Property revenue for the period amounted to SEK 129.8 M (114.3). The operating net rose by SEK 12.1 M to SEK 102.9 M (90.8). The increase over the corresponding period of 1998 is largely attributable to the surplus from properties acquired in 1998 and 1999 and from the active ownership of these properties by using the Pandoxmodel. The strong hotel market has also generated higher revenue from turnover- and income-based lease agreements. The adjusted direct yield for the period amounted to 9.4% (9.3).

Group income, after tax, improved by SEK 6.8 M compared with the year-earlier period, and net income for the period was SEK 39.7 M (32.9). Income includes a capital gain from the sale of real estate amounting to SEK 4.1 M (3.5).
Net financial items for the period amounted to SEK -37.9 M (-34.4).

Pandox acquired three hotel properties during the first half of the year. In January, Pandox took over the Provobis Star Hotel property in Lund, in April the Scandic Hotel Hallandia property in Halmstad and in June an agreement was signed to acquire the hotel property First Hotel Grand in Borås which will be taken over on July 1, 1999. The Hotell Bohème property (52 rooms) was divested during the period with a capital gain of SEK 4.1 M.

The Swedish hotel market continues to grow and has grown by about 3% during the first six months of 1999. In our opinion the growth in occupancy combined with no added hotel room supply will lead to an increase in average room rates in 1999, says Anders Nissen, Managing Director Pandox Hotellfastigheter AB.

Forecast for 1999
With the current portfolio of hotel properties, net income after tax for 1999, including capital gains, is expected to exceed SEK 78 M. Cash flow from operating activities is expected to exceed SEK 115 M, corresponding to SEK 7.67 per share.

Pandox Hotellfastigheter AB
Interim report
January-June 1999

*Income after tax for the period January-June 1999 amounted to SEK 39.7 M (32.9), corresponding to earnings per share of SEK 2.65 (2.19).
*The cash flow per share from operating activities was SEK 3.68 (3.13).
*The operating net increased by SEK 12.1 M to SEK 102.9 M (90.8).


REVENUE AND OPERATING NET - PROPERTY OPERATIONS

Total property revenue for the first half of 1999 amounted to SEK 129.8 M (114.3). Property expenses excluding depreciation totalled SEK 26.9 M (23.5).

The operating net rose SEK 12.1 M to SEK 102.9 M (90.8). The increase over the corresponding period of 1998 is largely attributable to the surplus from properties acquired in 1998 and 1999 and from the active ownership of these properties by using the Pandox model. The strong hotel market has also generated higher revenue from turnover- and income-based lease agreements. Adjusted for properties acquired and sold, the operating net was SEK 103.8 M (94.2). The period's adjusted direct yield before administrative costs was 9.4 per cent (9.3). The adjusted direct yield including property-related administrative costs was 9.0 per cent (9.0).


REVENUE AND INCOME - HOTEL OPERATIONS

Since 1 January 1999, Pandox does not operate hotels under its own management. In the corresponding period of 1998, Pandox conducted hotel operations in Hotell Park Astoria in Enköping.


INCOME

Consolidated income after tax rose by SEK 6.8 M compared with the preceding year, and net income for the period was SEK 39.7 M (32.9). The increase is mainly explained by a higher operating net in property operations, primarily attributable to acquisitions. Income was also affected by a SEK 4.1 M capital gain (3.5).


FINANCING AND CASH FLOW

Net financial items for the period amounted to SEK -37.9 M (-34.4). The Group's interest-bearing liabilities on 30 June 1999 totalled SEK 1,347.7 M. The loan portfolio has an average fixed interest period of 2.0 years and an average interest rate of 5.57 per cent. The mortgaging ratio for the properties was 60.8 per cent.

Disposable liquid assets, including unutilized overdraft facilities of SEK 50 M, amounted to SEK 74.3 M.

The period's cash flow from operating activities before change in working capital amounted to SEK 55.2 M (46.9), or SEK 3.68 (3.13) per share.


PROPERTY PORTFOLIO

Pandox acquired three hotel properties during the first half of the year. In January, Pandox took over the Provobis Star Hotel property in Lund. The purchase price including acquisition costs was SEK 101 M. Since the closing took place on 1 January 1999, the property is consolidated for the entire period. On 1 April, Pandox took possession of the Scandic Hotel Hallandia property in Halmstad, which was acquired for a price of SEK 49 M. An agreement was signed in June to acquire the First Hotel Grand in Borås for a price of SEK 70 M. The property is consolidated in Pandox as of 1 July 1999.

The Hotell Bohème property in Gothenburg with 52 rooms was divested during the period with a capital gain of SEK 4.1 M.

Pandox's property holdings as per 30 June 1999, including First Hotel Grand in Borås, consist of 30 hotel properties with a combined 4,758 hotel rooms and total floor space of 281,239 sq.m. The book value of the properties, including hotel equipment but excluding First Hotel Grand in Borås, was SEK 2,217.9 M as per 30 June 1999.
The Group's investments during the period amounted to SEK 13.1 M excluding acquisition, and mainly pertained to hotel product improvements in a number of properties.


FORECAST

With the current portfolio of hotel properties, net income after tax for 1999, including capital gains, is expected to exceed SEK 78 M. Cash flow from operating activities is expected to exceed SEK 115 M corresponding to SEK 7,67 per share.

Stockholm, 24 August 1999


Anders Nissen
Managing Director

Definitions:

Property-related

Total property revenue The sum of rental revenue and other property revenue.

Operating net Total property revenue minus operating and maintenance costs, tax, ground rent and other property expenses.

Adjusted operating net Operating net adjusted to reflect sales and acquisitions of properties during the year.
Direct yield 1 Adjusted operating net in relation to the book value of properties and hotel equipment at the end of the period. The book value of hotel equipment is included in the denominator, since equipment rent is included in the numerator.

Direct yield 2 Adjusted operating net including property-related administration in relation to the book value of the properties.

Property-related administration The portion of total administration expenses that is directly related to management and development of the properties. Other administration expenses pertain to central administration and costs for maintaining the company's stock exchange listing.


Financial

Interest coverage ratio Income after net financial items plus financial expenses, in relation to financial expenses.

Return on shareholders' equity Income after net financial items and paid tax in relation to average shareholders' equity. Average shareholders' equity has been adjusted for the new issue of shares.

Return on total capital Income after net financial items plus financial expenses, in relation to average total assets.

Equity ratio Shareholders' equity at the end of the period in relation to total assets.

Financial calendar
Interim report January-September, 22 October 1999
Year-end report 1999, 12 February 2000

The full interim report including tables is available to download from the enclosed link.