on Nasdaq Stockholm accounted for 60 (52) percent of all trading in Pandox shares in 2020. Ongoing trading transacted directly on the stock exchange amounted to around 50 (33) percent and oﬀ-exchange trades reported on the stock exchange to around 9 (19) percent. Trading in other marketplaces amounted to around 41 (48) percent of the trading volume.

During the year around 179 (30) million class B shares were traded on Nasdaq Stock-holm, corresponding to around 164 (28) percent of outstanding class B shares at year-end, for a value of around MSEK 19,800 (5,500). Average daily trading dur-ing the year amounted to 708,576 (120,273) shares, corresponding to around MSEK 78 (22) in value.

OWNERSHIP STRUCTURE AND NUMBER OF SHARES

As of 31 December 2020 Pandox had 12,854 (4,097) shareholders. Pandox's largest shareholders were Eiendomsspar AS, Helene Sundt AB and Christian Sundt AB. Other major shareholders were, in descending order, AMF Försäkring & Fonder, Swedbank Robur Fonder and Alecta Pensionsförsäkring.

The total number of shares is 183,849,999, of which 75,000,000 are class A shares and 108,849,999 class B shares. Class A shares entitle the holder to three votes and class B shares to one vote.

The 15 largest registered shareholders according to percentage of voting rights:

Number of	Number of	% of share	% of
Shareholder	class A shares	class B shares	capital	votes
Eiendomsspar AS	37,314,375	10,144,375	25.8	36.6
Helene Sundt AB	18,657,188	4,912,187	12.8	18.2
Christian Sundt AB	18,657,187	4,312,187	12.5	18.1
AMF Försäkring & Fonder	18,942,099	10.3	5.7
Swedbank Robur Fonder	6,058,466	3.3	1.8
Alecta Pensionsförsäkring	5,787,577	3.1	1.7
Länsförsäkringar Fonder	4,463,787	2.4	1.3
Lannebo Fonder	3,463,388	1.9	1.0
Fjärde AP-fonden	2,645,251	1.4	0.8
Vanguard	2,422,037	1.3	0.7
BlackRock	1,909,960	1.0	0.6
Tredje AP-fonden	1,702,867	0.9	0.5
Norges Bank	1,700,429	0.9	0.5
Nordea Fonder	1,670,328	0.9	0.5
JP Morgan Asset Management	1,508,178	0.8	0.5
Total, top 15 shareholers	74,628,750	71,643,117	79.6	88.5
Other shareholders	371,250	37,206,882	20.4	11.5
Total	75,000,000	108,849,999	100	100

Information compiled by Monitor as of 31 December 2020.

Sources: Euroclear Sweden, Morningstar, Finansinspektionen (FI), Nasdaq and Millistream.

Share facts

Market:

Nasdaq Stockholm

Segment:

Large Cap

Sector:

Real Estate

Ticker symbol:

PNDX B

Number of class B shares (listed): 108,849,999

Number of class A shares (unlisted): 75,000,000

Market cap:

MSEK 26,658 (class A and B shares)

Share volatility: 38% (from 18 June 2015, annual basis)

Share beta value: 1.09 (from 18 June 2015, OMXSBPI)

Average daily trading volume: 708,576 shares (2020)

Source: Nasdaq, InFront, Euroclear, Pandox. As of 31 December 2020.

Shareholders by category as percentage of capital, 31 December 2020

Swedish institutions, 27%

Foreign institutions, 11%

Swedish private

individuals, 3%

Other shareholders, 53%

Anonymous ownership, 7%

Shareholders by country as percentage of capital, 31 December 2020

Norway, 54%

Sweden, 30%

USA, 6%

Others, 10%

Information compiled by Monitor as of 31 December 2020. Sources: Euroclear Sweden, Morningstar, Finansinspektionen (FI), Nasdaq and Millistream.

Key ratios

Average daily trading volume, number of class B shares

Closing price, class B shares, SEK Highest price during the year, SEK Lowest price during the year, SEK Average price during the year, SEK

Share data

Return, OMX Stockholm Benchmark Index, % Return, OMX Stockholm Real Estate Index, % Dividend pay-out ratio of cash earnings, % Dividend pay-out ratio of EPRA NRV, % Dividend yield, %

Cash earnings, SEK Equity, SEK

Net asset value (EPRA NRV), SEK Dividend, SEK

Market cap and return Market cap, MSEK Return, Pandox shares, %

Key ratios per share, aﬅer dilution eﬀects

Proﬁt for the year, SEK

Weighted average number of class A shares, before dilution eﬀects, thousands Weighted average number of class A shares, aﬅer dilution eﬀects, thousands Number of class A shares at end of period, thousands

Weighted average number of class B shares, before dilution eﬀects, thousands Weighted average number of class B shares, aﬅer dilution eﬀects, thousands Number of class B shares at end of period, thousands

Weighted average number of shares, total, aﬅer dilution eﬀects, thousands Total number of shares at end of period, thousands

Key ratios per share, aﬅer dilution eﬀects 1) 2) Total net operating income, SEK	10.06	18.43 18.25 15.05 12.87
Proﬁt for the year, SEK	-7.61	15.91 16.83 19.89 14.65
Cash earnings, SEK 5)	3.64	12.84 11.28 10.46 8.49
Equity, SEK 5)	129.88	143.32 127.63 119.38 95.75
Net asset value (EPRA NRV), SEK	167.60	186.40 164.04 144.54 126.24
Dividend, SEK 3)	-	- 4.70 4.40 4.10
Market cap and return Market cap, MSEK	26,658	38,976 24,555 26,549 22,240
Return, Pandox shares, % 4)	-33.9	45.2 -7.5 12.1 -9.3
Return, OMX Stockholm Benchmark Index, % 4)	10.9	26.3 -8.3 6.6 5.0
Return, OMX Stockholm Real Estate Index, % 4)	-5.9	59.2 9.7 6.7 8.2
Dividend pay-out ratio of cash earnings, %	-	- 41.6 44.4 50.1
Dividend pay-out ratio of EPRA NRV, %	-	- 2.9 3.0 3.2
Dividend yield, %	-	- 3.2 2.8 2.9
Share data Closing price, class B shares, SEK	145.20	212.00 146.60 158.50 141.40
Highest price during the year, SEK	227.50	219.50 170.00 161.70 158.30
Lowest price during the year, SEK	50.20	143.00 135.00 134.30 121.50
Average price during the year, SEK	110.76	182.55 151.73 147.87 139.02
Average daily trading volume, number of class B shares 4)	708,576	120,273 120,121 135,226 167,589
Weighted average number of class A shares, before dilution eﬀects, thousands 1)	75,000	75,000 75,000 75,000 75,000
Weighted average number of class A shares, aﬅer dilution eﬀects, thousands 1)	75,000	75,000 75,000 75,000 75,000
Number of class A shares at end of period, thousands 1)	75,000	75,000 75,000 75,000 75,000
Weighted average number of class B shares, before dilution eﬀects, thousands 1)	108,850	95,053 92,499 82,856 75,266
Weighted average number of class B shares, aﬅer dilution eﬀects, thousands 1)	108,850	95,053 92,499 82,856 75,266
Number of class B shares at end of period, thousands 1)	108,850	108,850 92,499 92,499 82,499
Weighted average number of shares, total, aﬅer dilution eﬀects, thousands 1)	183,850	170,053 167,499 157,856 150,266
Total number of shares at end of period, thousands 1)	183,850	183,850 167,499 167,499 157,499

2020

1) For the period 2014-2015 retrospectively adjusted for share split in May 2015 for comparability when calculating key ratios.
2) For deﬁnitions of key ratios see page 176.
3) For 2020 the Board's proposed dividend is stated.
4) For 2015 measured from ﬁrst day of listing, 18 June 2015.
5) Attributable to the shareholders of the Parent Company.

SHARE CAPITAL HISTORY

2019

2018

2017

2016

75,000

Change in number of shares

YearEvent

1994 Formation
1995 New share issue
1995 Bonus issue
1997 4:1 split
1998 New share issue
2000 New share issue
2013 New share issue
2015 New share series and
6:1 share split
2016 New share issue
2017 New share issue
2019 New share issue

Source: Euroclear, Pandox.

1,250,000

1,247,500

7,500,000

5,000,000

9,900,000

100,000

50,000,000 7,499,999 10,000,000 16,350,000

SIZE OF SHAREHOLDINGS AS OF 31 DECEMBER 2020

2,500

- - - - - - - 75,000,000

1,252,500

2,500,000

10,000,000

15,000,000

24,900,000

25,000,000

- - -

75,000,000 82,499,999 92,499,999 108,849,999

Holding

Number ofshareholders

1-500

11,046

501-1,000

773

1,001-5,000

674

5,001-10,000

120

10,001-15,000

15,001-20,000

Total

20,001-

Source: Euroclear Sweden as of 31 December 2020.

% of share capital

% of votes

0.6 0.3

0.3 0.2

0.9 0.5

0.5 0.3

0.3 0.1

0.2 0.1

181 12,854

97.2 98.5

100 100

Number of shares aﬅer the transaction

2,500

Total

- - - - - - - 75,000,000 75,000,000 75,000,000 75,000,000

2,500

1,252,500

2,500,000

10,000,000

15,000,000

24,900,000

25,000,000

150,000,000 157,499,999 167,499,999 183,849,999

18,749,998 393,749,998

25,000,000 418,749,998

40,875,000 459,624,998

Share capital, SEK

150,000

Change

Total 150,000

75,000,000 75,150,000

74,850,000 150,000,000

- 150,000,000

75,000,000 225,000,000

148,500,000 373,500,000

1,500,000 375,000,000

- 375,000,000

Scandic Copenhagen

Pandox's sustainability agenda

Pandox has certiﬁed its ﬁrst three hotels according to plan and with a BREEAM rating at level Very Good. Additional nine properties started their certiﬁcation processes in 2020

82% satisﬁed guests in Pandox's hotels

81% satisﬁed employees

Energy consumption within Pandox's Operator Activities, kWh/sqm

300

200

100

2018

2019

2020

CO2 emissions within Pandox's Operator Activities, kg CO2e/sqm

2018

2019

2020

Water consumption within Pandox Operator Activities, l/sqm

2,000

2018

2019

2020

Director of Sustainable Business Pandox's role in a sustainable world

Despite a global pandemic where Pandox was in the eye of the storm, we showed determination during the year in reaching our long-term goal: to oﬀer sustainable hotel properties to our tenants.

As a leading hotel property owner, Pandox has signiﬁcant opportunities to inﬂuence how our properties are renovated, developed and, to some extent, operated in a climate- smart and resource eﬃcient way. This ena-bles us to contribute to the UN Sustainable Development Goals. This is particularly important for us and other businesses in the property industry, because the sector accounts for 36 percent of energy consump-tion and greenhouse gas emissions in Europe. The energy requirements are expected to escalate unless the transition to greater resource eﬃciency is speeded up 1).

ORGANISED TO ACCELERATE

To create meaningful results, a greater understanding of these issues is needed within the organisation. A genuine commit-ment and focus are required from the Boardof Directors and executive management. It also calls for an agile organisation that is able to manage and make progress on this using the right expertise, systems and pro-cesses.

Since 2018 Pandox has worked in a more structured way with sustainability. Now, we therefore have both the right resources and focus to address issues at an accelerated pace. With reliable data and the right priori-ties, monitoring processes and communica-tion, we can address the climate challenges in an entirely diﬀerent way than before.

SUSTAINABILITY AFFECTS EVERYONE Sustainability directly and indirectly aﬀects all Pandox employees. Examples of this are business ethics, diversity and inclusion in the workplace, human rights, supply chain transparency when contracts are signed, compliance, and awareness of resource eﬃency and productivity in actions related

1)https://ec.europa.eu/info/news/new-rules-greener-and-smarter-buildings-will-increase-quality-life-all-europeans-2019-apr-15 en

to energy and water. This is not about check-ing a box on a list, but rather an approach that starts and ends with each individual.

THE TAXONOMY

The politicians are increasingly driving sus-tainability issues. The upcoming EU Taxon-omy Regulation is a good example. Pandox will be subject to the taxonomy. In 2020 we invited our largest shareholders for a dialogue and started a process in order to report rele-vant information in the next Sustainability Report in 2021.

GREEN INVESTMENTS

During the pandemic, when occupancy at Pandox's 156 hotels fell dramatically, the importance of having control and operating properties resource eﬃciently became even more clear. We are therefore ﬁrmly commit-ted to our green investment programme, even though some of the more capital intensive investments have been postponed for one or two quarters. In the properties where therollout of our green investment programme has begun, we were able to use climate-smart solutions to adapt energy consumption in real time to match actual needs - a process we will continue in the years ahead.

FOCUS ON GREEN LEASES

Going forward, one of our main priorities will be to sign green leases with our tenants in the Property Management segment. This was put on hold during the pandemic when the focus was on other issues. We need to work together to identify new proactive steps to ensure that our properties and their operation are sustainable and well-equipped for the climate transition, to increase our competitiveness and to promote invest- ments that drive cash ﬂow and provide a good return.

Stockholm, March 2021 Caroline Tivéus

Read more about the Taxonomy on page 45.

VALUE CHAIN

Pandox's value chain

Pandox owns 156 hotel properties. Hotels are operated by external hotel operators in 136 of these under leases in the Property Management business segment. This means that Pandox is not responsible for the day-to-day operation of the hotels and has noinﬂuence over it. In these cases Pandox only has control over technical maintenance and operation, as well as development, renova- tions, conﬁguration and extensions. The remaining 20 properties are own operation within the Operator Activities businesssegment in an integrated collaboration with Property Management. In the Operator Activities segment Pandox has full control over sustainability-related issues, hotel operations, technical maintenance and operation, and developing the properties.

Full control 3)

Inﬂuence

Full control

Implementation of operating model

Property operation

Purchases

Guest services

Guest relations

Pandox's inﬂuence in the value chain

Pandox's inﬂuence on implementation of sustainability measures and on subcontractors engaged:Full controlInﬂuenceLimited inﬂuenceNo inﬂuence

1) Pandox uses four operating models: (1) Lease agreement with hotel operator (2) Own operation under management agreement (3) Own operation under franchise agreement (4) Own opera-tion with independent brand. Read more on pages 22-27. If Pandox takes over a property where a lease already exists, Pandox cannot terminate the lease with the existing tenant before the contract term ends.

Responsibility and inﬂuence in the value chain

Pandox operates throughout the value chain of a hotel - from acquisition and property develop-ment, through both technical maintenance and operating hotels itself, to remodelling, renovation or possibly selling properties. The business is organised in two segments: Property Management and Operator Activities. The ways in which Pandox can pursue sustainability diﬀer between the business segments.

In Property Management, which makes up 84 percent of the property portfolio's market value,

2) There are many diﬀerent aspects of operating hotels in which sustainability is an important consideration, for example in property operation, purchasing, food and beverage, waste, cleaning and marketing.
Full control
3) Exceptions in the form of management agreements may in a few cases aﬀect Pandox's control.

responsibility is shared between the hotel operator and Pandox. Pandox's responsibility in property-related matters is set out in the lease with the hotel operator. The hotel operator is in general responsi-ble for operating the hotel, but its responsibility with respect to investing in technical installations varies between the Nordics and other countries. Overall, Pandox has greater responsibility for the properties in the Nordics than in other countries.

It is the hotel operator, not the property owner, who is responsible for purchasing electricity, water,heating and cooling for the hotels. From a purely theoretical standpoint, Pandox is therefore limited in its ability to inﬂuence which steps are taken to reduce energy and water consumption at the hotel properties operated by Pandox's tenants in the Property Management segment. Pandox's ambition is to inﬂuence this by creating joint incentives in green leases. In the Operator Activities segment, which accounts for 16 percent of the market value, Pandox has full control over the property and the operation of the hotel.

Pandox's sustainability targets and strategy

Pandox's ambition to oﬀer its tenants sus-tainable properties contributes to the UN Sustainable Development Goals, to reduce climate impact from operations and to man-age risks related to climate change. These aims also have a positive impact on Pandox's results through investments and new com- mercial opportunities that drive cash ﬂow.

The targets for this are presented in the section on the Company's focus areas.

The Company's sustainability strategy is based on Pandox's vision and business objectives, its impact on communities in terms of sustainability and climate change, and which issues the stakeholders consider to be important for Pandox to work on.

Current trends and the risks and opportuni- ties identiﬁed by the Company are also taken into account.

In 2020 Pandox reviewed its material topics in sustainability, dividing them into ﬁve focus areas and linking them to the UN's

Sustainable Development Goals. See below.

Pandox's vision, business concept, goals and strategy Read more on page 16.

Value chain

Read more in Sustainability Note K10.

Human rights

Pandox is a member of the UN Global Com-pact and has therefore pledged to work according to its Ten Principles in areas such as human rights, labour right, the environ-ment and anti-corruption. Pandox has zerotolerance for criminality, prostitution or sexual exploitation.

In 2020 an inventory was done of the level of training in human rights at each of the hotels in Operator Activities, with a par-

Control over the supply chain

ticular focus on human traﬃcking and pros-titution. The results showed that the major-ity of the hotels provide regular courses. The courses are of very high quality and are usu-ally produced by established organisations in the area. They provide a deeper under-standing of how to identify, prevent and handle these issues. Only a few individual hotels do not have their own comprehensive training and these have been given access to the courses of other hotels.

One case of prostitution was reported in 2020 at a hotel in the Netherlands. The hotel staﬀ discovered the case and it was immedi-ately reported to the local police.

Pandox has also produced and published a Modern Slavery Act statement in which the Company strongly opposes all forms of exploitation, servitude and child labour.

Pandox's Code of Conduct for Business Part-ners describes the expectations that Pandox has of its suppliers regarding human rights, labour, the environment and anti-corrup-tion. The Code of Conduct for Business Part-ners is based on the Ten Principles of the UN

Global Compact and the ILO Declaration on

Fundamental Principles and Rights at Work.

In 2020 Pandox took a number of steps to improve its work on promoting sustaina-ble supply chains. The Code of Conduct for Business Partners was updated to clarify the requirements with respect to human rights and the environment. The Company also implemented a digital audit system for supplier audits. Suppliers within Property

Management classiﬁed as high risk, primarily in the construction industry, were requiredto ﬁll out a self-assessment form in which they evaluated their own sustainability work. A total of 90 suppliers received the form and 88 percent responded. Pandox then invited 54 suppliers to participate in an online training workshop to help them get started or to improve their existing sustaina-bility-related policies and processes. This will be followed up in 2021.

Pandox has also started individual dia-logue with suppliers whose performance was in the lowest 10 percent of the respondents based on the self-assessment form. The purpose is to encourage and support them to work more professionally and in a structured way on sustainability topics that are critical for Pandox.

The audit process also allows Pandox to foster and intensify relationships with the suppliers who are highly ranked. From the beginning of 2021 new suppliers within Property Management must be audited according to this process before a contract is signed. Pandox will also start random inspections beginning in 2021.

To increase knowledge and expertise, rel-evant employees have completed an internal course on sustainable supply chains. With respect to food and beverage suppliers,Pandox has been able to use its position to enable all hotels in Operator Activities - regardless of brand - to use Hilton's sup-plier platform. This is a digital purchasing system and it guarantees that the suppliers have been audited and that any discounts will beneﬁt the users. It also minimises situ-ations where bribery might occur.

In 2020 the Purchasing Policy for main-tenance and development in Property Management was introduced to set internal standards for conscious purchasing proce-dures. The Policy covers aspects such as waste services and purchasing of wood, paint and bathroom products in connection with renovations. Wooden products are to be environmentally certiﬁed, paint must be water-based and bathroom products need to have low-ﬂow solutions without compromis-ing the guest experience. A Maintenance Policy was also introduced to describe the work processes and procedures to be used within Pandox in this area. The objective is to ensure structured processes and good documentation of planned actions in each property, which will also help in budget planning in the medium term.

For data on anti-corruption and supplier audits, see Notes K10 and K11.

Focus area

Guest satisfaction and safety

Satisﬁed guests at the hotels, operated by Pandox, is the result of successfull operation. Pandox's properties must be safe and secure for those working there on a daily basis and those temporarily visiting. The Covid-19 pandemic has put new pressure on the organisation.

Pandox's targets and results in the guest satisfaction and safety focus area

Targets

Who is affectedOutcome 2020

Guest satisfaction

At least 80% of the guests at Pandox-operated hotels would recommend Pandox hotels to others

82%

Guest safety

Guests at Pandox-operated hotels must always experience Pandox's operations and hotels as safe

No incidents reported

Guest privacy and data security

Zero tolerance for incidents in own operations

No incidents reported

Outcome 2019	Contributes to the UN SDGs
85%	N/A
No incidents reported	Targets 3.4 and 8.8
One incident reported	N/A

Operator Activities - own hotel operations

Pandox (Property Management + Operator Activities + head oﬃce)

Satisﬁed hotel guests

Guest satisfaction is the most important indicator in the Operator Activities business segment as it shows how well a hotel is living up to the guests' expectations and indirectly how competitive the products Pandox oﬀers its guests are, in the form of attractive prop-erties. Drivers of guest satisfaction include personal service, individual attention, prod- ucts that oﬀer value for money, safety, consistent quality of service and product delivery, community engagement and a focus on the environment. People booking conferences and travelling in business in particular want hotels to be environmentally certiﬁed. Leisure travellers have also started to require this, as more and more people become aware of the climate crisis today.

Pandox's long-term objective is for guest satisfaction to exceed 80 percent for hotels that have been included in Operator Activi-ties for one year or more. Guest satisfaction was 82 (85) percent according to Pandox's annual guest survey, which was conducted by an external party in 2020. The decrease can mainly be linked to restrictions due to Covid-19 such as those that limited supply, for example restaurant closures.

82% (85%)

satisﬁed hotel guests

in 2020

Hotel guest health and safety

Hotel guests expect the hotel to deliver a safe and memorable experience. The hotel prem-ises are to be safe and the employees must have the right skills to operate them in a safe and secure way.

Within the Property Management seg-ment it is the tenant who is responsible for all forms of security such as perimeter protection, for example window and door alarms, security guards and surveillance cameras. Within Operator Activities, Pan-dox is responsible for security. Hotel safety is an area covered in Pandox's Code of Con-duct for employees. In addition, all hotels in Pandox's Operator Activities segment have emergency preparedness plans and safety policies in place.

Safety is also a topic covered in the Pandox Code of Conduct training. The employees also receive training in ﬁrst aid and all hotels regularly perform ﬁre and evacuation drills. No incidents relating to hotel guest health and safety were reported in 2020.

For more information on employees and guests, see Notes K9 and K12.

Pandemic-related actions

In response to Covid-19 Pandox introduced additional safety measures to ensure that guests can be safe while on the premises. Pandox ensures that all public spaces at the hotels, such as toilets, reception areas and lobbies, as well as the surfaces touched the most within the hotel, are cleaned more frequently.

Many hotels within Operator Activities, such as Hilton hotels, use a safety seal for conference rooms and hotel rooms. This is an additional assurance that the room has been cleaned and can be used safely. Thehotels also constantly provide updated information on various restrictions in order to guide and reassure the guests.

Pandox has also increased ventilation to improve the air quality and installed CO2 sensors to measure carbon dioxide levels in the indoor air and to optimise air ﬂow. The

Company has also increased the number of times the water system is ﬂushed to mini- mise the risk of Legionnaires' disease while fewer guests are on the premises.

Being proactive during the pandemic

Say hello to Patrick Krueger, Director of Operations Germany. Can you tell us about some actions you took to increase safety during the pandemic?

"One important step we took was to proactively obtain the Bureau Veritas SafeGuard hygiene label for ﬁve hotels that we operate ourselves. The hotels were the ﬁrst in Germany to obtain this certiﬁcation which guarantees that appropriate health, safety and hygiene protocols are in place. The purpose is to be able to provide a safe environ-ment for guests and employees during the pandemic. It includes training personnel in the increased hygiene standards required during a pandemic. The certiﬁcation was then communi-cated to the guests via the hotel's website and in display at the hotel, to reassure the guests that they could feel safe on the property. This initiative was highly appreciated by employees and guests."

Patrick Krueger,

Director of Operations Germany

Data security and customer integrity

Data security and protecting the guests' per-sonal data are critical for Pandox. The Code of Conduct for employees contains guide-lines on integrity and information security. To minimise the risk of a data breach, train-ing in data security takes place locally at each hotel as well as through the mandatory Group-wide digital training. To protect the guests' personal data Pandox uses technical and organisational protective measures, such as ﬁrewalls and password-protected systems. Employees must also respect the guests' privacy and ensure that their personal data is treated conﬁdentially.

In 2020 there were 0 (1) GDPR breaches and no customer data was lost.

Why are there so few women in hotel general manager positions in Europe?

What is it like being a woman and a hotel general manager in an industry where two out of three general managers are men? Ellen Deboeck, General Manager at Hilton Grand Place in Brussels, shares her thoughts.

WHAT IS IMPORTANT IN ORDER TO SUCCEED IN THE ROLE OF GENERAL MANAGER?

"Ultimately it's about making a diﬀerence through the right leadership, decisions and priorities. Communicating a clear vision to the team and staying updated of new trends in travel, communication and conferences."

WHY DO YOU THINK THERE ARE SO FEW WOMEN IN HOTEL GENERAL MANAGER POSITIONS IN EUROPE?

"Plenty of studies show that gender equality in the workplace adds value. Still, despite the fact that women make up 50 percent of the workforce in Europe, only a third of gen-eral managers are women. But I think this is changing. Today gender equality is high up on the agenda - both in the media and in businesses - in a way that was not the case a few years ago. This reﬂects the current situa-tion. A heightened focus on gender equality is increasing opportunities for women to reach higher positions."

"Pandox's culture is very attractive to female leaders. All the right conditions exist for female leaders to have the chance to perform at a high level. We also provide an atmosphere of individual freedom, trust and respect. We need to work in a more structured way on this issue."

WHAT IS THE BIGGEST CHALLENGE IN BEING A WOMAN AND A GENERAL MANAGER?

Ellen Deboeck, General Manager at Hilton Brussels Grand Place.

"The biggest challenge is the stereotypical assumptions and hidden biases that prevent gender equality in the job market. Women in managerial positions are asked questions about their work-life balance - something that men are never asked about. Also, there is an assumption that women are more driven by their emotions and less able to make decisions, which is entirely wrong."

eration and try to make sure the hotel indus- try oﬀers gender equality in the workplace. I see this as part of our responsibility as lead-ers. But above all, more gender equality helps make companies better.

WHAT DO YOU CONSIDER TO BE THE MAIN OPPORTUNITIES?

WHAT CAN PANDOX DO TO BETTER SUPPORT WOMEN IN GENERAL MANAGER ROLES?

"At Pandox we can make a diﬀerence and continue working towards breaking the glass ceiling. When we build our careers and achieve success we are honouring all the inspiring women who came before us - who paved the way for our generation. Similarly, it's our duty to pave the way for the next gen-

"Pandox's culture is very attractive to female leaders. All the right conditions exist for female leaders to have the chance to perform at a high level. We also provide an atmos-phere of individual freedom, trust and respect. We need to work in a more struc-tured way on this issue and be observant sothat we don't inadvertently negatively impact motivation or opportunities for women in our company. This creates the right conditions for growth! I've had the good fortune to be surrounded by inspiring leaders who have given me opportunities to have an impact, and who have taught me how the industry works and how to achieve results in a very competitive sector. Some areas where improvement is needed are net-working and mentorship, and identifying and developing talented women. We should ask our people what they need and make sure we create a culture that is stimulating for them and makes it easier to thrive.

"I start each work day by checking the energy and water consumption in our energy system. This allows me to quickly identify any prob- lems and ﬁx them."

Abdel Jabbar Rharssi, Cluster Chief Engineer, Hilton Brussels Grand Place and The Hotel, Brussels.

Green heroes

You don't notice them at ﬁrst. That's because true heroes are not the type to boast. They work quietly and methodically behind the scenes to make sure that the buildings are resource eﬃcient and oﬀer a good indoor environment for employees and guests. Abdel Jabbar Rharssi is one of them, which is why he received Pandox's "Green Hero of the Quarter" award for his work on sustainability at two of the Company's hotels in Brussels.

Abdel Jabbar Rharssi has worked for Pandox since 2018. He started working at The Hotel in Brussels and is now also responsible for Hilton Brussels Grand Place. Abdel was named a Pandox Green Hero in 2020. His proactive stance, good technical knowledge and a profound business focus are what led to him receiving this award.

machinery or equipment are not performing optimally, so I can quickly take steps to ﬁx the issue and save energy. I can also identify any water leaks and reduce the risk of poten- tial damage to the building. We think ﬁrst, make a considered decision and then act.

manager to change the nighttime settings and this enabled us to save energy and money."

WHAT'S THE BEST THING ABOUT YOUR JOB?

HOW DOES SUSTAINABILITY FIT INTO YOUR DAY-TO-DAY WORK?

"I start each work day by checking the energy and water consumption in our energy system. This allows me to see if any items of

We've installed submeters so we can see how much energy is being consumed in dif-ferent parts of the building. This provides us with valuable information. For example, one submeter showed high nighttime consump-tion for one of our tenants in the building, even though they only operate during the day. We worked with their operations

"I appreciate my colleagues and the fact that we work together to solve any problems that arise. Most of the work we do is behind the scenes - not always visible - but it's still vital in ensuring that everything is working properly. It's encouraging to meet satisﬁed guests who like our hotel and want to come back."

Focus area Attractive and equal workplace

Pandox's corporate culture is the key to the Company's success. It provides the right conditions for motivated and independent employees with clear authority in their roles, and for equality in the workplace. Pandox has 1,148 employees from 91 diﬀerent countries, which reﬂects the diversity in the hotel industry.

Pandox's targets and results in the focus area attractive and equal workplace

Targets

At least 80% satisﬁed employees in annual survey

Increase the percentage of women in the roles of general manager and hotel manager

Start collecting sickness absence data from the beginning of 2020

Who is affected

Operator Activities - own hotel operations

Outcome 2020

81%

30%

Executed

Outcome 2019	Contributes to the UN SDGs
80%	Targets 3.4, 4.4, 4.5, 5.1, 5.5, 8.5, 8.7, 8.8 and 10.2
13%	Targets 5.1, 5.5 and 10.2
N/A	Targets 3.4 and 8.8

Pandox (Property Management + Operator Activities + head oﬃce)

Eﬀects of the pandemic Attractive employer

When the Covid-19 pandemic was in full force in 2020, 760 employees were fur- loughed and 179 had to be laid oﬀ, calculated as the number of full-time equivalents. Since support packages varied from country to country, more workers were furloughed in the countries where the most support was provided. However, the majority of the hotels were not fully closed because they needed to be prepared to start up again with-out too much of a delay once restrictions were lifted. This proved to be a good strategy when some restrictions were eased during the summer.

For more information, see Note K9.

Pandox makes every eﬀort to be one of the most attractive employers in the industry. In order to be an attractive employer, Pandox oﬀers a dynamic but also secure working envi-ronment that encourages development and does not tolerate discrimination or harass- ment. Employees are oﬀered a clear mandate to succeed in their role at work. As the Com-pany has a lean organisation, having a strong moral compass and independence is essential.

In 2020 a survey was introduced for hotel employees within Operator Activities. The purpose is to measure employee satisfaction on a quarterly basis and the short-term tar-get is a score of 80 percent. The employees also have an opportunity to suggest improvements. The 2020 result was 81 (80) percent. No incidents of discrimination were reported in 2020.

Employee turnover is another indicator of how satisﬁed the employees are. The turn- over of Pandox's hotel employees was 36 (22) percent in 2020. Employee turnover at the head oﬃce was 8 (2) percent. All of Pandox's employees are able to join a trade union. Collective agreements are used in Operator Activities and collective bargaining takes place. In 2020 a total of 72 (70) percent of employees within Operator Activities were covered by collective bargaining agree-ments.

Also, workplace evaluations of the physi-cal and psychosocial work environment are carried out every three years or when signiﬁ-cant changes are made within the organisa-tion, such as in connection with renovation or remodelling.

Development opportunities

Personal development is a company priority.

Pandox's ambition is to oﬀer all employees training, development opportunities and career planning, as well as ﬂexible ways to ﬁnd balance in their lives. In 2020 perfor-mance and career development reviews were conducted with 43 (66) percent of Pandox's employees. The reduction relates to Opera-tor Activities and is due to fewer hours worked by the employees in 2020.

As the majority of the employees in Oper-ator Activities were furloughed, only a few courses were completed during the year.

Health and safety

All employees are to have a healthy, safe and secure work environment. Risk assessments are carried out on a regular basis. Risks identi- ﬁed are usually associated with building sites and physical risks at hotels, such as the risk of ﬁre and of trips, slips and falls. All employees receive annual training, information and instructions on safety. There are procedures in place to review evacuation routes and check emergency lighting and signs on an ongoing basis. While renovations are taking place emergency exit routes must be maintained by keeping evacuation routes clear and by keep-ing emergency lighting in working order and ﬁre detection systems active.

During the year 0 (0) work-related deaths occurred and 1 (5) workplace injury of a more serious nature occurred. This

Health and wellness

Pandox aims to ensure that employees have a good work-life balance and encourages physical activity to promote wellbeing and improved performance. Pandox Movement is an initiative for the head oﬃce and the Prop-erty Management segment where employees participate together in sports and other physi-cal activities. Employees are encouraged to challenge themselves and set ambitious goals, such as taking part in races such as "Spring för

Livet" (Run for Your Life). Last summer around 30 key employees together climbed Kebnekaise, Sweden's highest mountain, in a joint leadership challenge aimed at increasing team spirit. This was a particularly important internal initiative in the wake of Covid-19.

Hotels in the Operator Activities segment are themselves responsible for the health

PANDOX'S CORE VALUES

It is important to the Company that all employees have a strong moral compass, take the initiative and are independent. This is because Pandox is a lean organisation ﬁlled with a spirit of entrepreneurship where everyone helps out and every employee is vital. Pandox also has an amusing company symbol in its illustrations of Pepper the dog, who is always up to his tricks. He is there to remind all employees to enjoy themselves and not to take them-selves too seriously.

involved a server slipping on a wet ﬂoor, resulting in a broken knee. Pandox has also started collecting data on sickness absence to analyse the current situation and to see if the Company needs to establish common goals for this going forward.

Contractors taken on for renovation, remodelling or extension work are instructed in Pandox's health and safety rou-tines and, in their capacity as employers, are formally responsible for investigating and taking steps if any of their employees are injured at work. Pandox has no formal responsibility for the employees of the ten- ants. However, Pandox does try to inﬂuence their practices through its Code of Conduct for Business Partners, which describes what the Company expects of them.

For more information on health and safety see Note K9.

and wellbeing programmes oﬀered to the employees and this is often determined by which brand they operate under. Some hotels oﬀer employees wellness opportuni-ties in the form of use of the hotel's gym, pool and sauna before or after their shift. Some hotels oﬀer employees help to stop smoking as a way of promoting better health. In 2020 some initiatives were paused or had to change course due to restrictions relating to Covid-19.

Employees at Pandox's head oﬃce were oﬀered a health survey to complete at speciﬁc intervals depending on their age. The employees were also able to obtain computer screen glasses paid for by the Company.

For data on the employees' health and safety, see Sustainability Note K9.

Diversity and gender equality

Future generations of employees will want their employer to take responsibility in the community and focus on sustainability issues such as gender equality, diversity and the climate 1). The hotel industry is charac-terised by diversity - both in terms of nationality and age groups. Pandox's employees should reﬂect the diversity that exists among the guests. There is, however, a lack of women in senior roles overall, and particularly outside the Nordics. Pandox is therefore requiring equal gender representa-tion in the recruitment process for senior roles in the Operator Activities segment. Of the three new general managers recruited in 2020, two are women and one is a man. The total percentage of female general managers at the end of 2020 was 30 (13) percent.

Also, an analysis of diversity and inclu-sion among the employees was to be con-ducted during the year to provide the Com-pany with a clearer picture of how they feel about their work situation. As the majority of the employees were furloughed, this process has been postponed until 2021. The purpose is to ensure that Pandox is living up to its ambition of being a fair and equal com-pany. The results of the analysis will be pre-sented to the executive management team, so that they are well-informed about the challenges and opportunities that exist within the Company. The process will also include some concrete proposals on how to proceed in promoting gender equality and diversity.

1) Most important when choosing an employer - Young Profes-sional Attraction Index 2020, Academic Work.

Focus area

Living local communities

Hotels play a vital role in the local community. Hotels create jobs, experiences and a place to stay, but they also make a positive contribution to development in society and to safe and vibrant city centres.

Pandox's targets and results in the living local communities focus area

Targets

Who is affected

Outcome 2020 for 20 hotels

Outcome 2019 for 16 hotels

Contributes to the UN SDGs

Community projects

Every hotel and the head oﬃce will be involved in at least one project to sup-port the local community in 2020 (Target: at least 19 projects)

18 hotels

15 hotels

Targets 4.4, 4.5, 8.6 and 10.2

All hotels are to have facade and/or entrance lighting to increase safety in the vicinity

14 hotels

11 hotels

Target 11.7

Operator Activities - own hotel operations

Pandox (Property Management + Operator Activities + head oﬃce)

For a living local community

Hotels have a signiﬁcant role to play in the local community by providing experiences, meetingplaces and a place to stay for the night, and as employers and purchasers of local products and services. Hotels are also a vital part of the tourism industry as they generate income for the government at the national and municipals levels and for the local community. By working closely with the local community and employing people who live in the area, hotels can also support social sustainability. The hotel properties also play an important role in helping to create safe and vibrant city centres. Safety in the area around hotels can be improved by, for example, lighting up entrances and facades. 14 of 20 hotels in Operator Activities have lighting at their entrances and 15 have surveillance cameras.

Community engagement

One aspect of Pandox's leadership is contrib-uting to local communities where the Com-pany operates and in areas where Pandox's employees have particular expertise, skills and interests. Pandox's community engage-ment strategy requires all hotels in Operator Activities, as well as the head oﬃce, to sup-port at least one local project. The choice of organisation or project is determined by the employees, as real engagement comes from the grass roots.

In 2020 all hotels except for 2 (1) in Oper-ator Activities were involved in a local project and progress is being monitored in 2021. Examples of projects include providing food to homeless people and oﬀering internships to young people with disabilities.

A selection of Pandox's joint projects

ENBACKSSKOLAN IN TENSTA

Pandox is working closely with Enbacks-skolan in Tensta, a school in a socio-economically vulnerable area outside Stockholm. The purpose is to broaden the students' network of contacts in the job market and to lower entry barriers in society by facilitating integration through, for example, workplace visits and practi-cal workplace experience. Unfortunately this initiative had to be postponed due to Covid-19 restrictions. However, Pandox is going to help Enbacksskolan to hold Swe- den's ﬁrst education fair for schools in vul-nerable areas in 2021. The goal is to create an arena for those at vulnerable schools to discuss current topics, share their experi-Pandox also wants to oﬀer the students leisure activities outside their neighbour-hood, which many of them seldom leave. This provides them with a safe and enjoy-able way to experience other parts of Stockholm with surrounding areas. Through this initiative Enbacksskolan was able to arrange a trip to Romme so that students in grade 7 to 9 could learn to ski in the winter season. Bus trips were arranged to various bathing spots and theme parks during the summer break, as many students have parents who cannot aﬀord a holiday. Students in grade 8 and 9 went to a camp in the Björnö nature reserve in August where they camped for two nights. Many of these students hadences and pursue various issues.

The podcast studio at Enbacksskolan, which was created by Pandox and the school two years ago, won the interna-tional Quality Innovation Award in 2020 in the Innovation in the Education Sector category. Various organisations in society and experts on diﬀerent topics that stu-dents and parents do not normally comeinto contact with, are interviewed in pod-cast format. This gives students the opportunity to turn sociology theory in the classroom into a practical exercise. The podcast format acts as a channel to increase interaction and the students' awareness, knowledge and community engagement. This initiative also led to a partnership with the Järva news agency.

not spent time in nature before and the experience encompassed a range of sub-jects such as biology, physical education and science. According to the students, this trip was the highlight of their year.

MASKROSBARN

Pandox supported children's rights organisation Maskrosbarn's summer campaign during the summer. The summer is especially diﬃcult for children whose parents struggle with addiction or mental illness, or for children exposed to violence. Accord-ing to children's rights organisation BRIS, the number of calls it received relating to mental illness increased by 30 percent every week between the months of March and May 2020.

The purpose of the campaign was to raise funds in order to oﬀer recre-ational activities that allow children to take a break from their everyday lives. Another objective was to make summer camps available to more children, allowing them to get away from a dysfunctional home life and meet trained coaches and others in similar situations.

GIVING PEOPLE

Summer 2020 was particularly diﬃcult ﬁnancially for many families where parents were laid oﬀ or furloughed. In response Pandox decided to support the organisation Giving People which pro-vides families in vulnerable areas with groceries. Bags of groceries were dis- tributed to families who cannot aﬀord to buy the essentials to get by, which isespecially important when all meals had to be eaten at home during the pandemic. In many families the only food the chil-dren get is what is served at school.

THE SALVATION ARMY

Pandox decided to give the Salvation Army a Christmas gift. The Salvation Army (in Sweden Frälsningsarmén) is a Christian organisation active in 90 cities in Sweden that supports groups such as single mothers and pensioners who are in need of food, clothes, hygiene prod-ucts, nappies and, not least, advice and support in contacts with various authorities. Many are living at the sub-sistence level and some even below it,and therefor ﬁnd it hard to put food on the table for their children. In December the Salvation Army distributed gift cards for ICA grocery stores. The amounts varied depending on the size of the household.

Geographical overview

Belgium

Share of Pandox total 6% 9 hotels 7% 2,474 rooms 6% of market value

Demand

InternationalRegionalDomestic

Crowne Plaza Brussels - Le Palace Green KeyIHG Green

354 rooms

EngageSafe Guard

Green Key

NH Brussels Bloom 305 rooms

Hotel Indigo Brussels City 284 rooms

Safe Guard

Green Key

Green KeyIHG Green

Hilton Grand Place Brussels 224 rooms

EngageSafe Guard

IHG Green Engage

Crowne Plaza Antwerp 262 rooms

Safe Guard

Demand

Denmark

Share of Pandox total

5% 8 hotels
5% 1,845 rooms
5% of market value

InternationalRegionalDomestic

Copenhagen

Nordic Swan

Scandic Hvidovre 207 rooms

Nordic Swan

Scandic Copenhagen 486 rooms

Urban House Copenhagen by MEININGER 228 rooms

Hotel Mayfair 203 rooms

Green Key

Nordic Swan

Scandic Glostrup 120 rooms

Finland

Share of Pandox total 9% 14 hotels 9% 3,081 rooms 6% of market value

Demand

InternationalRegionalDomestic

Scandic Imatran Valtionhotelli 137 rooms

Pilot Airport Hotel 109 rooms

Scandic Park Helsinki 523 rooms

Nordic Swan

Scandic Kuopio 137 rooms

Nordic Swan

Hilton Helsinki Strand 190 rooms

Canada

Share of Pandox total 1% 2 hotels 3% 952 rooms 2% of market value

Montreal

Demand

InternationalRegionalDomestic

Green Key

InterContinental Montreal

Safe Guard

Green Key

InterContinental Montreal

Green Key

InterContinental Montreal 357 rooms

Safe Guard

DoubleTree by Hilton Montreal 595 rooms

ISO 14001

Safe GuardSafe Guard

DoubleTree by Hilton Montreal

Green KeySafe Guard

Netherlands

Share of Pandox total 1% 2 hotels 1% 405 rooms 3% of market value

Norway

Share of Pandox total 9% 14 hotels 7% 2,573 rooms 5% of market value

InternationalRegionalDomestic

Demand

InternationalRegionalDomestic

Demand

Bergen

Planet 21

Novotel Den Haag World Forum 216 rooms

Green Globe

Park Centraal Amsterdam 189 rooms

ISO 14001

Comfort Hotel Bergen 159 rooms

Nordic Swan

Scandic Solli 226 rooms

Norway, cont.

Green Key

Radisson Blu Bodø 191 rooms

Scandic Haell 210 rooms

Scandic Lillehammer 303 rooms

Clarion Collection Bastion 99 rooms

ISO 14001

Scandic Sørlandet 210 rooms

Nordic Swan

Scandic Valdres 139 rooms

Sweden

Share of Pandox total 27% 42 hotels 25% 8,788 rooms 24% of market value

Demand

InternationalRegionalDomestic

Malmö

Nordic Swan

Scandic Grand Örebro 224 rooms

ISO 14001, 9001, 50001

Hilton Stockholm Slussen 289 rooms

Green Key

Elite Stora Hotellet Jönköping 167 rooms

Nordic Swan

Vildmarkshotellet Kolmården 213 rooms

Scandic Kramer 113 rooms

Nordic Swan

Switzerland

Share of Pandox total

1% 1 hotel
1% 206 rooms
1% of market value

Basel

Austria

Share of Pandox total 1% 2 hotels 2% 639 rooms 2% of market value

Demand

InternationalRegionalDomestic

Green Key

Radisson Blu Basel 206 roomsRadisson Blu Basel

Green Key

NH Salzburg City 140 rooms

Eco Friendly

NH Vienna Airport 499 rooms

ISO 14001

Germany

Share of Pandox total 24% 38 hotels 24% 8,366 rooms 25% of market value

Demand

InternationalRegionalDomestic

Planet 21

Dorint am Dom Erfurt 160 rooms

IHG Green Engage

Holiday Inn Lübeck 159 rooms

Planet 21

Dorint Parkhotel Bad Neuenahr 238 rooms

Leonardo Royal Köln am Stadtwald 150 rooms

Safe Guard

ISO 14001

NH München Airport 236 rooms

Eco Friendly

Germany, cont.

Leonardo Royal Frankfurt 449 rooms

Eco Friendly

NH Collection Hamburg 129 rooms

Green Key

Radisson Blu Bremen 235 rooms

Hotel Berlin, Berlin 701 rooms

Green Key

Safe GuardISO 14001

Leonardo Hannover Airport 214 rooms

Safe GuardBREEAM

Radisson Blu Cologne 393 rooms

Green Key

United Kingdom

Share of Pandox total 13% 21 hotels 15% 5,286 rooms 15% of market value

Demand

InternationalRegionalDomestic

Jurys Inn Glasgow 321 rooms

Green Tourism Gold

Hilton Garden Inn Heathrow 364 rooms

Green Tourism Gold

Jurys Inn Sheﬃeld 259 rooms

The Midland Manchester 312 rooms

Green Tourism Gold

Safe Guard

ISO 14001

Jurys Inn Birmingham 445 rooms

Green Tourism Gold

United Kingdom, cont.

Jurys Inn Dublin Christchurch 182 rooms

Green Tourism Gold

Jurys Inn Dublin Christchurch

Green Tourism Gold

Ireland

Share of Pandox total 2% 3 hotels 1% 445 rooms 2% of market value

Demand

InternationalRegionalDomestic

Jurys Inn Galway 130 rooms

Green Tourism Gold

Jurys Inn Cork 133 rooms

Green Tourism Gold

Jurys Inn Cork

PROPERTY PORTFOLIO

Property portfolio

At year-end 2020, Pandox's property portfolio consisted of 156 (155) hotel properties with 35,060 (34,685) hotel rooms in 15 (15) countries. The Nordic region made up around 41 (41) percent of the market value of the property portfolio. A total of 136 of the hotel properties are leased to third parties, which means that around 84 percent of

PORTFOLIO OVERVIEW BY SEGMENT AND COUNTRY, 31 DECEMBER 2020

the market value of the property portfolio is covered by long-term external leases. The remaining 20 hotel properties are owned and operated by Pandox.

Pandox's tenant base consists of reputable hotel operators with strong hotel brands in their respective markets.

Number

Property Management

Hotels

Sweden (SE)

Germany (GE)

United Kingdom (UK)

Finland (FI)

Norway (NO)

Denmark (DK)

Austria (AT)

Belgium (BE)

Ireland (IE)

Switzerland (CH)

Netherlands (NL)

Total Property Management

Operator Activities

Belgium (BE)

1 136

Germany (GE)

Canada (CA)

United Kingdom (UK)

Denmark (DK)

Netherlands (NL)

Finland (FI)

Total Operator Activities Total

1 20 156

Market value (MSEK)

Rooms

Per countryAs % of total

8,788

Per room

14,573

24 1.7

6,876

11,962

20 1.7

4,675

8,512

14 1.8

2,921

3,851

6 1.3

2,573

3,036

5 1.2

1,442

2,669

4 1.9

639

1,441

2 2.3

519

870

1 1.7

445

1,366

2 3.1

206

728

1 3.5

189 29,273

1,173 50,181

2 6.2

84 1.7

1,955

3,266

5 1.7

1,490

3,085

5 2.1

952

1,146

2 1.2

611

788

1 1.3

403

713

1 1.8

216

340

1 1.6

160 5,787 35,060

23 9,361 59,542

0 0.1

16 1.6

100 1.7

PORTFOLIO OVERVIEW BY BRAND, 31 DECEMBER 2020

Number

Brand Scandic Jurys Inn Leonardo Hilton Radisson Blu

Nordic Choice Hotels NH

Dorint Crowne Plaza Mercure Elite Hotels Novotel Holiday Inn InterContinental Maritim

Indigo Pullman Meininger Best Western Independent brands Total

HotelsRoomsAs % of total

10,908

4,410

3,547

2,298

2,033

1,837

7 5 2 4

1,681 1,085 616 760

5 3 2 2

2 2

493 421

1 1

2 1

469 357

1 1

316

284

1 1 1

252 228 103

1 1 0

2,962

156

35,060

100

1) Includes the submarkets England, Scotland, Wales and Northern Ireland.

Countries SE, NO, FI, DK

UK, IE

SE, FI, UK, BE, CA CH, GE, UK, NO, SE

SE, NO AT, BE, GE

GE BE GE SE GE, NL BE, GE

CA GE BE GE DK SE

SE, FI, BE, GE, NL, UK 15 1)

Rooms by operator/brand, 31 December 2020

Scandic, 31%

Jurys Inn, 13%

Leonardo, 10%

Hilton, 7%

Radisson Blu, 6%

Nordic Choice, 5%

NH Hotel Group, 5%

Others, 24%

Lease maturity proﬁle 31 December 2020

MSEK

600

100

500

400

300

200

100

00 2021 2027 2033 2039 2045 2051

Expiring rental value, MSEKAccumulated expires, %

CHANGE IN PROPERTY VALUE

Change in property value

At the end of 2020 Pandox's property portfolio had a total market value of MSEK 59,542 (63,469), of which MSEK 50,181 (53,697) was for Investment Properties and MSEK 9,361 (9,772) was for Operating Properties. In January 2020 the acquisition of Maritim Hotel Nürnberg was completed. In April 2020 Pandox took over operating two hotels in central Copenhagen, at which point they were reclassiﬁed from Property Management to Operator Activi-ties. The market value of operating properties is reported for infor-mation purposes only and is included in EPRA NRV. Operatingproperties are recognised at cost less depreciation and any impairment.

At the end of the period the carrying amount of operating properties was MSEK 7,363 (6,861).

At year-end 2020 the average valuation yield amounted to 5.44 (5.41) percent for investment properties and 6.37 (6.41) per-cent for operating properties.

Read more about Pandox's valuation of hotel properties on page 97.

CHANGE IN VALUE - INVESTMENT PROPERTIES
MSEK
Investment properties, opening balance (1 January 2020)	53,697
+ Acquisitions 1)	693
+ Investments in existing portfolio	492
- Divestments	-
+/- Reclassiﬁcations 2)	-739
+ Remeasurement for the year of property, plant and equipment in
comprehensive income	-
+/- Change in value, unrealised	-1,779
+/- Change in value, realised	-
+/- Change in exchange rates	-2,183
Investment properties, closing balance (31 December 2020)	50,181
CHANGE IN VALUE - OPERATING PROPERTIES
(REPORTED FOR INFORMATION PURPOSES ONLY)
MSEK
Operating properties, opening balance (1 January 2020)	9,772
+ Acquisitions 3)	-4
+ Investments in existing portfolio	406
- Divestments	-
+/- Reclassiﬁcations 2)	739
+/- Change in value, unrealised	-1,014
+/- Change in value, realised	-
+/- Change in exchange rates	-538
Operating properties, closing balance (31 December 2020)	9,361

1) Refers to acquisition of a hotel property in Germany at MSEK 639, acquisition of supplemen- tary premises at Jurys Inn Cardiﬀ and adjustments to previously completed acquisitions.
2) Refers to the reclassiﬁcation of two hotel properties in Denmark from Property Management to Operator Activities.
3) Refers to adjustment for Novotel Hannover (MSEK -2) and Novotel Den Haag World Forum (MSEK -2).

Pandox's own brands, 31 December 2020

SIGNIFICANT DROP IN THE TRANSACTION MARKET IN 2020

Volumes on the global hotel transaction market decreased by around 60 percent in 2020, heavily impacted by Covid-19 and the uncertainty brought by the pandemic.

Trends on the transaction market:

• Venture capital and high net worth individuals are expected to be active buyers of hotel properties in 2021
• Development of traditional management agreements
• Changed consumer behaviours will inﬂuence the design of hotel rooms
• ESG will become increasingly important

STRONG RECOVERY EXPECTED IN 2021

The global transaction market is expected to increase by around 35-40 percent in 2021 compared with 2020. Investors are expected to particularly favour assets in resort destinations and less densely populated cities.

Source: JLL Hotel Investment Outlook 2021.

Property list

Property Management

Environmental certiﬁcation/

Hotel	City	Location	environmental management system	Type of agreement 1)
Sweden
Best Western Royal Star, Älvsjö	Stockholm	Congress centre	Green Key	OG
Clarion Grand, Helsingborg	Helsingborg	City centre	ISO 14001	OG
Clarion Grand, Östersund	Östersund	City centre	ISO 14001	OG
Elite Park Avenue, Gothenburg	Gothenburg	City centre	Green Key	OG
Elite Stora Hotellet, Jönköping	Jönköping	City centre	Green Key	OG
Hilton Stockholm Slussen	Stockholm	City centre	ISO 9001, ISO 14001, ISO 50001,	O
Light Stay, Green Key
Mora Hotell & Spa	Mora	City centre	OG
Quality Ekoxen	Linköping	City centre	ISO 14001	OG
Quality Grand, Borås	Borås	City centre	ISO 14001	OG
Quality Luleå	Luleå	City centre	ISO 14001	OG
Quality Park, Södertälje	Södertälje	City centre	ISO 14001	O
Quality Winn, Gothenburg	Gothenburg	Ring road	ISO 14001	OG
Radisson Blu Arlandia	Stockholm	Airport	Green Key	OG
Radisson Blu Malmö	Malmö	City centre	Green Key	OG
Scandic Alvik, Stockholm	Stockholm	Ring road	Nordic Swan	OG
Scandic Backadal, Gothenburg	Gothenburg	Ring road	Nordic Swan	OG
Scandic Crown, Gothenburg	Gothenburg	City centre	Nordic Swan	O
Scandic Elmia, Jönköping	Jönköping	Congress centre	Nordic Swan	OG
Scandic Grand, Örebro	Örebro	City centre	Nordic Swan	O
Scandic Hallandia, Halmstad	Halmstad	City centre	Nordic Swan	O
Scandic Helsingborg Nord	Helsingborg	Ring road	Nordic Swan	OG
Scandic Järva Krog, Stockholm	Stockholm	Ring road	Nordic Swan	O
Scandic Kalmar Väst	Kalmar	Airport	Nordic Swan	OG
Scandic Kista	Stockholm	City centre	Nordic Swan	O
Scandic Kramer, Malmö	Malmö	City centre	Nordic Swan	O
Scandic Kungens Kurva, Stockholm	Stockholm	Ring road	Nordic Swan	OG
Scandic Linköping Väst	Linköping	Ring road	Nordic Swan	OG
Scandic Luleå	Luleå	Ring road	Nordic Swan, BREEAM certiﬁcation	OG
in progress
Scandic Malmen, Stockholm	Stockholm	City centre	Nordic Swan	OG
Scandic Mölndal, Gothenburg	Gothenburg	City centre	Nordic Swan	O
Scandic Norrköping Nord	Norrköping	Ring road	Nordic Swan	OG
Scandic Park, Stockholm	Stockholm	City centre	Nordic Swan	O
Scandic Plaza, Borås	Borås	City centre	Nordic Swan	O
Scandic S:t Jörgen, Malmö	Malmö	City centre	Nordic Swan	OG
Scandic Segevång, Malmö	Malmö	Ring road	Nordic Swan	OG
Scandic Skärholmen	Stockholm	City centre	Nordic Swan	O
Scandic Star Sollentuna	Stockholm	City centre	Nordic Swan	OG
Scandic Sundsvall Nord	Sundsvall	Ring road	Nordic Swan	OG
Scandic Södertälje	Södertälje	Ring road	Nordic Swan	OG
Scandic Winn, Karlstad	Karlstad	City centre	Nordic Swan	O
Scandic Örebro Väst	Örebro	Ring road	Nordic Swan	OG
Vildmarkshotellet, Kolmården	Norrköping	Resort	Nordic Swan	OG
Norway
Clarion Collection Arcticus, Harstad	Harstad	City centre	ISO 14001	OG
Clarion Collection Bastion, Oslo	Oslo	City centre	ISO 14001	O
Comfort Børsparken, Oslo	Oslo	City centre	ISO 14001	OG
Comfort Hotel Bergen	Bergen	City centre	ISO 14001	OG
Scandic Alexandra, Molde	Molde	City centre	Nordic Swan	O
Radisson Blu Bodø	Bodø	City centre	Green Key	OG
Scandic Kokstad, Bergen	Bergen	Airport	Nordic Swan	O
Scandic Bodø	Bodø	City centre	Nordic Swan	O
Scandic Haell	Øyer	Resort	Certiﬁcation in progress	O
Scandic Lillehammer	Lillehammer	City centre	Certiﬁcation in progress	O
Scandic Ringsaker	Hamar	Ring road	Nordic Swan	OG
Scandic Solli, Oslo	Oslo	City centre	Nordic Swan	OG
Scandic Sørlandet, Kristiansand	Kristiansand	Resort	Nordic Swan	O
Scandic Valdres, Fagernes	Fagernes	Resort	Certiﬁcation in progress	O

1) O = Revenue-based, OG = Revenue-based with guaranteed minimum rent level, OR = Revenue-based and proﬁt-based, R = Proﬁt-based, F = Fixed, IO = International proﬁt-based,

M = Management agreement, FR = Franchise agreement, AM = Asset management agreement.

Number ofOperator/brand

Sq mrooms

BrandDemand 1)

Private/Best Western

Nordic Choice Hotels/Clarion Hotel Nordic Choice Hotels/Clarion Hotel Elite/Elite Hotels

Elite/Elite Hotels Hilton/HiltonPrivate/Independent

Nordic Choice Hotels/Quality Hotel Nordic Choice Hotels/Quality Hotel Nordic Choice Hotels/Quality Hotel Nordic Choice Hotels/Quality Hotel Nordic Choice Hotels/Quality Hotel Radisson Hospitality/Radisson Blu Radisson Hospitality/Radisson Blu Scandic/Scandic Scandic/Scandic Scandic/Scandic

Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic

Scandic/Scandic Scandic/ScandicScandic/Scandic Scandic/Scandic Scandic/ScandicScandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Private/IndependentNordic Choice Hotels/Clarion Collection Hotel Nordic Choice Hotels/Clarion Collection Hotel Nordic Choice Hotels/Comfort Hotel

Nordic Choice Hotels/Comfort Hotel Scandic/Scandic

Radisson Hospitality/Radisson Blu Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic

1) D = Domestic, R = Regional, I = International.

4,900

8,555

8,766

103

158

197

Best Western Nordic Choice Hotels Nordic Choice Hotels

21,998

11,378

326

167

Elite Hotels Elite Hotels

18,416

289

Hilton

14,671

12,166

10,292

9,161

9,593

5,800

140

208

158

220

157

121

Independent Nordic Choice Hotels Nordic Choice Hotels Nordic Choice Hotels Nordic Choice Hotels Nordic Choice Hotels

15,260

18,969

342

229

Radisson Blu Radisson Blu

12,075

24,380

9,397

324

236

338

Scandic Scandic Scandic

11,230

12,900

11,300

11,581

7,617

9,399

5,485

5,517

7,441

287

224

170

240

215

150

149

113

257

Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic

6,105 5,565

153 160

Scandic Scandic

15,130 11,000 6,768

332 208 151

Scandic Scandic Scandic

12,290

10,592

24,401

18,573

10,580

10,300

6,284

7,400

4,948

5,630

7,621

203

204

288

169

208

270

169

131

199

212

213

Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic Independent

3,540

4,688

9,736

5,920

112

248

159

Nordic Choice Hotels Nordic Choice Hotels Nordic Choice Hotels Nordic Choice Hotels

18,356

15,546

165

191

Scandic Radisson Blu

9,654

199

Scandic

8,750

136

Scandic

9,540

210

Scandic

18,000

303

Scandic

9,250

176

Scandic

12,962

226

Scandic

9,940

210

Scandic

10,310

139

ScandicR D D R D R

D D D D D R R D R R R D D D D R D R D R D D

Bureau Veritas

During the year Pandox worked closely with Bureau Veritas in respect of the hotels Pandox operates itself, with the aim of achieving a high standard of health, safety and hygiene for both employees and guests during Covid-19.

Bureau Veritas is a world leader in testing inspection, classiﬁcation, consult- ing and certiﬁcation services. Bureau Ver-itas performed remote and site audits on Pandox hotels to ensure compliance with good hygiene practices, social distancing and other recommendations by the authorities aimed at controlling the risk of spreading Covid-19.

R R D R D D D R R D D D D D

During the year 15 hotels that Pandox operates itself were awarded the Safe-Guard label, which shows that the hotels have addressed material risks and met strict hygiene standards.

D R R D D D D D D D D R D D

The Hotel Brussels


Hotel	City
Denmark
Urban House by Meininger Copenhagen	Copenhagen
Scandic Copenhagen	Copenhagen
Scandic Glostrup	Copenhagen
Scandic Hvidovre	Copenhagen
Scandic Kolding	Kolding
Scandic Sluseholmen	Copenhagen
Finland
Skyline Airport Hotel	Vantaa
Pilot Airport Hotel	Vantaa
Hilton Helsinki Kalastajatorppa	Helsinki
Hilton Helsinki Strand	Helsinki
Scandic Imatran Valtionhotelli	Imatra
Scandic Espoo	Espoo
Scandic Grand Marina, Helsinki	Helsinki
Scandic Jyväskylä	Jyväskylä
Scandic Kajanus	Kajaani	Congress centre
Scandic Kuopio	Kuopio	City centre
Scandic Park, Helsinki	Helsinki	City centre
Scandic Rosendahl, Tampere	Tampere	Resort
Scandic Tampere City	Tampere	City centre
Germany
Dorint am Main Taunus Zentrum Frankfurt	Frankfurt	Ring road
Dorint an der Kongresshalle Augsburg	Augsburg	City centre
Dorint an den Westfalenhalle Dortmund	Dortmund	Congress centre
Dorint am Dom Erfurt	Erfurt	City centre
Dorint Parkhotel Bad Neuenahr	Bad Neuenahr	Resort
Mercure Frankfurt Airport	Frankfurt	Airport
Mercure Frankfurt Eschborn Ost	Frankfurt	City centre
Mercure München Neuperlach	Munich	City centre
Pullman Stuttgart Fontana	Stuttgart	City centre
Mercure Schweinfurt Maininsel	Schweinfurt	City centre
Leonardo Aachen	Aachen	City centre
Leonardo Düsseldorf Airport - Ratingen	Düsseldorf	Airport
Leonardo Düsseldorf City Center	Düsseldorf	City centre
Leonardo Frankfurt City South	Frankfurt	Airport
Leonardo Hamburg City Nord	Hamburg	City centre
Leonardo Hannover	Hannover	City centre
Leonardo Hannover Airport	Hannover	Airport
Leonardo Heidelberg	Heidelberg	City centre
Leonardo Heidelberg-Walldorf	Heidelberg	City centre
Leonardo Karlsruhe	Karlsruhe	City centre
Leonardo Köln-Bonn Airport	Cologne	Airport
Leonardo Mannheim City Center	Mannheim	City centre
Leonardo Mönchengladbach	Mönchengladbach	City centre
Leonardo Royal Baden-Baden	Baden-Baden	City centre
Leonardo Royal Düsseldorf Königsallee	Düsseldorf	City centre
Leonardo Royal Frankfurt	Frankfurt	City centre
Leonardo Royal Köln Am Stadtwald	Cologne	City centre
Leonardo Wolfsburg City Center	Wolfsburg	City centre
Maritim Nürnberg	Nuremberg	City centre
NH Collection Hamburg	Hamburg	City centre
NH Frankfurt Airport	Frankfurt	Airport
NH Munich Airport	Munich	Airport
Radisson Blu Cologne	Cologne	Congress centre

Environmental certiﬁcation/
Location	environmental management system	Type of agreement 1)
City centre	OG
City centre	Nordic Swan	O
Ring road	Nordic Swan	O
Ring road	Nordic Swan	O
Ring road	Nordic Swan	OG
Ring road	Nordic Swan	O
Airport	EcoCompass	OG
Airport	O
Ring road	ISO 14001, Light Stay	OG
City centre	Nordic Swan	OG
City centre	Certiﬁcation in progress	OG
Ring road	Nordic Swan	O
City centre	Nordic Swan	OG
City centre	Nordic Swan	OG
Nordic Swan	O
Nordic Swan	OG
Nordic Swan	OG
Nordic Swan	O
Nordic Swan	OG
Planet 21	F
Planet 21	OG
Planet 21	OG
Planet 21	OG
Planet 21	F
Planet 21	F
Planet 21	F
Planet 21	F
Planet 21	F
Planet 21	F
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
OG
Fair Pﬂichtet, ISO 14040	F
Eco Friendly	F
Eco Friendly	OG
ISO 14001, Eco Friendly	OG
Green Key	OG

1) O = Revenue-based, OG = Revenue-based with guaranteed minimum rent level, OR = Revenue-based and proﬁt-based, R = Proﬁt-based, F = Fixed, IO = International proﬁt-based,

M = Management agreement, FR = Franchise agreement, AM = Asset management agreement.

Operator/brand

Meininger/Meininger Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/ScandicPrivate/Independent Private/Independent Scandic/Hilton Scandic/Hilton Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/Scandic Scandic/ScandicHR Group/Dorint HR Group/Dorint HR Group/Dorint HR Group/Dorint HR Group/Dorint HR Group/Mercure HR Group/Mercure HR Group/Mercure HR Group/Pullman HR Group/Mercure Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Fattal/Leonardo Maritim/Maritim NH/NH Collection NH/NH

NH/NH

Radisson Hospitality/Radisson Blu

Sq m

8,158

31,500

5,767

9,005

10,472

14,177

9,717

3,570

26,171

18,450

12,234

6,407

29,607

8,952

13,405

9,538

32,271

18,348

19,012

13,518

9,300

14,000

15,050

22,496

5,325

10,000

9,557

10,306

9,929

5,320

9,900

10,544

15,800

9,237

10,350

11,777

9,484

7,966

8,857

7,900

10,300

6,018

8,300

20,771

24,000

9,500

19,275

14,795

11,611

14,564

7,148

29,746

1) D = Domestic, R = Regional, I = International.

Number of roomsBrand

228

Meininger

486

120

207

186

215

Scandic Scandic Scandic Scandic Scandic

214

109

Independent Independent

238

190

Hilton Hilton

137

470

150

181

137

523

213

263

Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic Scandic

282

184

221

160

238

Dorint Dorint Dorint Dorint Dorint

150

224

253

252

133

Mercure Mercure Mercure Pullman Mercure

199

134

295

182

178

214

169

161

147

177

148

128

121

253

449

150

343

316

Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Leonardo Maritim

129

158

236

393

NH NH NH Radisson Blu

Demand 1)

R R R R D R

R R R R D D R D D D R D D

R D D D D R R R R D D R R R R D D D D D R D D D R R R D D R R R

Environmental certiﬁcation/
Hotel	City	Location	environmental management system	Type of agreement 1)
United Kingdom
England
Hilton London Heathrow Airport	London	Airport	ISO 14001, LightStay	O
Jurys Inn Birmingham	Birmingham	City centre	Green Tourism Gold	OG
Jurys Inn Bradford	Bradford	City centre	Green Tourism Gold	OG
Jurys Inn Brighton Waterfront	Brighton	City centre	Green Tourism Silver	OG
Jurys Inn Cheltenham	Cheltenham	City centre	Certiﬁcation in progress	OG
Jurys Inn East Midlands Airport	East Midlands	Airport	Green Tourism Bronze	OG
Jurys Inn Hinckley Island	Hinckley	Ring road	Certiﬁcation in progress	OG
Jurys Inn Leeds	Leeds	City centre	Green Tourism Gold	OG
Jurys Inn London Croydon	London	City centre	Green Tourism Gold	OG
Jurys Inn Manchester	Manchester	City centre	Green Tourism Gold	OG
Jurys Inn Middlesbrough	Middlesbrough	City centre	Green Tourism Silver	OG
Jurys Inn Oxford	Oxford	Ring road	Certiﬁcation in progress	OG
Jurys Inn Sheﬃeld	Sheﬃeld	City centre	Green Tourism Gold	OG
Jurys Inn Swindon	Swindon	City centre	Green Tourism Gold	OG
The Midland, Manchester	Manchester	City centre	Green Tourism Gold	OG
Ireland
Jurys Inn Cork	Cork	City centre	Green Tourism Gold	OG
Jurys Inn Dublin Christchurch	Dublin	City centre	Green Tourism Gold	OG
Jurys Inn Galway	Galway	City centre	Green Tourism Gold	OG
Northern Ireland
Jurys Inn Belfast	Belfast	City centre	Green Tourism Gold	OG
Scotland
Jurys Inn Glasgow	Glasgow	City centre	Green Tourism Gold	OG
Jurys Inn Inverness	Inverness	City centre	Green Tourism Silver	OG
Wales
Jurys Inn Cardiﬀ	Cardiﬀ	City centre	Certiﬁcation in progress	OG
Other
Belgium
NH Brussels BLOOM!	Brussels	City centre	Green Key	OG
NH Brussels EU Berlaymont	Brussels	City centre	Green Key	OG
Netherlands
Park Centraal Amsterdam	Amsterdam	City centre	Green Globe	OG
Switzerland
Radisson Blu Basel	Basel	City centre	Green Key	OG
Austria
NH Salzburg City	Salzburg	City centre	Eco Friendly	OG
NH Vienna Airport	Vienna	Airport	ISO 14001	OG

1) O = Revenue-based, OG = Revenue-based with guaranteed minimum rent level, OR = Revenue-based and proﬁt-based, R = Proﬁt-based, F = Fixed, IO = International proﬁt-based,

M = Management agreement, FR = Franchise agreement, AM = Asset management agreement.

Operator/brand

Sq mNumber of roomsBrand

Hilton/Hilton Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Independent

Fattal/Jurys Inn Fattal/Jurys Inn Fattal/Jurys Inn

Fattal/Jurys InnFattal/Jurys Inn Fattal/Jurys Inn

25,090

Demand 1)

27,455

398

FACTS - TOTAL PANDOX PORTFOLIO

Rooms by agreement type, 31 December 2020

11,866

Hilton

28,290

13,615

12,749

10,160

16,755

11,600

6,092

6,416

7,869

8,625

9,589

445

34,500

198

210

122

164

362

248

240

265

132

240

259

229

Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn Jurys Inn

312

Independent

4,708 6,475 5,107

133 182 130

Jurys Inn Jurys Inn Jurys Inn

13,023

I R D R D D D D I R D R D D RD I R

270

Revenue-based with guaranteed minimum rent level, 58%

Revenue-based, 19% Fixed, 7%

Franchise

(Operator Activities), 8%

Independent

(Operator Activities), 5%

Management (Operator Activities), 3%

Rooms by brand, 31 December 2020

Jurys Inn

14,465 4,993

321 118

Jurys Inn Jurys InnDR D

Scandic, 31%

Jurys Inn, 13%

Leonardo, 10%

Hilton, 7%

Radisson Blu, 6%

Nordic Choice, 5%

NH Hotel Group, 5%

Others, 24%

Fattal/Jurys Inn

10,400

142

Jurys Inn

DNH/NH NH/NH

26,963 10,827

305 214

NH NHI IGrand City Hotels/Independent

10,811

189

Independent

IRadisson Hospitality/Radisson Blu

19,493

206

Radisson Blu

RNH/NH NH/NH

7,301 22,208

1) D = Domestic, R = Regional, I = International.

140 499

NH NH

R I

Operator Activities

Hotel Belgium

City

Crowne Plaza Antwerp

Antwerp

Crowne Plaza Brussels - Le Palace

Hilton Grand Place Brussels

Holiday Inn Brussels Airport

Hotel Hubert Brussels

Hotel Indigo Brussels City

The Hotel Brussels

Finland

Hotel Korpilampi, Espoo

Denmark

Hotel Mayfair Hotel Twentyseven Canada

DoubleTree by Hilton Montreal InterContinental Montreal Netherlands

Novotel Den Haag World Forum United Kingdom

England

Hilton Garden Inn Heathrow

Scotland

Radisson Blu Glasgow

Germany

Holiday Inn Lübeck

Hotel Berlin, Berlin

Novotel Hannover Radisson Blu Bremen Radisson Blu DortmundBrusselsBrusselsBrusselsBrusselsBrusselsBrusselsEspooCopenhagen CopenhagenMontreal MontrealThe HagueLondonGlasgowLübeckBerlinHannover Bremen Dortmund

External management agreements

Hotel Bahamas

City

Pelican Bay, Grand Bahama Island*

Lucaya

Location

Ring roadCity centreCity centreAirportCity centreCity centreCity centreResortCity centre City centreCity centre City centre

Congress centreAirportCity centreRing roadCity centreCity centre City centre Congress centre

Environmental certiﬁcation/ environmental management system

IHG Green Engage, SafeGuard, BREEAM certiﬁcation in progressGreen Key, IHG Green Engage, SafeGuard, BREEAM certiﬁcation in progress

Green Key, ISO 14001, LightStay, SafeGuard, FR BREEAM certiﬁcation in progress

Green Key, SafeGuard,

BREEAM certiﬁcation in progressGreen Key, SafeGuard,

BREEAM certiﬁcation in progressGreen Key, BREEAM certiﬁcation in progress IOGreen Key Green KeyGreen Key, SafeGuard Green Key, SafeGuardPlanet 21

ISO 14001, LightStay, SafeGuard, BREEAM certiﬁcation in progress

Green Tourism Silver, BREEAM certiﬁcation M in progress

IHG Green Engage, SafeGuard, BREEAM certiﬁcation in progress

Green Key, ISO 14001, SafeGuard, BREEAM IO certiﬁcation in progress

Planet 21, SafeGuard

Green Key, BREEAM In Use, SafeGuard Green Key, BREEAM In Use, SafeGuard

Location

Resort

Type of agreement 1)

FRFRIOFRIOIO IO

FR M

FRFRM FR FR

Type of agreement 1)

* Owned by Sundt AS, a related party of Helene Sundt AS and CGS Holding AS, a principal shareholder in Pandox. Pandox is paid based on a percentage of the hotel's revenues.

1) O = Revenue-based, OG = Revenue-based with guaranteed minimum rent level, OR = Revenue-based and proﬁt-based, R = Proﬁt-based, F = Fixed, IO = International proﬁt-based,

M = Management agreement, FR = Franchise agreement, AM = Asset management agreement.

Number ofOperator/brand

Pandox/Crowne PlazaPandox/Crowne PlazaPandox/HiltonPandox/Holiday InnPandox/IndependentPandox/IndigoPandox/Independent

Sq mrooms

Brand

18,340 28,095

262 354

Crowne Plaza

Demand 1)

DCrowne Plaza

22,186 21,072

224 310

Hilton

IHoliday Inn

13,850

4,650

FACTS - TOTAL PANDOX PORTFOLIO

Rooms by country, 31 December 2020

100 284

Independent

IIndigo

35,612

Sweden, 25%

Germany, 24%

UK, 15%

Finland, 9%

Norway, 7%

Belgium, 7%

Denmark, 5%

Others, 8%

421

Independent

Pandox/IndependentPandox/Independent Pandox/IndependentPandox/Hilton IHG/InterContinentalGrape/Novotel

Pandox/Hilton

12,918

160

Independent

7,465 7,963

203 200

DIndependent IndependentR R

44,148 25,524

595 357

Hilton InterContinentalI I

10,500

Rooms by demand type, 31 December 2020

216

Novotel

14,733

Domestic, 42%

Regional, 42%

International, 16%

364

Hilton

IRadisson Hospitality/Radisson BluPandox/Holiday InnPandox/IndependentGrape/Novotel Pandox/Radisson Blu Pandox/Radisson Blu

20,261

247

Radisson Blu

7,022

Rooms by location, 31 December 2020

159

Holiday Inn

42,610 13,048 26,900 9,100

701 205 235 190

IndependentD

INovotel Radisson Blu Radisson Blu

D D D

City centre, 61%

Ringroad, 16%

Airport, 11%

Resort, 5%

Congress centre, 4%

Business park, 4%

Operator/brand

Sq mNumber of roomsBrandDemand 1)

Sundt AS/Independent

1) D = Domestic, R = Regional, I = International.

186

Independent

Thorough risk management creates opportunities

A number of factors aﬀect, or could aﬀect, Pandox's operations - either directly or indirectly. Pandox works continuously and in a structured way to identify business risks, in order to manage these as consciously and eﬀectively as possible. Good risk management contributes to proﬁtable growth and strengthens conﬁdence in the Company among the outside world.

WHAT:

Risk is an uncertainty that could prevent Pandox from achiev- ing its business objectives. Risks need to be identiﬁed, evalu-ated and managed on an ongoing basis. Pandox's risk work is based on a combination of expertise, experience, organisation and responsibility, as well as policies, rules and instructions.

HOW:

Pandox's Board of Directors has formal responsibility for the Company's risk management. However, operational responsi-bility is delegated to Pandox's executive management, which works on risk matters as part of the Company's operating activities. Signiﬁcant areas include valuation, ﬁnancing and acquisition of hotel properties, as well as leases and other con-tractual relationships, investments in hotel properties and the running of hotel operations.

Pandox's value creation and operational risk are continually evaluated by the Company's executive management and Board of Directors. Risk is managed through a combination of advanced business expertise and an organisation with a clear division of responsibility. Governance and support are also provided by policies adopted by the Company's Board of Directors as well as supplementary governing documents and instructions.

4 Operations
Internal factors such as Pandox's organisation, eﬃciency and ability to create proﬁtable growth and value for the Company's stakeholders with a predetermined level of risk. This includes compliance risk, which relates to external requirements, rules and laws.
5 Financial

WHAT:

External and internal factors such as ﬂuctuating interest rates and exchange rates, inaccurate property valuations, liquidity risk and counterparty risk. This includes reﬁnancing risk associated with the tenants' ﬁnancial performance and status.

HOW:

Financial risk is regulated primarily in Pandox's Financial Policy. Risks are identiﬁed, assessed and managed continu-ously by Pandox's executive management and Board of Directors, including in a separate Finance Committee.

2 External
3 Strategy

Pandox beneﬁts from a signiﬁcant ﬂow of information about the business climate thanks to its broad geographical pres-ence and large network of business partners and external advisors. As well as having strong internal capacity for analy-sis, executive management and Board of Directors are able to quickly identify, evaluate and act on the risks and opportuni-ties arising in the world around us.

External factors such as the economic cycle, new hotel capac-ity, changed business models, geopolitical events, terrorist attacks and social restrictions - e.g. due to pandemics - can have an eﬀect on the travel market and thus hotel demand.
Internal factors that directly impact Pandox's ability to real-ise its strategy and achieve its business objectives with a predetermined level of risk, such as access to the specialist expertise that allows the Company to run its business competitively.
Pandox's Board of Directors and management jointly evalu-ate key strategic risks and examine the need for adjustments to the Company's strategy on an ongoing basis. Pandox works actively to ensure that the Company is attractive to existing and new personnel.
6
Sustainability
Strategic and operational risk relating to the environment, human rights, social and personal circumstances as well as corruption which, together with the Company's ﬁnancial performance, lay the foundations for the conﬁdence of the world around us.
Pandox's ﬁrst line of defence is the individual employee's competence and the Company's basic values. The risks are regulated in various codes and policies adopted by the Board of Directors and are managed through the Company's active monitoring and control in Operator Activities and in partner-ship with tenants in Property Management.

PANDOX'S RISK WORK

Pandox's business activities are associated with risk and the Com-pany works in a structured and proactive way to map, analyse and manage this. During the year, taking into account the extraordinary circumstances brought about by Covid-19, Pandox worked actively to manage risk through a newly established Financial Committee, with a particular focus on risk associated with the tenants' ﬁnancial status, reﬁnancing of loans and meeting the conditions of the loans.

Risks were continuously assessed and managed within the frame-work of the Company's strategy and operations.

Pandox assesses each risk based on the expected impact (from insigniﬁcant to very signiﬁcant) if the event that triggers the riskshould occur, and the likelihood (from very low to very high) of the risk then being realised. This assessment then forms the basis of an evaluation of how the risk should be prioritised, whether it requires speciﬁc action or if it can be managed as part of Pandox's normal administration. The eﬀectiveness of existing measures to mitigate risk is assessed on a scale ranging from low to high control.

Identiﬁed risks are mapped in a risk matrix based on expected impact and likelihood. By taking active steps the potential eﬀects of risks on the business can be reduced. One example of such a risk is interest rate ﬂuctuation. This risk is managed primarily through

Pandox's Financial Policy and internal expertise in treasury and risk.

FINANCIAL EFFECTS OF CHANGES IN CERTAIN KEY PARAMETERS, AS OF 31 DECEMBER 2020:

Valuation yield

Investment properties, eﬀect on fair value

Change in exchange rates

2 2

5 5

Net operating income*

Change

+/-0.5 pp

+/-1%

Investment properties, eﬀect on revenues*

RevPAR (assuming a 50/50 split between occupancy and rate) 2

+/-1%

Change

Operating properties, eﬀect on revenues*

RevPAR (assuming a 50/50 split between occupancy and rate) 2

Change

+/-1%

Eﬀect on value, MSEK -4,222 /+5,076

+/-356 +/-391 (538)

Revenue eﬀect, MSEK +/-3 (25)

Revenue eﬀect, MSEK +/-7 (23)

FINANCIAL SENSITIVITY ANALYSIS

The sensitivity analysis to the left describes the ﬁnancial eﬀects of changes in certain key parameters linked to risk. The ﬁgures indicate which risk area is most relevant to each parameter. In terms of ﬁnancial report- ing of both income and ﬁnancial posi- tion, it is mainly ﬂuctuating interest rates, changes in RevPAR and valuation yields that have the greatest impact.

Financial sensitivity analysis, eﬀect on earnings

Interest expense with current ﬁxed interest, change in interest rates

Interest expense with a change in the average interest rate

2 2

+/-1% -/+316

Remeasurement of interest rate derivatives following shiﬅ in yield curves

Change

Proﬁt before changes in value, MSEK

5 5

+/-1% -/+118

+/-1% -/+868

* The lower value relates to results for 2020 and the higher value in parentheses relates to a normal year "pre-corona".

2020 has been a unique year from a risk perspective. Pandox's strategy, busi-ness model, organisation, employees, income statement and balance sheet have been tested to an extent never experienced before, due to a great many interacting factors. The main reason was social restrictions at a level unprece-dented in modern history - especially in democratically governed countries - combined with inadequate government support measures that did not com-pensate for the loss of income. Moreover, there was a high correlation of these restrictions between countries. This decreased demand dramatically in all of Pandox's key markets and essentially made the Company's geographical diversiﬁcation ineﬀectual.

The weakest link in the risk chain is currently ﬁnancially squeezed operators that may not be able to pay their rent. This is in turn linked to the

(discounted) cash ﬂows that make up the value of Pandox's hotel properties, which in turn materially aﬀect Pandox's ﬁnancial key ratios such as theinterest coverage ratio and the loan-to-value ratio - and by extension also

Pandox's reﬁnancing risk.

Pandox's ﬁnancial protection consists mainly of contracted minimum rent and ﬁxed rent, which covers all Pandox's costs and ensures an interest coverage ratio with a satisfactory margin against ﬁnancial covenants at Group level. Pandox also has a strong ﬁnancial position with cash and cash equivalents and unutilised credit facilities of MSEK 5,221 as at 31 December 2020. In addition, the fact that Pandox is able to take over operations at hotel properties owned by the Company oﬀers signiﬁcant operational and ﬁnancial protection. However, taking over operations on a large scale can reduce earnings in the short term.

See also pages 92-100 for more information on Pandox's work in the Covid-19 crisis.

PANDOX'S RISKS AND THE COMPANY'S MANAGEMENT OF SUCH RISKS ARE DESCRIBED IN MORE DETAIL BELOW.

Risk

Description

Risk management

1. EXTERNAL RISK
Economic downturn	Economic activity is a primary driver of both business and leisure travel, and a weakened economy can therefore have a negative eﬀect on demand.	• The portfolio consists of a large number of sizeable hotel properties with a good spread as regards geography, location, brand, operating model and type of demand (international, domestic and regional) • The hotel properties are predominantly full-service hotels in the upper-mid scale segment, which has historically been more stable in earnings than, for example, the high price segment
Disruptive business models	Pandox's business model may be challenged by the emergence of new business models, such as online travel agencies (OTAs) and so-called home-sharing services. If Pandox is not able to keep up with the competition, this could have a negative impact on revenues and earnings.	• Pandox works with nearly 30 diﬀerent hotel operators and hotel brands; this gives the Company a unique position as regards information and knowledge of market changes and also helps to spread commercial risk • Pandox's working methods are based on optimising revenues taking into account the distribution landscape and its impact on revenue and costs, including through the support of a Group-wide Revenue Management Centre • Long leases with external hotel operators containing a minimum guaran-teed rent clause and general deductions for commission are not usually permitted
Geopolitical events	Security and geopolitical events can have signiﬁcant eﬀects on travel patterns and demand in the hotel market.	• A well thought-out strategy and business plan exists for each individual hotel property and geographical area; the ability to continually monitor economic conditions for each individual hotel property creates a readiness to make quick business decisions when needed
Overexpansion of hotel rooms	New capacity in the form of new hotels and hotel rooms could have a signiﬁcant adverse impact on RevPAR in individual markets.	• Ongoing market analysis is carried out for each geographical area of oper-ations and hotel property, which means that changes in the market are detected early on and measures can be initiated without delay
Pandemics	Global spread of infectious diseases resulting in extraordinary social measures in many countries simultaneously, such as travel restrictions, limits on meeting up and public gatherings, and restricting the ability to run hotel operations.	• Geographically diversiﬁed hotel property portfolio • Exposure to mainly domestic demand • Signiﬁcant proportion of leases with minimum guaranteed rent level and ﬁxed rental income
2. STRATEGIC RISK
Growth through acquisitions	Risks attributable to acquisitions is mainly the risk of paying too much for assets, the risk of incorrect assumptions as regards future earnings of the acquired asset/business, the risk of tak-ing over leases or other agreements that are unfavourable, and the risk of management time and other resources being spent on acquisitions that are not completed.	• Pandox's long-term focus on hotel properties as a class of asset has generated extensive specialist expertise • An active Board of Directors and active principal shareholders, experienced management and a sound basis for decisions • Pandox has a well thought-out strategy in which the country, city, type of hotel, brand, type of agreement, form of operation and yield are continually and consistently evaluated • Tried and tested due diligence processes supported by internal and external specialists reduce the risk of incorrect acquisitions • Pandox's way of working (the Pandox Method) increases cash ﬂow and limits risk for the hotel in question
Major investments in the existing portfolio	There is a risk that the costs of investments may be higher than expected and that the return is therefore lower than expected because of inaccurate costings, unprofessional procurement or ineﬃcient project implementation.	• Extensive specialist knowledge of the identiﬁcation, evaluation and implementation of investments in the existing hotel property portfolio • Long-term investment management of measures implemented in the property portfolio • Capital expenditure in excess of MSEK 10 is referred to the Board of Directors for a decision • Monthly review of all investment projects • Follow-up and calculation of actual costs and outcomes for completed investment projects
Impact of digitalisation	Pandox's ability to develop its organisation and its way of working to take into account new digital possibilities is a decisive factor in the Company's long-term competitiveness.	• Digital expertise on the Board of Directors • Pandox works proactively at an operational level to gather know-how on strategic digitalisation matters • Work on targeted initiatives is in progress within various parts of the Company

Risk

Description

Risk management

3. OPERATIONAL RISK
Dependence on key individuals	High dependence on individuals in key positions can pose a risk of daily duties not being able to be performed with adequate eﬃciency and quality.	• Plan for long-term talent supply • Good knowledge of external individuals in senior roles for recruitment • Strong external network with supporting specialist expertise • Remuneration Committee that ensures competitive levels of remuneration • Clear personal incentives and long contract terms • Procedures and process descriptions for key functions to reduce dependence on individual personnel
Access to the right competencies	The risk that Pandox is unable to ﬁnd the right competen-cies in new markets or to replace lost competencies in existing markets, or is unable to do so suﬃciently quickly.	• As part of operational HR work, recruitment needs are reviewed regularly at both the central and local level • Strong external network with supporting specialist expertise • Attractive workplace with great personal freedom in professional roles and good opportunities to develop
Tenants' business and ﬁnancial status	The risk that tenants underperform and/or are unable to pay their rent.	• Individual business plans for each hotel property • Each tenant's results are followed up monthly, as are ongoing investment projects • Various guarantees that in certain circumstances may be called on to cover unpaid rent
Integration of acquisitions	Commercial, technical and accounting risks that arise ahead of, during and after an acquisition or business takeover.	• Many years of experience of integrating acquisitions in numerous geographical markets • Clear project organisation and allocation of roles • Internal specialist expertise in property, ﬁnance, tax, valuation, law and communication • Clear work methods and processes • Extensive external network with specialist expertise
Own operating activities at hotels	Pandox is exposed to certain risks that commonly occur within hotel operations, such as increased operating costs that cannot be fully oﬀset by increased room rates or increased prices for other hotel services, the costs of compliance with laws and regulations, the ability to forecast occupancy and average room rates and to plan staﬃng, the quality and reputation of hotel brands used, an inability to keep pace with technical developments, faults in or damage to IT systems, as well as risks and costs associated with protecting the privacy of guests' personal data and providing for their physical safety.	• Strategic and operational work to ensure each hotel is optimally positioned in each market • Strong local management and an eﬀective organisation • A Group-wide Revenue Management Centre for distribution • Modern systems for revenue forecasts, staﬃng and productivity • Ongoing benchmarking and analysis of each hotel's performance in relation to its immediate competitors
IT risk	As digitalisation as increased, so too has the risk of IT inci-dents that could result in the loss, manipulation or locking of data and systems.	• Well-separated system environments with few users at Group level • Regular risk analysis and continual maintenance of IT security supported by external expertise
Tax risk	Pandox could be aﬀected by changes in tax legislation or practice. Pandox's tax situation may worsen if the Company's past or current management and assessment of tax matters is successfully questioned.	• Pandox has internal tax expertise and works with reputable external tax advisors on acquisitions, divestments and ongoing evaluation of changes in tax legislation and its interpretation in each country of operation • Planning of measures based on proposed changes to tax legislation is initiated at an early stage • In the event of inquiries from local tax authorities, reputable external tax advisors are consulted • Pandox has a Tax Policy adopted by the Board of Directors which, among other things, expressly stipulates that Pandox is to comply with all laws and rules in force where the Group's companies operate, and that tax is to be managed on a sound business basis and in an ethical way that is prudent and transparent; aggressive or advanced tax planning is not allowed

Risk

Description

Risk management

4 . FINANCIAL RISK
Fluctuations in interest rates	Interest expense is, and has historically been, Pandox's largest item of expenditure. Interest expense is aﬀected by market interest rates and by credit institutions' margins, as well as by Pandox's strategy as regards ﬁxed interest. The majority of Pandox's credit facilities have a variable rate of interest. There is a risk that Pandox's interest expense will increase if market interest rates rise, or that Pandox will ﬁx its interest rates at a level that is higher than the market interest rate.	• Interest rate derivatives are used - mainly interest rate swaps - in order to manage interest rate risk and increase the predictability of Pandox's earnings • Variable interest rates are partially swapped through interest rate swaps, giving Pandox ﬁxed interest rates • Pandox has a Financial Policy that regulates risk mandates and is approved annually by the Board of Directors • Internal specialist expertise in treasury and risk • Close cooperation with external ﬁnancial expertise
Reﬁnancing and liquidity risk	Reﬁnancing risk is the risk that ﬁnancing cannot be obtained or renewed upon maturing, or only at signiﬁcantly higher costs. Liquidity risk refers to the risk that Pandox will be unable to meet its payment commitments due to a lack of liquidity.	• Pandox has access to long-term ﬁnancing • Pandox's Financial Policy speciﬁes minimum levels of unutilised credit and loan-to-value ratio • Pandox has a liquidity reserve to ensure that the Company is able to meet ongoing payment obligations at all times • Pandox has good access to long-term credit facilities • Pandox has access to long-term ﬁnancing and in 2020 increased both its liquidity and credit facilities • Pandox has a diversiﬁed portfolio of lenders consisting of 11 Nordic and international banking partners • Pandox has established a separate Financial Committee consisting of members of Pandox's Board of Directors and executive management in order to manage key practical and strategic matters relating to the Company's ﬁnancing
Breach of terms and covenants in credit agreements	Considering the extraordinary situation created by Covid-19, it cannot be ruled out that a situation might arise where, for example, commitments and covenants in the Company's credit agreements are not met	• Ongoing monitoring and control of the credit portfolio and its terms and covenants • Proactive and close dialogue with lenders concerning adapting the terms and covenants in existing credit agreements • Speciﬁc actions that can be taken, if needed, to remedy any non-compliance, such as payment of interest into an escrow account, adjustment of covenants, covenant holidays or certain repayments • In 2020 lenders provided waivers in individual credit agreements
Currency risk	Currency risk is deﬁned as the risk of the consolidated income statement and consolidated statement of ﬁnancial position being negatively impacted by exchange rate ﬂuctuations. This risk can be divided up into transaction exposure, i.e. the net amount of operating and ﬁnancial (interest/principal repayment) ﬂows, and translation exposure associated with net investments in foreign Group companies.	• Foreign operations generally report both income and expenses in local currency, which means that currency exposure resulting from current ﬂows, i.e. transaction exposure, is limited. In view of the limited risk, Pandox does not currency-hedge these ﬂows unless there is a particular reason to do so • Equity is currency-hedged ahead of acquisitions, investments and divestments to avoid changes in the value of equity • Pandox reduces its currency exposure associated with net investments in foreign Group companies by taking out loans in local currencies
Certiﬁcation and authorisation	Authority to take decisions, approval matrix and payment processes.	• An approval matrix established by the Board of Directors • Well-deﬁned levels of authority in internal systems • Special veriﬁcation for payments and orders above a certain level in the approval matrix
Financial statements	Errors in or inconsistent quality of both internal and external reporting, such as errors in rent accounting and property valuation. Risks also include late reporting or reporting not being in compliance with the Group's accounting principles.	• Pandox aims to have uniform procedures and checks for ﬁnancial reporting that are adapted to and support its operations across the Group • Manuals, instructions, schedules and reviews with the subsidiaries in the Group to ensure consistent and timely reporting • An Audit Committee appointed by the Board of Directors reviews the Group's ﬁnancial reporting and risk management
Property valuation	Individual and systematic errors in the valuation process, such as incorrect assumptions regarding growth, proﬁtability and valuation yield.	• The valuation model consists of an accepted and proven cash ﬂow model, where the future cash ﬂows the hotel properties are expected to generate are discounted • The valuation is based on the business plan for the hotel concerned, which is updated at least twice a year and takes into consideration, among other things, developments in underlying operator activities, market develop-ments, the contract situation, operating and maintenance issues and investments aimed at maximising the hotel property's cash ﬂow and yield in the long term • External valuations of all properties are carried out annually by independent property appraisers. The external appraisers complete a more in-depth inspection at least every three years or in conjunction with major changes to the properties. These external valuations provide an important reference point for Pandox's internal valuations • Pandox always uses the valuation yield provided by external property appraisers • Quarterly review of valuations by management, Audit Committee and Board of Directors before publication of each ﬁnancial report

Risk

Description

Risk management

5. SUSTAINABILITY RISK
Environment	Pandox impacts the environment through the use of energy, water, chemicals and materials, and generates emissions and waste. A deterioration in the physical environment may impact people in and around our hotels as well as having a negative impact on the properties, which could result in increased costs and a need for investments.	• Environmental Policy • Collaboration with tenants and business partners on investments for environmental improvements • Measures to improve resource eﬃciency through our programme of green investments • Environmental certiﬁcation of hotel operations and properties
Climate change	Extreme weather and ﬂoods could cause damage to the prop-erties. Higher temperatures and more heatwaves could result in water shortages. Scarcity of natural resources could result in increased costs for materials and energy. The transformation of society could result in reduced international travel but greater regional travel, thereby creating new business opportunities.	• Environmental Policy • Measures to reduce energy and water consumption and to lower emissions of greenhouse gases and volumes of waste • Environmental certiﬁcation of hotel operations and properties • Increased use of renewable energy and photovoltaics
Human rights	Failures in the supply chain and in the operations could result in infringement of human rights. In the property sector there is a risk of illegal labour and wage dumping; in the hotel industry, the main risk is of traﬃcking and prostitution in and around the hotels.	• Human Rights Policy • Code of Conduct for employees and business partners • Risk analysis and supplier monitoring process • Training in human rights for employees • Whistleblower system and process for following-up on incidents • Modern Slavery Act statement
Employees	There is a risk that Pandox may be seen as an unattractive employer and ﬁnd it diﬃcult to retain existing staﬀ and to recruit new employees. Dissatisﬁed employees could have a negative eﬀect on the Company, hotel guests and business partners, which is an operational risk.	• Code of Conduct for employees • Healthcare and wellbeing initiatives • Performance and career development reviews and annual pay revision • Opportunities for specialisation and further training • Varied work with great opportunities to have an inﬂuence
Occupational health and safety	In the hotel industry there are health and safety risks due to heavy lifting as well as slips, trips and falls, a risk of suﬀering burns and cuts, and risks relating to threats. Fires are another safety risk. Failures in health and safety procedures could result in injuries and ill-health among staﬀ, guests and suppliers.	• Preventive healthcare and wellbeing initiatives • Regular ﬁre inspections and ﬁre drills • Contingency plans and security policies • Training in CPR and installation of deﬁbrillators
Anti-corruption	Pandox has zero tolerance for corruption. Nonetheless, there is a risk of corruption in connection with, for example, sourcing of goods and services, bribery and partiality when signing agreements, and a risk of internal irregularities.	• Anti-corruption Policy • Code of Conduct for employees and business partners • Anti-corruption training • External whistleblower service for reporting irregularities • Internal control procedures
Data security	The risk that failures in data security and data processing could breach customers' privacy. There is also an increasing risk of falling victim to cybercrime in society.	• Each year the Board of Directors adopts an IT Policy • Code of Conduct for employees • Technical and organisational protective measures, such as ﬁrewalls and password-protected systems • Training of employees • Annual review of risks and vulnerabilities

Corporate data 2020

Financial information, sustainability notes and governance

Clarion Collection Hotel Arcticus

Contents

FROM THE CFO

HOW TO READ THE FINANCIAL INFORMATION

Financial statements for the Group

ADMINISTRATION REPORT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME COMMENTS - CONSOLIDATED COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION COMMENTS - CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOW

COMMENTS - CONSOLIDATED STATEMENT OF CASH FLOW

Financial statements for the Parent Company

PARENT COMPANY INCOME STATEMENT

COMMENTS - PARENT COMPANY FINANCIAL STATEMENTS PARENT COMPANY BALANCE SHEET

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY PARENT COMPANY STATEMENT OF CASH FLOW

Notes

Figures in MSEK unless otherwise indicated.

A.	ALTERNATIVE PERFORMANCE MEASURES
A1.	EBITDA
CASH EARNINGS
EPRA NRV
LOAN-TO-VALUE RATIO
OTHER ALTERNATIVE PERFORMANCE MEASURES
B.	GENERAL INFORMATION AND OVERALL ACCOUNTING
PRINCIPLES
B1.	OVERALL ACCOUNTING PRINCIPLES
B2.	EVENTS AFTER THE CLOSING DAY
B3.	RELATED PARTY TRANSACTIONS
C.	REVENUE AND COSTS
C1.	BUSINESS SEGMENTS
C2.	REVENUE
C3.	CENTRAL ADMINISTRATION COSTS
C4.	COSTS, PROPERTY MANAGEMENT
C5.	COSTS, OPERATOR ACTIVITIES
C6.	OPERATING COSTS BY TYPE
C7.	SALARIES, OTHER REMUNERATION AND PAYROLL OVERHEADS
D.	TAX
D1.	TAX
E.	ASSETS
E1.	INVESTMENT PROPERTIES
E2.	EQUIPMENT/INTERIORS
E3.	OPERATING PROPERTIES
E4.	TRADE ACCOUNTS RECEIVABLE AND DEFERRED RENT
ATTRIBUTABLE TO TEMPORARY PAYMENT TERMS
E5.	OTHER NON-CURRENT RECEIVABLES
E6.	PREPAID EXPENSES AND ACCRUED INCOME

CONTENTS

92 93

OPERATING LIABILITIES

F1. ACCRUED EXPENSES AND PREPAID INCOME 132

F2. PROVISIONS 132

F3. PLEDGED ASSETS AND CONTINGENT LIABILITIES 132

FINANCING, CAPITAL STRUCTURE AND EQUITY

102

103

104

105

106

107

G1. FINANCIAL INCOME AND EXPENSE 133

G2. FINANCIAL RISK AND RISK MANAGEMENT 133

G3. FINANCIAL ASSETS AND LIABILITIES - CLASSIFICATION, 137 FAIR VALUE AND OFFSETTING

G4. EQUITY 139

G5. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES 140

106

GROUP STRUCTURE

H1.

PARTICIPATIONS IN SUBSIDIARIES 141

CASH FLOW STATEMENT

I1.

SPECIFICATION OF CASH FLOWS FOR THE GROUP 144

108

109

110

111

PARENT COMPANY ACCOUNTING PRINCIPLES AND SUPPLEMENTARY DISCLOSURES

J1. PARENT COMPANY ACCOUNTING PRINCIPLES 145

J2. CURRENT AND NON-CURRENT LIABILITIES, PARENT COMPANY 145

J3. APPROPRIATION OF PROFIT 145

SUSTAINABILITY

K1.

ABOUT THE SUSTAINABILITY REPORT 146

K2. MATERIALITY ANALYSIS AND STAKEHOLDER DIALOGUE 147

K3. SUSTAINABILITY MANAGEMENT 150

112

K4. ENERGY 151

K5. CARBON EMISSIONS 151

K6. WATER 152

K7. WASTE 152

K8. SUSTAINABILITY CERTIFICATION 152

K9. EMPLOYEES 153

K10. ANTI-CORRUPTION 156

K11. SUPPLIERS 156

115 117 117

K12. GUESTS 156

FROM THE CHAIRMAN 157

118

CORPORATE GOVERNANCE REPORT 158

120

121

SIGNING OF THE ANNUAL REPORT 164

121

AUDITOR'S REPORT 165

122

125

127 130 130 131

131 131

The formal audited sections of the annual report can be found on pages 94-145 and page 164.

FROM THE CFO

From the CFO

From attack to active defence

2020 was another very active year for Pandox - but for diﬀerent reasons than in previous years because of Covid-19. Over a long weekend in mid-March we completely changed tactics, from focusing on acquisitions and growth to addressing liquidity, ﬁnancial position, minimum rents and government relief programmes. Thanks to Pandox's well-trained team, we were quickly able to organise ourselves and deal with the main issues in order to strengthen our ﬁnancial position and secure liquidity.

CLEAR PRIORITIES IN A DIFFICULT SITUATION

When the WHO conﬁrmed on 11 March 2020 that Covid-19 was a pandemic, we changed our business focus over the course of a long weekend. From being on the attack and looking at acquisitions and growth, we switched to active defence and addressed matters surrounding liquidity, ﬁnancial position, property valuations, minimum rents and government relief programmes.

For me, and for my colleagues in account- ing and ﬁnance, this meant we had new pri- orities in our daily work. The ﬁrst priority was to ensure that we were heading in the same direction and working on the key mat-ters. We increased the number of daily checks, to ensure more than ever that all was in order and that we had good control over our liquidity and incoming and outgoing payments. The second priority was to adaptour existing procedures to be more precise; for example, ensuring that our rents were received at the appointed time. The third focus area was to have close, constructive and proactive dialogue with our lenders so that they would feel secure with the deci-sions we were making. The fourth priority was perhaps the most important: to keep calm - to trust our methods and the "machinery" that we had built up over many years. Many of us have been colleagues for a long time, and we are used to working together both in sunshine and in pouring rain.

RESILIENT BUSINESS MODEL

Pandox's business model, which is largely centred on revenue-based rent, provides powerful leverage when times are good in the hotel market. The defensive qualities of the business model, i.e. minimum and

guaranteed rents, tend to be overshadowed

in normal years but were particularly

important in 2020.

Although the contribution from reve-

nue-based rent was low, our contractual minimum rents and ﬁxed rents amounting to around MSEK 500 per quarter were suﬃ-cient to cover all our costs. With this founda-tion, Pandox is able to report a positive result before changes in value for 2020 - ultimate proof of the defensive qualities of our business model.

Proactive and constructive dialogue with our 11 Nordic and international banking partners meant that in addition to reﬁnanc-ing loans of around MSEK 5,000, we were also able to secure new ﬁnancing for previ-ously completed acquisitions totalling around MSEK 1,665. I'm particularly pleased about this in a turbulent year.

READY FOR ANY SCENARIO

We do not known when the virus will be under control and the world will return to normal, and this is beyond Pandox's control.

What we can inﬂuence is how we ourselves act.

We are going into 2021 with a stable plat-form, good procedures, strong liquidity, a proven business model, good relationships with lenders, long-term shareholders and a clear plan for the way forward. None of this would be possible, however, without our strong team of "Pandoxers" who are solution-minded, courageous and forward-looking. We're ready!

Stockholm, March 2021

Liia Nõu

HOW TO READ THE FINANCIAL INFORMATION

How to read the ﬁnancial information

From a ﬁnancial perspective, Pandox operates two types of business which are reported as distinct business segments. The largest is Property Management which, taking into account the nature of hotel properties, is fully comparable to most otherproperty companies. The second is Operator Activities where Pandox, in addition to owning the hotel property, also operates the hotel in the property. This combination means that Pandox's earnings at the aggre-gate level are not fully comparable withthose of other property companies and that Pandox's two business segments are not fully comparable with each other either.

For a better understanding of Pandox's ﬁnancial statements and to facilitate ﬁnan-cial analysis, we have explained a few important items below.

INCOME STATEMENT

 Net sales: Consists of both rental income from Property Management and revenue from Operator Activities and is therefore less useful as an aggre-gate measurement. Revenue from the respective business segments should be assessed separately.

 Net operating income: For comparability between the business segments, depreciation is added to gross proﬁts for Operator Activities.

 Changes in value: Three diﬀerent types of changes in value are recognised under this heading:

1. Unrealised changes in value of properties refers to the change (increase/decrease) in the market value of investment properties. Remember that operating properties are not measured at market value according to IFRS. They are instead recog-nised at cost. Pandox does, however, assess the market value of operating properties on an ongoing basis and reports the value for information purposes. This value is also included in EPRA NRV.

2. Realised changes in value of properties is the diﬀerence between the properties' book value and the value realised upon divestment.

3. Unrealised changes in value of derivatives refers to the change (increase/decrease) in the market value of interest rate derivatives used to reach a desired interest maturity proﬁle.

 Tax: Consists of current tax, which is the tax on operating activities paid by Pandox, and deferred tax, which - simply put - is equivalent to the change in the diﬀerence between the fair value and the adjusted taxable value of the properties.

 Cash earnings: A key measure of Pandox's ﬁnancial value creation and the basis for valuation of the hotel properties. The item cash earnings con- sists of EBITDA minus ﬁnancial expense (normally signiﬁcant) plus ﬁnancial income (normally marginal) and current tax. Cash earnings are more volatile than net operating income because they include more cost items, which may also vary from quarter to quarter.

Consolidated statement of comprehensive income

FINANCIAL

STATEMENTS FOR THE GROUP

MSEK

Revenue, Property Management

Rental income

Other property revenue Revenue, Operator ActivitiesNet sales

Costs, Property Management

Costs, Operator ActivitiesGross proﬁt

- of which gross proﬁt, Property Management - of which gross proﬁt, Operator Activities

Central administration

Financial incomeFinancial expense

Financial expense for right-of-use assets Proﬁt before changes in value

Changes in value

Properties, unrealised Properties, realised Derivatives, unrealised Proﬁt before tax

Current tax

Deferred taxProﬁt for the year

Other comprehensive income

Items that have been or may be reclassiﬁed to proﬁt or loss Hedging of net investment in foreign operations Translation diﬀerences, foreign operationsOther comprehensive income for the year

Comprehensive income for the year

Proﬁt for the year attributable to the shareholders of the parent company Proﬁt for the year attributable to non-controlling interests

Total comprehensive income for the year attributable to the shareholders of the parent company Total comprehensive income for the year attributable to non-controlling interests

Per share data

Weighted average number of shares

Total earnings per share before and aﬅer dilution, SEK

See comments on next page.

BALANCE SHEET

Note

C1, C2, E1 C1, C2, E1 C1

C1, C4, C6, C7, G5 C1, C5, C6, C7, G5

C1, C3, C6, C7

C1, G1 C1, G1 G1, G5

C1, E1 C1, E1 C1, G2

C1, D1 C1, D1

 Non-current assets: Here operating proper-ties (the sum of operating properties and equip-ment/interiors) are recognised at cost and invest-ment properties at fair value (market value).

 Deferred tax assets: This consists of the carrying amount of tax loss carryforwards which Pandox expects to be able to utilise in future ﬁnan- cial years, and temporary measurement diﬀer-ences for interest rate derivatives. The loss carry-forwards are mainly in the Nordic markets.

Pandox Annual Report 2020 102

 Deferred tax liabilities: These largely con- sist of temporary diﬀerences between the fair value

2020 2019

2,228 3,017

171 112

779 2,424

3,178 5,553

-381 -365

-1,182 -1,993

1,615 3,195

2,018 2,764

-403 431

-171 -175

2 1

-902 -866

-86 -81

458 2,074

-1,779 1,389

0 70

-221 -39

-1,542 3,494

-57 -122

191 -672

-1,408 2,700

-659 520

-351 -474

-1,010 46

-2,418 2,746

-1,399 2,706

and adjusted taxable value of investment proper-Provisionsties, and temporary diﬀerences between the carrying amount and taxable value of operating properties.

 Equity/assets ratio: The equity/assets ratio is a common method of measuring a company's ﬁnancing situation and its ability to withstand ﬁnancial diﬃculties and losses. A company's actual equity/assets ratio may, however, deviate signiﬁ-cantly from the reported equity/assets ratio because it does not take into account so-called hidden reserves, i.e. assets that are not included or may be undervalued in the balance sheet. In Pandox's case EPRA NRV is a more accurate meas-ure of equity because it includes the market value of all properties and derivatives and of deferred tax assets and tax liabilities. Growth in EPRA NRV is also how Pandox measures return on the shareholders' combined equity in the Company.

See page 103 for more comments on Pandox's performance.

-6

2,749 -3

STATEMENTS FOR THE GROUP

FINANCIAL

170,053,287 15.91

Consolidated statement of ﬁnancial position

31 Dec

2020 2019

NoteMSEK ASSETS Non-current assets

Operating properties

Equipment/interiorsInvestment properties

Deferred non-current rent receivables attributable to new temporary payment terms Right-of-use assets

Deferred tax assets Derivatives 1)

Other non-current receivables Total non-current assets

Current assets Inventories Current tax assets

Trade accounts receivable

Deferred current rent receivables attributable to new temporary payment terms Prepaid expenses and accrued income

Other receivables

Cash and cash equivalents

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity

Share capital

Other paid-in capital Reserves

Retained earnings including net proﬁt for the year Total equity attributable to the owners of the parent Non-controlling interests

Total equity

Liabilities Non-current liabilities

Non-current interest-bearing liabilities 2)3)

Other non-current liabilities Non-current lease liabilities

Derivatives 1)Deferred tax liabilities

Total non-current liabilities

Current liabilities Provisions

Current interest-bearing liabilities 2)3)

Current lease liabilities

Tax liabilities

Trade accounts payableOther current liabilities

Accrued expenses and prepaid income Total current liabilities

Total liabilities

Total equity and liabilities

1) The fair value measurement for derivatives belongs to Level 2 in the fair value hierarchy in IFRS, i.e. it is based on inputs that are observable, either directly or indirectly.
2) The carrying amounts of interest-bearing liabilities and other ﬁnancial instruments constitute a reasonable approximation of their fair values.
3) Arrangement fees of MSEK 177 (202) have reduced interest-bearing liabilities.

See comments on next page.

Pandox Annual Report 2020 104

See page 105 for more comments on Pandox's ﬁnancial position.

Administration Report

The Board of Directors and Chief Executive Oﬃcer hereby submit the Annual Report and consolidated accounts for the 2020 ﬁnancial year for Pandox AB (publ), company registration number 556030-7885, Box 15, 101 20 Stockholm, Sweden, street address Vasagatan 11.

Figures in brackets refer to the correspond- ing period the previous year. The ﬁnancial statements are presented in whole millions of Swedish kronor (MSEK), which means that there may be diﬀerences in certain tables due to rounding oﬀ. The Board of

Directors proposes that the income state-ment and balance sheet in the Annual Report be adopted by the Annual General Meeting on 12 April 2021.

The information in the Sustainability Report on pages 146-156 (and 41-61), in the statement by the Chairman on page 157 and in the Corporate Governance Report on pages 158-163 (and 170-173) has not been audited by the Company's external auditors and does not form part of the statutory annual report.

With respect to the Company's ﬁnancial results and position in general, please refer to the ﬁnancial statements and comments that follow.

OPERATIONS

Pandox is listed on Nasdaq Stockholm's

Nordic Large Cap list. Pandox is one of

Europe's leading hotel property companies, with a geographical focus on Northern Europe. Pandox's strategy is to own sizeable hotel properties in the upper-mid to high-end segment with strategic locations in key leisure and corporate destinations. Pandox is an active owner with a business model based on long-term leases with the best

Contribution of business segments to proﬁt

operators in the market. In the absence of these conditions, Pandox has many years of experience of running hotels itself, which creates business opportunities throughout the hotel value chain.

At the end of 2020 Pandox's hotel prop-erty portfolio contained 156 (155) hotels with a total of 35,060 (34,685) hotel rooms in 15 countries, with a market value of MSEK 59,542 (63,469). Of the 156 hotels, 136 (137) were leased on a long-term basis to well-known tenants with established brands, providing income stability and lower investment costs and risk for Pandox. The remaining 20 (18) hotel properties are owned and operated by Pandox under vari-ous brands.

In the Property Management business segment, the acquisition of Maritim Hotel Nürnberg was completed in 2020. Two properties in Denmark were reclassiﬁed to Operator Activities. In addition, an oﬃce property belonging to Jurys Inn Cardiﬀ was acquired.

The weighted average unexpired lease term (WAULT) for investment properties was 14.6 (15.6) years. Pandox has a manage- ment agreement for Pelican Bay Lucaya

Resort in the Bahamas, which is owned by aﬃliates of Helene Sundt AS and CGS

Holding AS.

2020 was a year like no other in the history of the hotel industry. The year was dominated by Covid-19 and the restrictions

MSEK

Proﬁt before changes in value Unrealised changes in value Realised changes in value Operator Activities contribution

Operator Activities

Property Management contribution

Unrealised changes in value Realised changes in value

Property Management Gross proﬁt

Property Management Gross proﬁt	2,018	2,764 2,517 1,882 1,495
Unrealised changes in value	-1,779	1,389 1,428 1,625 1,301
Realised changes in value	0	70 67 6 159
Property Management contribution	239	4,223 4,012 3,513 2,955
Operator Activities Proﬁt before changes in value	-403	431 377 324 292
Unrealised changes in value	-	- - - -
Realised changes in value	-	- - 283 -
Operator Activities contribution	-403	431 377 607 292

introduced to stop the spread of the virus, which had a clear negative impact on demand in the hotel market.

REVENUE AND PROFIT Group

Proﬁt for the year attributable to the Parent

Company's shareholders amounted to MSEK -1,399 (2,706). The decrease is explained mainly by the downturn in the market because of Covid-19 and by unreal-ised changes in the value of properties amounting to MSEK -1,779 (1,389). The Group's net sales totalled MSEK 3,178 (5,553). For comparable units net sales decreased by 50 percent, adjusted for currency eﬀects.

Property Management

Revenue from Property Management amounted to MSEK 2,399 (3,129), a decrease of 23 percent. Revenue includes one-time revenue equivalent to MSEK 28 relating to settlement with Tribe Invest, as well as transition relief totalling the equiva-lent of MSEK 35.

For comparable units revenue decreased by 32 percent, adjusted for currency eﬀects.

The decrease is explained by low demand due to extensive government restrictions in response to Covid-19, which signiﬁcantly limited the ability to operate hotels from

2020

2019

2018

2017

2016

March onwards. The negative eﬀects of Covid-19 were oﬀset to some extent by reve-nue from contractual minimum rent and ﬁxed rent, and a clear improvement in demand during the holiday period in the third quarter and in early autumn. However, the year ended with the reintroduction of restrictions and this had a signiﬁcantly negative impact on demand in essentially all of Pandox's submarkets.

Net operating income from Property Management amounted to MSEK 2,018 (2,764), a decrease of 27 percent. For comparable units net operating income decreased by 31 percent, adjusted for currency eﬀects.

Operator Activities

Revenue from Operator Activities amounted to MSEK 779 (2,424), a decrease of 68 per- cent. Again, the decrease is due to eﬀects related to Covid-19. The relatively large loss of revenue compared with Property Man-agement is partly explained by the fact that as an operator of hotels, Pandox has full exposure to the hotels' revenue, and partly by the higher percentage of large conference hotels in international markets, in particular Brussels. For comparable units revenue and RevPAR decreased by 72 and 75 percent respectively, adjusted for currency eﬀects.

Net operating income from Operator Activities amounted to MSEK -168 (625). The decrease is explained in its entirety by low demand as a result of Covid-19. Pandox beneﬁtted during the period from govern-ment grants equivalent to around MSEK 214 within Operator Activities. Read more in the section on Covid-19 eﬀects.

The Group's EBITDA, ﬁnancial expenses and changes in value

EBITDA amounted to MSEK 1,699 (3,231), a decrease of 47 percent, which is explained by a decrease in underlying net operating income for both Property Management and Operator Activities.

Financial expense amounted to MSEK -902 (-866). The increase is mainly due to increased gross debt.

Proﬁt before changes in value amounted to MSEK 458 (2,074), a decrease of 78 per-cent that is mainly due to the decline in the market because of Covid-19. Unrealised changes in value for investment properties amounted to MSEK -1,779 (1,389); see also the section on the eﬀects of Covid-19. Realised changes in value amounted to MSEK 0 (70). At the end of the period Pandox's property portfolio had a total market value of MSEK 59,542 (63,469), of which investment prop-erties accounted for MSEK 50,181 (53,697) and operating properties for MSEK 9,361

(9,772). The market value of operating prop-erties is reported for information purposes only and is included in EPRA NRV.

Complete information on changes in the value of properties can be found on page 75.

As of 31 December 2020 the average valu-ation yield for Pandox's investment proper-ties was 5.44 (5.41) percent and for operating properties 6.37 (6.41) percent.

Unrealised changes in the value of deriva-tives amounted to MSEK -221 (-39).

CURRENT AND DEFERRED TAX

Current tax amounted to MSEK -57 (-122), which is mainly explained by intra-Group eliminations. Current tax being charged despite a negative result is explained by full intra-Group eliminations - for example across national borders - not being possible. Deferred tax amounted to MSEK 191 (-672).

See also Note D1.

CASH FLOW AND CASH EARNINGS

Cash earnings amounted to MSEK 660

(2,177). Cash ﬂow from operating activities before changes in working capital amounted to MSEK 613 (2,119). Taxes paid amounted to MSEK -45 (-208). The change in working capital aﬀected cash ﬂow in the amount of MSEK -153 (-185). Cash ﬂow from investing activities aﬀected cash ﬂow in the amount of

MSEK -1,598 (-5,188) and is mainly explained by fewer acquisitions. Cash ﬂow from ﬁnancing activities amounted to MSEK 3,071 (3,193). Signiﬁcant items include new borrowing and loan repayments. Cash and cash equivalents at the end of the period amounted to MSEK 2,622 (632).

FINANCING

As of 31 December 2020 the loan-to-value ratio was 48.7 (46.0) percent. Cash and cash equivalents, including credit facilities, amounted to MSEK 5,221 (4,215), of which unutilised credit facilities amounted to MSEK 2,599 (3,583).

At the end of the period the loan portfolio, excluding loan arrangement fees, amounted to MSEK 31,629 (29,823). The average ﬁxed interest period was 2.8 (3.8) years and the average interest rate, corresponding to the interest rate level at the end of the period, was 2.6 (2.6) percent, including eﬀects of interest rate derivatives but excluding arrangement fees. The average repayment period was 2.8 (3.3) years. The loans are secured by a combination of mortgage collateral and pledged shares.

In order to manage interest rate risk and increase the predictability of Pandox's earnings, interest rate derivatives are used, mainly in the form of interest rate swaps. At the end of the period Pandox had interest rate derivatives totalling a gross amount of MSEK 22,395 and a net amount of MSEK 17,441, which is also the portion of Pandox's loan portfolio for which interest rates are hedged. Around 51 percent net of Pandox's loan portfolio was thereby hedged against interest rate movements for periods longer than one year.

At the end of the period, the net market value of Pandox's ﬁnancial derivatives amounted to MSEK -798 (-577).

EQUITY AND NET ASSET VALUE

Equity attributable to the Parent Company's shareholders amounted to MSEK 23,880 (26,350) and EPRA NRV (net asset value) was MSEK 30,813 (34,270). EPRA NRV per share was SEK 167.60 (186.40).

ACQUISITIONS, SALES AND RECLASSIFICATIONS

In the Property Management business segment, the acquisition of Maritim Hotel Nürnberg was completed in 2020 and two properties in Denmark were reclassiﬁed to Operator Activities. In addition, an oﬃce property belonging to Jurys Inn Cardiﬀ was acquired.

Net sales and total net operating income, MSEK

6,000

5,553

5,124

5,000

4,269

3,945

4,000

3,389 3,178

3,057

3,000

2,376

1,934

2,000

1,850

1,000

2016

Net sales

2017

Loan-to-value ratio, %

50.8

47.9

49.7

48.7

46.0

Proﬁt for the year, MSEK

4,000 3,000 2,000 1,000

3,148

2,823

2,700

2,214

-1,408 0

-1,000 -2,000

2018 2019

2020

Total net operating income

2016

2017

2018 2019

2020

2016

2017

2018

2019

2020

INVESTMENTS IN EXISTING HOTEL PROPERTIES

In the period January-December 2020 investments in property, plant and equip-ment, excluding acquisitions, amounted to MSEK 907 (674), of which MSEK 492 (412) was for Investment Properties, MSEK 406 (257) was for Operating Properties and

MSEK 9 (5) was for the head oﬃce. At the end of 2020 approved investments for ongo-ing and future projects amounted to around

MSEK 1,125. Of this ﬁgure, around MSEK 790 is expected to be completed during 2021.

Larger projects are Crowne Plaza Brussels Le Palace, NH Brussels Bloom, Hilton Brus-sels Grand Place, DoubleTree by Hilton Montreal, Holiday Inn Brussels Airport, Hotel Berlin Berlin, Hotel Pullman Stuttgart Fontana, Dorint Parkhotel Bad Neuenahr,

Holiday Inn Lübeck, NH Frankfurt Airport,

NH Munich Airport, The Midland Manches- ter, Scandic Luleå, Quality Park Södertälje,

Hotel Twentyseven and the green invest-ment programme.

PARENT COMPANY

Administration for activities within Pandox's property-owning companies is provided by staﬀ employed by the Parent Company,

Pandox AB (publ). The costs of these services are invoiced to Pandox's subsidiaries. Amounts invoiced during the period January-December 2020 totalled MSEK 150 (122) and proﬁt for the period amounted to MSEK -486 (2,313). At the end of the period the Parent Company's equity amounted to MSEK 8,603 (9,089) and the external interest-bearing debt was MSEK 4,804 (6,305), of which MSEK 3,294 (3,427) was in the form of long-term debt.

SHARES AND OWNERSHIP

The class B shares of Pandox AB (publ) were listed on Nasdaq Stockholm on 18 June 2015. Pandox's share capital at the end of the year amounted to MSEK 460 (460) distributed among a total of 183,849,999 shares, of which 75,000,000 are class A shares and 108,849,999 are class B shares. The shares are denominated in SEK and each share has a quota value of SEK 2.50. According to the Articles of Association, holders of class A shares are entitled to convert all or part of their holding in class A shares to class B shares. The Articles of Association stipulate limitations on the transfer of shares and on voting rights for class A shares. All class B shares are transferable without restriction. Each class A share in Pandox entitles the holder to three votes at shareholders' meet-ings, while each class B share entitles the holder to one vote at shareholders' meetings. No pledges have been made to the employees regarding shareholdings.

Certain of the Group's major ﬁnancing agreements contain a conventional Change of Control clause. This means that in certain circumstances, the lenders have the right to demand renegotiation of the terms or to call for early repayment in the event of a change of control over the Company.

The following shareholders have direct or indirect ownership representing 10 percent or more of the voting rights for all shares in the Company:

Holding on 31 December 2020	% of votes
Eiendomsspar Sverige AB	36.6
Helene Sundt AB	18.2
Christian Sundt AB	18.1

ASSET MANAGEMENT Capital structure

Pandox's target is a loan-to-value ratio of between 45 and 60 percent, depending on the market environment and opportunities that exist.

This key ratio is deﬁned as interest- bearing liabilities divided by the sum of the market value of investment properties and operating properties.

 See also key ratios on page 112.

Dividend

The Board of Directors is proposing that no divided is paid for the 2020 ﬁnancial year.

Pandox's target is a dividend pay-out ratio of between 30 and 50 percent of cash earnings, with an average pay-out ratio over time of around 40 percent. Cash earnings is deﬁned as EBITDA plus ﬁnancial income, less ﬁnan-cial expense and current tax. Future divi-dend pay-out and the size of such dividends depend mainly on Pandox's future perfor- mance, ﬁnancial position, cash ﬂows and working capital requirement.

Debt management

Pandox seeks to achieve the lowest possible ﬁnancing costs while simultaneously limiting interest rate, currency and borrowing risks.

Pandox's Financial Policy describes in more detail how ﬁnancial risks are to be managed.

 For more information see Note G2 on page 133.

Financial targets

Pandox has a dividend target and a capital structure target.

Dividend: Pandox's target is a dividend pay-out ratio of between 30 and 50 percent of cash earnings 1), with an average pay-out ratio over time of around 40 percent.

Capital structure: A reported loan-to-value ratio 2) of between 45 and 60 percent, depending on market development and the opportunities that exist.

DIVIDEND PAY-OUT RATIO of cash earnings, %

LOAN-TO-VALUE RATIO net, %

% 50 40 30 20 10 0

Outcome: No dividend is pro-posed for 2020. Future dividend pay-out and the size of such divi-dends depend on Pandox's future performance, ﬁnancial position, cash ﬂows, working capital requirement, investment plans and other factors.

50.8

47.9

49.7

48.7

46.0

Outcome: At year-end 2020 the reported loan-to-value ratio was 48.7 (46.0) percent.

2016

2017

2018

2019

2020

1) Deﬁned as EBITDA plus ﬁnancial income less ﬁnancial expense less current tax.

2016

2017

2018

2019

2020

Target interval:MinAverageMax

Target interval:MinMax

2) Deﬁned as interest-bearing liabilities less cash and cash equivalents as a percentage of the market value of the properties at the end of the period.

RISKS AND UNCERTAINTIES Summary of Covid-19 eﬀects for Pandox Property Management business segment

Pandox is monitoring and evaluating the business climate on an ongoing basis and is in close dialogue with tenants in the Property Management segment regarding each respective party's business situation.

Contractual guaranteed minimum rents plus contractual ﬁxed rents amount to the equivalent of nearly MSEK 2,000 on an annual basis.

Agreements on temporary changes to payment terms are made with tenants where this is possible and appropriate. No reduc-tions in hotel rents have been granted. At

31 December 2020 accounts receivable relat-ing to deferred rent under new temporary payment terms amounted to the equivalent of MSEK 439.

Pandox received transition relief in government programmes in Norway and Sweden totalling an amount equivalent to MSEK 35 for full-year 2020, which was recognised in Other property revenue.

For more information see page 24.

Operator Activities business segment

Pandox took advantage of relief pro-grammes within Operator Activities in Belgium, Germany, the Netherlands, Canada, and Finland amounting to the equivalent of MSEK 97 for full-year 2020. This is recognised as a decrease in costs under "Costs, Operator Activities".

In addition, around MSEK 117 for the full year was transferred directly from the authorities to Pandox employees in the form of salary support for furloughed personnel. These are therefore not included in Pandox's reported ﬁgures.

The combined government grants received within Operator Activities totalled MSEK 214 for full-year 2020.

For more information see page 26.

Current earnings level

At the end of the year Pandox's total costs were on a par with revenues from contrac- tual minimum rent and ﬁxed rent.

Investments

Planned investments in 2021 amount to the equivalent of around MSEK 790, added to which is MSEK 45 for maintenance. Possible practical restrictions due to Covid-19 consti-tute a risk that planned investment volumes will not be fully reached in 2021.

Valuation of hotel properties

Pandox performs internal valuations of its hotel property portfolio and investment properties are recognised at fair value in accordance with accounting standard IAS 40. Operating properties are recognised at cost less depreciation and any impairment. For operating properties, internal valuations are reported for information purposes only and they are included in EPRA NRV.

The valuation model consists of an accepted and proven cash ﬂow model, where the future cash ﬂows that the hotel proper-ties are expected to generate are discounted by the market yield requirements. The valu-ation is based on the business plan for the hotel concerned, which is updated at least twice a year and takes into consideration, among other things, developments in under-lying operator activities, market develop-ments, the contract situation, operating and maintenance issues and investments aimed at maximising the hotel property's cash ﬂow and yield in the long term. External valu-ations of all properties are normally carried out annually by independent property appraisers. The external appraisers com-plete a more in-depth inspection at least every three years or in conjunction with major changes to the properties. These external valuations provide an important reference point for Pandox's internal valuations.

At the end of 2020 Pandox valued the hotel properties according to the same method and model used since the IPO in 2015.

Uncertainty about the pandemic's impact on future cash ﬂows remains high. This is partly due to uncertainty about vaccination programmes, the spread of infection and related governmental restrictions, and partly to uncertainty about the possible lasting eﬀects of Covid-19 on the economy in general and on the hotel market in the longer term. The pandemic's eﬀects on valu-ation yields cannot yet be determined with any reasonable degree of certainty as there is not suﬃcient evidence available in the trans-action market or for the valuation of hotel properties.

Parameters that aﬀect the valuations are closely monitored and as the eﬀects of

Covid-19 become clearer, Pandox will be able to estimate valuation yields and future cash ﬂows with greater precision.

Due to Covid-19 only about 60 external valuations, as a reference point for Pandox's internal valuations, were carried out during the year.

The external valuations exhibit signiﬁcant variation both within and between markets, which reﬂects continued elevated uncer-tainty. Overall, completed external valu-ations are about 6 percent below Pandox's internal valuations - within a range of about 0 to -10 percent per country. Hotel proper-ties in the Nordic region consistently exhibit less diﬀerence and dispersion between

Pandox's and the external appraisers' values, while there is a greater diﬀerence for hotel properties outside the Nordic region.

The valuation diﬀerence for hotel proper-ties outside the Nordic region is mainly explained by the fact that external apprais-ers have increased the yield requirements on hotel properties based on the assumption of continued negative eﬀects from Covid-19.

For 2020 the unrealised changes in value for investment properties amounted to MSEK -1,779, mainly explained by lower expected cash ﬂows due to Covid-19.

For more information see page 75 and Note E1.

Financing

Pandox has a strong ﬁnancial position. As of 31 December 2020 the net loan-to-value ratio was 48.7 percent, and cash and cash equivalents plus unutilised credit facilities amounted to MSEK 5,221.

Pandox's debt ﬁnancing consists exclu-sively of credit facilities from 11 Nordic and international banks secured mainly by mort-gage collateral. Credit facilities with a matu-rity of less than one year amount to MSEK

5,544. Of this ﬁgure, MSEK 3,802 will mature in December 2021. Constructive discussions on reﬁnancing are ongoing.

At the Group level, Pandox's ﬁnancial covenants are:

1. Loan-to-value ratio at a level where Pandox's ﬁnancial target for loan-to- value provides comfortable headroom
2. Interest coverage ratio at a level where satisfactory headroom is provided by revenue from contractual minimum rents and ﬁxed rents alone

Pandox has a positive and close dialogue with its lenders on new ﬁnancing, reﬁnanc-ing and adjustment of existing terms and covenants taking Covid-19 into account. In 2020 lenders provided waivers in individual credit agreements.

 For more information see page 95 and Note G2.

Government relief programmes for tenants and employees

In certain countries there are programmes that cover a speciﬁc percentage of a compa- ny's ﬁxed costs. In general, there is no rent support for property owners. Tenants in Germany and the UK were able to postpone rent payments during some parts of the year, and to capitalise and pay their rents subse-quently over an extended period. This possi-bility has been extended until 31 March 2021 in the UK but has expired in Germany, which has instead introduced revenue sup- port for companies aﬀected by restrictions in November and December 2020.

After the end of the period, other than the above-mentioned revenue support in Germany, the main form of relief that was still available and that could be used was fur-lough support in Pandox's various markets.

In 2021 Pandox intends to apply for addi-tional government grants to cover costs in 2020, which will be recognised when the ﬁgures are known.

Tax measures

To address the ﬁnancial impact of Covid-19 on Pandox, certain tax measures have been taken such as correcting preliminary tax payments, property tax and deferral of VAT payments. Tax payments for 2020 amount-ing to the equivalent of around MSEK 93, mainly VAT-related, have been deferred until 2021, for example.

Pandox has taken a cautious approach with respect to certain assistance that involves additional costs - for example interest and deferral of tax payments - in order to reduce the one-time eﬀect when the

Covid-19 crisis is over and the relief pack-ages end. Pandox is continually monitoring all new tax incentives that are oﬀered in the jurisdictions where the Company operates and will act when it is deemed appropriate to do so.

Potential eﬀects of Brexit

Pandox's operations in the UK mainly serve local customers and operate in local cur-rency. The preliminary assessment is that the UK's leaving the EU will have a limited eﬀect on Pandox's local operations in the

UK. It is not possible to assess the impact on ﬁnancing in GBP and on the value of invest-ment properties in the longer term, other than as described in the notes concerned. On translation of the UK ﬁnancial state-ments to SEK any changes in the exchange rate between SEK and GBP will aﬀect the consolidated ﬁnancial statements.

General risks and uncertainties

Risks and uncertainties that impact Pandox's earnings and cash ﬂow from operating activ-ities are mainly related to changes in rental income in Property Management and changes in revenue and costs in Operator Activities.

The primary operating risks consist of a weakening of the hotel market and/or increased competition, a fall in occupancy rates and thereby lower revenue, unfavour-able cost development and lower productivity.

 Pandox's risks and risk management are described further on pages 84-89.

Rental income in Property Management is largely linked to the hotels' revenue and normally involves a guaranteed minimum rent, making it possible to have increased income in an improved market as well as downside protection in a weaker market. In some cases, however, the minimum rent is at a signiﬁcantly lower level than the current revenue-based rent. Also, it is the hotel operator that has operational responsibility and thereby has the greatest ability to impact the hotel's results. The division of maintenance costs and investments between the tenant and the hotel property owner distinguishes hotel properties from other real estate because the tenant bears a greater responsibility.  This is described further on pages 24 and 33.

Within the Operator Activities business segment Pandox has operational and invest-ment responsibility, and is thereby fully exposed with respect to operations and proﬁts.  This is described further on pages 24 and 33.

Pandox has a substantial loan portfolio and interest expense is the Company's largest expense item. Pandox is exposed to changes in interest levels as a result of changed market interest rates and/or interest rate margins from Pandox's lenders. Reﬁnancing risk is the risk of not being able to obtain or renew ﬁnancing when a loan matures, or being forced to borrow at a signiﬁcantly higher cost. Liquidity risk is the risk that Pandox will not have suﬃcient funds to meet its payment obligations at any point in time.

 Financial risks are described in detail on page 84 and in Note G2.

TAX SITUATION

At the end of the year deferred tax assets amounted to MSEK 631 (383). This consists mainly of the carrying amount of tax loss carryforwards which the Company expects to be able to utilise in future ﬁnancial years,and temporary measurement diﬀerences for interest rate derivatives.

Deferred tax liabilities amounted to MSEK 4,307 (4,552) and relate mainly to temporary diﬀerences between fair value and the taxable value of investment proper- ties, as well as temporary diﬀerences between the carrying amount and the taxable value of operating properties.

ONGOING DISPUTES

The tenant at Park Centraal Amsterdam has ﬁled a lawsuit against a Pandox subsidiary demanding certain temporary adjustments to an existing lease, mainly with respect to the minimum rent level. Court proceedings are expected to commence in the second quarter of 2021.

A Pandox subsidiary has ﬁled a lawsuit against Köln Bonn Airport which has not granted an extension of a heritage building right for the Leonardo Hotel Köln Bonn

Airport property. The hotel has 177 rooms. An initial oral hearing in court was held at the end of January 2021. Pandox believes that there is a good possibility of a favour-able resolution, or compensation, for the Company.

As Pandox previously communicated, it has received a decision from the Swedish Tax Agency regarding the Group's transfer pricing. Pandox has now appealed the deci-sion to the Supreme Administrative Court and is waiting for a decision, which is expected to be handed down in 2021. Pandox is maintaining its position that the Company has followed the law. Pandox's transfer pric- ing does not diﬀer from industry practice.

However, the Swedish Tax Agency is of the opinion that proﬁts are to be allocated not to the country where the properties are located and the operations are conducted, but to the country of the parent company - i.e. Sweden. Pandox maintains that the Group's companies are following and have followed applicable laws on transfer pricing and taxation in the countries where the Group's companies operate. Pandox has been granted an exten-sion of payment by the Swedish Tax Agency due to the uncertainty regarding the out-come of the case. Pandox believes that there is a good possibility that a higher court will rule in favour of the Company.

WORK OF THE BOARD OF DIRECTORS

A statement by the Chairman can be found on page 157. A Corporate Governance Report has been prepared and can be found on pages 158-163 and 170-173. The

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Pandox AB published this content on 25 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 March 2021 08:58:05 UTC.

Real-time Estimate Cboe Europe Other stock markets 05:08:52 2024-04-26 am EDT			5-day change	1st Jan Change
168.2 ^SEK	+1.57%		-0.59%	+11.30%

Apr. 25	Transcript : Pandox AB, Q1 2024 Earnings Call, Apr 25, 2024
Apr. 25	Pandox AB Reports Earnings Results for the First Quarter Ended March 31, 2024	CI

Outcome 2019	Contributes to the UN SDGs
Started this year	Targets 6.4, 7.2, 7.3, 8.4, 11.6, 12.4, 12.5, 13.1 and 15.5
83% of 16 hotels	Targets 6.3, 6.4, 7.2, 7.3, 8.4, 11.6, 12.4, 12.5 and 13.1
69% of 138 hotels	Targets 6.3, 6.4, 7.2, 7.3, 8.4, 11.6, 12.4, 12.5 and 13.1
80% of 16 hotels	Target 7.2
19% of 16 hotels	Target 7.2
Implementation started	Targets 8.4, 12.3 and 12.5
For outcome see page 50	Targets 6.4, 7.3, 8.2, 8.4 and 11.6
-	Targets 6.4, 7.2, 7.3 and 8.4

Outcome 2019	Contributes to the UN SDGs
83%	Targets 3.4, 4.4, 4.5, 5.1, 5.5, 8.5, 8.7, 8.8, 10.2 and 16.5
0 cases	Target 8.7
0 cases	Target 16.5

Transcript : Pandox AB, Q1 2024 Earnings Call, Apr 25, 2024	Apr. 25
Pandox AB Reports Earnings Results for the First Quarter Ended March 31, 2024	Apr. 25	CI
Pandox Sells Canadian Hotel for CA$80 Million	Apr. 15	MT
An unknown buyer completed the acquisition of DoubleTree by Hilton Montreal from Pandox AB (OM:PNDX B).	Apr. 14	CI
Pandox AB Approves Dividend	Apr. 10	CI
Pandox Strikes CA$80 Million Deal to Divest Canadian Hotel	Feb. 26	MT
An unknown buyer has entered into an agreement to acquire DoubleTree by Hilton Montreal from Pandox AB (OM:PNDX B) for CAD80 million.	Feb. 25	CI
Transcript : Pandox AB, 2023 Earnings Call, Feb 08, 2024	Feb. 08
Pandox AB Proposes a Dividend	Feb. 08	CI
Pandox AB Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 08	CI
Pandox AB Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 08	CI
Pandox AB Announces Links Existing Loans with Two Banks	Dec. 29	CI
Pandox Ties SEK2 Billion Loans to ESG Targets Amid Validation by SBTi	Dec. 29	MT
Pandox Leases Hotel in Nuremberg to Scandic Hotels Group	Dec. 14	MT
Pandox AB Signs A New Lease with Scandic Hotels Group for Hotel Pomander in Nuremberg, Germany	Dec. 14	CI
Transcript : Pandox AB - Analyst/Investor Day	Nov. 21
Pandox Secures SBTi Validation for Climate Targets	Nov. 09	MT
Transcript : Pandox AB, Nine Months 2023 Earnings Call, Oct 26, 2023	23-10-26
Pandox AB Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	23-10-26	CI
Pandox Enters Lease Agreement with Strawberry for Copenhagen Hotel	23-10-09	MT
Pandox AB Signs Attractive Lease Agreement for Hotel Property in Central Copenhagen	23-10-09	CI
Pandox to Acquire UK Hotel for GBP40 Million	23-07-20	MT
Pandox Acquires Hotel in the UK for Approximately £40 million	23-07-20	CI
Pandox AB (OM:PNDX B) acquired Hilton Belfast from Starwood Capital Operations, LLC for approximately £40 million.	23-07-19	CI
Transcript : Pandox AB, H1 2023 Earnings Call, Jul 14, 2023	23-07-14

Pandox AB

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PNDX B

SE0007100359

Real Estate Development & Operations

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