Okay. Welcome everybody to Pandox Capital Markets Day 2019. We are proud and honored to see so many of you here. We know it's a very busy day in the financial market with many reports and annual general meetings and whatnot. I would also like to welcome the participants on the webcast. You are most welcome as well. Our lineup today consists of Anders Nissen, our CEO. Liia Nõu. We are switching today. Liia Nõu, our CFO. Jonas Törner, who is senior vice president of Business Intelligence and a long-timer with Pandox. Caroline Tivéus, director of Sustainable Business, and myself, Anders Berg, head of Communications and IR. Today, we will divide the day into 3 parts. The first part, we will present Pandox strategic and financial position, and the Pandox platform.
In the second part after the break, we will turn our attention to Pandox growth drivers, followed by some conclusions. The third part will be a Q&A session. We will not take any questions during the presentations. We will keep the tempo up and save the questions to the third part, which is a Q&A session. At that point, we will also take written questions from the web. Today's presentations have been published on www.pandox.se under the section Events for Capital Markets Day 2019. You can find it there, and you can keep track of it as we go through the program. I also wish to remind you that this event is webcasted and recorded, and we will put it up on our website also afterwards. Well, that's all, folks. Time to get started. Please let me hand over the ball to Anders Nissen.
Thank you very much, Anders Berg. Oh, I have pain in one of my leg. It's my old handball career, which was not so great, but a lot of injuries. Welcome even from me. Anders didn't mention, I didn't know if that was a reason, but we also have a Capital Markets Day in London tomorrow. All of you are most welcome to follow us. We can go like a team together with SOS 7:15 P.M. or something like tonight. We are heading up in hotel close to Liverpool Street Station tomorrow. Warm welcome even from me. The next 2 hours is Pandox. Pandox was established in 1995, and I think I can say that the company has been known from the first day for its focus strategy. This specialization create value in itself. Firstly, we had developed knowledge and expertise which give us information advantages.
Secondly, we can manage complicated project like big investment program or welcome the chairman of Pandox, and buying underperforming hotel. Specialization is important. This is Pandox life. Hotels, hotels. It's beautiful life. I've been in it for 35 years. I love every day. The business model, the business concept based on our focus strategy is an integrated, flexible model in 2 pieces or in 2 ways. First one is to own hotels and lease them out. That is the main strategy to strong hotel operators. If this conditions is not in place, we can choose to operate hotel ourself. We have multiple options to then do operations from this business model. First, we can sign lease agreement, very common in Scandinavian and Northern Europe, where we get a percentage of the revenue from the hotel. Number 2, we can sign a management contract.
Not so well-known in Sweden. I only think there is two or three in Scandinavia, but very often, this is the majority agreement in the U.S. and some part of Europe. This means that a third party operate on behalf of the owner of the business, and they get a fee for that. The third one is owned and operate with a franchise brand. This meaning that Pandox signs up with a brand or a flag, and we have support in sales, marketing, and distributions, and we pay them a fee. Finally, the fourth model is to own and operate with independent brand where we need maybe more a brand of a stronger personality. The beautiful with this is that we do all four.
With a very integrated, flexible model, we also have multiple options to minimize the risk or make sure that the potential is there. I believe we have a clear investment case on three fundamentals. The first one is good growth opportunities. That is a strong growth in the tourism and travel market, expect to be 4% the next 10 years globally. In addition to this, we have low market shares in hotel property market. It's a very fragmented ownership market. Despite our size, we only own 1%, so we can expand with acquisitions or organic. The second fundamental is a strong market position. We have reached a strong market position the last couple of years, a pan-European, as one of the few. We are a very attractive partner for banks, operators, and brands. Maybe most important, balanced risk. The balanced risk is of two reasons.
Ability to be active through the value chain. As I said, we can operate hotels, we can lease them out, and diversification of the hotels in terms of revenue that we are now located in 15 countries and 82 different cities. What is the USP for Pandox? Let me give you six. Only hotel properties, as I said, gives the benefits. One tenant per property. The tenants then have a strong impact on the value of the property, and we can contribute to the business and make sure that we can increase our rental income. No vacant positions or no vacant properties. That is maybe the most important of the business model. We can rent out the business to Pandox. That's rather unique for a property company. Pan-European position, we have talked about.
The flexible model we have jumped into. Deep knowledge in hotel industry. Over this year, we have developed a strong knowledge in hotel business, hotel property business, and business development itself. The most important is, of course, the team. We have top scorers on every position in the office in Pandox. We are like a sports team, and we train together every day to improve our skills. Everyone is sniffing out for the next business opportunities. You can say that you have two jobs when you work in Pandox. The first one is to do the job you are paid for, while the second is that you should do that job a little better every day. The worst day for someone working in Pandox is a Friday. It's a terrible day because then it's the weekend in front of you, and you're not allowed to meet your colleagues from Monday morning.
This is how Peppo looking at this, our copper dog. Lucky us, there always be a Monday once a week, at least. Friday is the worst day. Sustainability is an important part of Pandox DNA. I welcome back the stage to Anders Berg.
Thank you, Anders. Yes, as you know, sustainability is an important area. It's a very interesting area. In 2018, we revised our sustainability strategy to focus on seven areas, which are shown on the slide below me, behind me, rather. The starting point for our strategy is to work step by step and integrate sustainability into the business. The starting point is data, which we collect and analyze, both from the property management segment and from the operator activity segment. Based on the data, we prioritize between the actions we must take and where we can excel. This is important for us and also important when you talk about sports, that maybe you should rather focus on the things that you're really good. That is what we do.
In that also lies that an important aspect of our strategy work is to also find out and decide what not to do. We are entrepreneurs also when it comes to sustainability. Our focus is to find concrete and well-defined projects, so we can snowball positive effects throughout our portfolio. To help explain this in a little bit more detail, what we do, I would like to introduce my colleague, Caroline Tivéus. She is Director of Sustainable Business at Pandox and really our spearhead into the sustainability area.
Thank you for that introduction, Anders. Today, we just want to give you a flavor of everything we do. We have, as you said, seven focus areas, but we will just focus on three of them. Green properties, green operations, and contribution to local society or in communities. As you said, this year is about piloting. It's piloting our different projects that we have chosen, testing them, evaluating, and setting the direction for our future sustainability work onwards and which role we should play. This is a very exciting year for us. Yes.
Okay.
Yeah. This is my favorite roof. It's a sidetrack now, but Hotel Berlin, we have put 1,100 sq m solar panels, and it generates a lot of energy. Approximately, if you translate it, is 161,500 kWh, and that's approximately 250 hotel rooms that are driven on LED lights. It's a good project. As you said in the introduction, we have now also included our whole portfolio in the sustainability work, not only focusing on our operated hotels. We are also looking at our building, and two things I want to highlight is, first of all, we are testing out now to certify a few selected properties in accordance to BREEAM. The reason why we are doing that is to future-proof our buildings.
We also want to see if we can also add some business value in the process, because it can easily become administrative monster, and you're running around thinking you should do everything. This is very interesting and we are testing this approach. The second thing we are doing when it comes to building is that we have a more holistic view on properties. We understand that we can't work in silos. The building, the shell, and also the operations are dependent on each other. We have proactively invited our largest tenants to discuss green leases and how we can manage to have a greater impact when it comes to reduction within, for example, energy and water and waste.
Let's go inside.
Yes, we go inside. Green operations is for our operated activities. We have the luxury to have 16 properties where we can try projects and see how it affects also the buildings. This project that I want to highlight that we are doing right now is called Kaizen, and it's a water and energy efficient management project. Kaizen is a Japanese term, and it stands for continuous improvement. That's really how we work, as Nissen told us earlier. It's our approach at Pandox, always be a little better. This is about especially behavioral change among our staff and increase engagement and awareness and knowledge about how they can be more efficient when it comes to water and energy in their day-to-day work.
Studies have shown that we can, with this approach and methodology, save 3%-10% in cost savings in just doing things a little bit in a different manner. Of course, we also include CapEx savings, that can additionally include and get us more, 10%-15% in CapEx savings and cost savings.
Sounds good.
Yeah.
You talked about integration, awareness-
Yeah
Development. It's interesting that hotels, as you know, are an integral part of society, and they also have a big contribution to the local community. This is something that lies very close to our heart. We have a third area which we focus on.
Yeah. This is something completely different from energy and water. This is more about good citizenship. Here we want to contribute, as you said, to local society, and we had a chance to adopt Enbacksskolan in Tensta, a socioeconomic challenge area. We had agreed with the school to have two focus areas. The first is movement, to get children, the iPad generation, to test other sports that they are not used to, like handball or go skiing, but also about integration. We have helped them to create study visit, as you see here at Scandic Star Sollentuna, but also work experience opportunities also in collaboration with our business partner, Scandic, with six of their hotels.
It has been very successful, we will include more companies this year, not only hotels, because our aim is to broaden up and open the world for them, and also facilitate the possibility to get contact network and come out and try new jobs.
Very good. Call us, and then we can get some good things going.
Exactly.
Thank you, Caroline.
Thank you.
Back to you, Anders.
Thank you very much. Thank you, Caroline. Oh, my leg, not so good. Strategic position. Next year, Pandox turning 25 years, so we celebration. I think I can say over this close to 25 years, that we have had a strong growth, and it has come from three drivers. The first driver had been a strong hotel market. We had been active in that market, and we have done many profitable acquisitions. The company, when we started this in 1995, we have SEK 600 million of assets, quite bad assets, all of them in Sweden. Now we have SEK 57 billion. It is 87 times growth. We have number of countries has increased from 1 to 15, and cities from 15, as I said, small cities in Sweden, to 82, and good hotel markets across Northern Europe and Canada. We have also expand the company.
When we did a comeback in the stock market, we said that we would like to enlarge the company, and we would like to do it more diversified. We have expand the company by SEK 19 billion the last three years or four years, we are expanding U.K., Germany, Ireland, Austria, Belgium, and in the Netherlands. We had also sold out hotels for SEK 1.5 billion in Belgium and in Sweden. This is how we look today. We had a very well-diversified portfolio today, premium hotels and upper mid-market hotels, 144 properties totally with 32,000 rooms. For the market value is close to SEK 57 billion. 128 is owned and leased out, representing 85% of the property value and demonstrate this our core business. 16 hotels with 5,000 rooms and with the turnover for close to SEK two and a half billion is operator activities, hotels we own and operate ourselves.
It's representing 15% of the property value. The strategic position, also geographic, has a strong balance today. Before we were the Scandinavian company. It's still our home market with 45%. In Central Europe, we now own 32% of the value coming from Germany, Austria, Switzerland, Netherlands, and Belgium. We are 21%, the new upcoming is U.K. and Ireland, and 2% in Canada. This is something we are very proud of. We had most likely in Europe and one of the world's best portfolio of brands and partners. Of course, this is a network, and this give us knowledge, and this give us information in a way that very not easy to copy. It also give us the chance of tailor-made strategy hotel for hotel. Our strategic position when we talk about what we should have in our portfolio is based on three categories.
We like to own hotel in international markets like London, Amsterdam, Dublin, Montreal, Brussels, and Berlin. Also in domestic cities like Bodø, Leeds, Jönköping, Dortmund, and Wolfsburg. If the international cities are very dynamic, their domestic, it's rather stable. Of course, we would like to have hotels in what we call regional cities like Stockholm, Basel, Hamburg, Munich, Copenhagen, and Cologne. If the international cities are very international in driving international demand, the domestic is very local, the regional had the best of the two worlds. Like Stockholm is still a very local regional business, but it has a flavor of international business on the top. This is very important. As you can see in the next slide here, you can see that what is dominated is the domestic and the regional cities, which is very important.
You can understand this, it's what we have in Pandox is rather stable. This give us also a picture of where we have these different hotels. The international is in London and it is in Karlsruhe, and it's in Vienna, and it's in Brussels. Most of them, as you said, is regional and domestic hotels across Germany, U.K., and Scandinavia. Here a few example of international flagships that we own. Hilton London Heathrow Airport is linked to Terminal 4. It's one of the few hotels on Heathrow, which has a direct link to one of the airports. 398 room ranking at one of the best airport hotel in the world. We have a long lease there with Hilton. NH Vienna Airport is the largest airport hotel in Vienna Airport. It's a growing airport, little bit smaller than Stockholm, but it's a growing airport.
Park Centraal Amsterdam, absolutely city center, the same as Hotel Berlin. DoubleTree by Hilton, we had changed brand from Hyatt to Montreal to Hilton to become even more DoubleTree by Hilton, become even more international. The Hotel Brussels, the big landmark and the big meeting hotel that we own in Brussels. All of them is international hotel and in international markets. You have regional flagships like Hilton Stockholm Slussen, Scandic Copenhagen, and Radisson Blu Cologne. They are very strong hotel who have a strong local position but have a lot of international guests. Finally, domestic flagship like Dortmund, Radisson Blu, Leonardo Wolfsburg, Jurys Inn Sheffield, Scandic Tampere, and Elite Stora Hotellet in Jönköping. They are local hotels with very strong local position, and it's important to have all these three categories. That take me to the first conclusions.
Specialization is itself, which is a very important part of our business model, drives value. The second one is that we have now reached a Pan-European position, which create opportunities for Pandox. Lucky me, I work with the best people who make these things happen. I would like to hand over to another top scorer in the office, Liia Nõu. You're just in Pandox for 15 years.
At least 12.
At least 12. Okay. It looked like 15.
Am I that old? Okay. Thank you. It starts with operations. Profitable operations and hotel profitable operations. Independent of whether it's an external operator handling our property, or whether it's Pandox itself, who is the operator for our hotels. For each property, it's important to have the right business model, the right business partner, the right agreement structure, whether it's a lease or a management contract or franchise, et cetera. The right hotel product, optimized, efficient revenue management, and then also right segmentation for that hotel. The way Pandox creates value, as I said, it all starts with profitable operations. That, of course, gives increased cash flow, increased growth in cash earnings. This increases the value of the property and the EPRA NAV.
It enables a sound financial platform and financial flexibility in the sense that we have sound LTVs and also we have a possibility to refinancing when the value of the properties increase. It enables profitable investment opportunities and development in existing portfolio. It enables opportunities for accelerated growth through profitable acquisitions and also enables sound distribution of funds to our shareholders. I will return back to these boxes. My colleagues will talk a little bit more later on in the presentation especially about our investment cases and the acquisitions we have done for the last two, three years. We have, since our IPO 2015, had a very fast business tempo. We have more than doubled our net operating income from SEK 1.5 billion to more than SEK 3 billion.
We have also more than doubled our cash earnings from below SEK 900 million to almost close to SEK 2 billion, which is, if I may say so, quite impressive. Our portfolio value has increased over this time, 114%. From December 2014, SEK 26.5 billion, it's now worth around SEK 57 billion. Majority part, 72% or SEK 19 billion, comes from acquisitions. 26%, or close to SEK 7 billion, comes from unrealized value changes, increases value of the portfolio. It's yield compression, of course, but even more importantly, it's the growth in cash earnings and cash flow that increases the value of the portfolio. 9% or SEK 2.4 billion is what we have invested since 2015. Of course, those investments have been important value drivers for the increased value of the portfolio and will also be an important driver for the value increase going forward. 13% is currency, SEK 3.3 billion.
The majority part of our hotels are outside of Sweden. We also divested SEK 1.5 billion, where the timing and price were right. The growth in EPRA NAV has, in turn, increased with more than 70% over this period, supported with strong earnings and solid value increases in the portfolio. If you look at rolling 12 months as of Q1 this year, the growth in the EPRA NAV is more than 15%. Pandox policy for loan-to-value, LTV, is to be between 45%-60%. Our financial base has been stable and sound over time, and this is despite we acquired for SEK 19 billion, we invested for SEK 2.4 billion. We divested, yes. Still this time, the LTV has basically been stable below 50% with an exception of one year here.
This is also taking into account two new share issues of SEK 2.5 billion, as well as, of course, yearly dividend. The Q1 number here is adjusted for the dividend we paid out in the second quarter in April. We've been around 47%-49%. The loan portfolio consists of SEK 28.4 billion of multicurrency loans and credit facilities, secured primarily by mortgage collateral. Our average interest rate is 2.6%. Our average repayment period is three years. Also importantly, we have SEK 3.6 billion in cash and unutilized credit facilities, as of Q1, which can come in handy. We believe we have a balanced and sensible allocation of capital.
For investments, for profitable acquisitions, and also distribution of funds to shareholders. Pandox has had a dividend policy of a payout ratio of cash earnings of between 40%-60%, where the average payout ratio over time should have been around 50%. You see the last two couple of years it's been 44% and 42%. On the right-hand side, you see the actual dividend, which has been paid out since the IPO, over a total increase of 24% since 2015. As many of you hopefully have noticed, we sent out press release today. Pandox has decided to adjust this target range of dividend payout ratio from 40%-60% to 30%-50%, with an average payout ratio over time to be around 40%.
This increased financial flexibility, we believe, will enable Pandox to catch growth opportunities while still having a sound financial platform, and we believe it will create value for its shareholders in a growing hotel market. We have a proven and profitable model for our value creation. We are committed to growth and shareholder value, and we do believe we have a balanced approach to capital allocation. Now I welcome Jonas to tell you a little bit about who he is and what his area of expertise is.
Thank you, Liia. My name is Jonas Törner. I was introduced as an old fox in the firm. I started in 2005, and I have had slightly different positions in the company. Now I'm heading up the Business Intelligence Department, which is a department consisting of basically five analysts doing a quite wide variety of different tasks. For instance, transactions, valuations, a whole wide range of business cases, benchmarking of hotels, budgeting, forecasting, business controlling, and maybe most importantly, a support to our business area managers, represented here today by Martin and Erik. Let's jump into the next section at once. We call it Key Concepts for Hospitality Industry. It's a short recap, maybe a bit educational, so let's go. I just want to remind you that the main driver of hotel demand is general economic activity.
The most important components of that in the national accounts is consumer spending for predicting or explaining the leisure side of the business, and business investment for explaining and predicting the business side segment of hotel demand, meetings, stuff like that. There are, of course, other drivers as well. There's a lot of things going on in the market. I will come back slight on that later on, just to give you a flavor. Economic activity, other drivers obviously gives us the hotel demand. It meets supply, and we get occupancy at some sort of equilibrium price. The product of occupancy and average price is RevPAR, more simpler put, revenue per available room. That's the key metric for the industry.
It's a key metric for an individual hotel, if you compare it to a competitive set or a market, you get very good data on how to act upon this hotel demand. It's also important to remember that RevPAR only refers to the room revenue part when you read the report. The room revenue part of a hotel. Basically, 25%-30% of revenues are excluded from the equation. That is food and beverage sales, meeting room rentals, spa rentals, or whatever other types of services that the hotel provides. That's good to know. Meaning that the RevPAR figure that we report does not necessarily translate into the total revenue growth in our operating activities. Nor does it necessarily mean that the RevPAR growth that you see is reflected also in the rentals that we get on our property management side. It's important to know.
If you look a bit on how demand looks like globally, domestic versus internationally, the domestic demand, as Anders told you a bit before, is the most important driver for the hotels. These are global figures, roughly 70%. There are variances, of course, between destinations and countries. For instance, Spain, traditional leisure market, has 55% of international demand versus 45% in domestic demand. More mature markets, or should we say traditional markets like U.K., big hotel markets, U.K., Germany, has domestic demand of 85% roughly, and only 15% of the international flavor. Higher international share. You're more exposed, obviously, towards international demand, global demand, global events, trends, shocks, exchange rate fluctuations, stuff like that. The international markets are more dynamic but still more volatile.
Anders showed you before that Pandox demand profile with 80%, roughly, focused towards the local and regional demand side and 20% towards the international side. That is what we think is a very balanced demand profile for Pandox. Focus is, of course, for many destinations on the international side, because this is the faster-growing segment. Mainly due to a growing global middle class and improved connectivity between destination and countries gives you more travel. Let me just show you the hotel cycle for a while. Here divided in 4 categories: recovery phase, the growth phase, maturity phase, and the declining phase. After a supply shock or a slowdown or a recession, we always come into the recovery phase. This is where occupancy is relatively low. The main focus for the operators, the hotelier, is to get heads in beds. That's the main focus.
They don't have that much opportunity to actually increase price at this stage. They're more price takers. In the second growth phase, obviously, demand continues to evolve and increase, the operators have a stronger possibility to increase their rates through negotiations with corporate contracts, or more importantly, when occupancy is rising, you get more compression nights, compression nights mean full nights. It's really those nights where you can yield up pricing in the hotel industry. The maturity phase, of course, supply growth tends to balance out with demand growth. What is left for the operators to work with is the price and segmentation, meaning that they can sacrifice a bit on the occupancy side to get higher paying customers, because switching occupancy for price is very profitable for operators. The driver in the recovery phase, rate and occupancy rate, and good growth in the recovery phase.
Very strong growth in the growth phase, obviously, and some growth in the maturity phase due to rate. The declining phase often comes with a shock or a supply shock or whatever happens in the global world. Demand falls and ADR follows suit. If you just look at the supply side of business, it's normally so that most of the supply, more supply is coming in in the late growth phase, or the maturity phase. Speaking of supply, we saw that for Europe last year, supply increased 1.2%. At the same time, the demand increased 2.3%, nearly double. The pipeline for Europe is dominated by large hotel markets, Germany, U.K., France, Turkey is included, and Spain. For Pandox, supply growth affecting Pandox quite a lot for the time being is the sub-market of Heathrow.
We have it more and more in Copenhagen, Oslo, and some regional cities in the U.K. On the other hand, we have a lot of markets that are not so much influenced by new supply coming in. Brussels, Montreal, Stockholm for the time being, and many regional markets in the Nordics as well, in U.K., Germany. With that said, I'm handing over back again to Anders.
Yes. Thank you, Jonas.
Thank you.
Yeah, you can all see all the top scorers. In 30 years, I will leave the company, and the platform of management will be there. Or 35, sorry. The Pandox platform, where we are today and how we see things. We are in many ways a new company today compared to the company who was entering into the stock market for four years ago. We said at that time we would like to be larger and more diversified, and the company is much bigger and much more international compared to four years ago. One important driver for this had been acquisitions. We should now take a deep dive into this and see what we have done and the actions, what we have taken and the result. We have done since 2015, three portfolios, acquisitions and five single assets.
The first portfolio was 18 properties in Germany and sale and lease back together with Leonardo Hotels for EUR 400 million. That was done in December, the year we come back to the stock market. On the brand of Leonardo Hotels. The driver here was that we saw it was mid-market hotels, so was underperforming, and we had profitable lease signed, and we see this is something we really can do, and we understand how to take more market shares into hotel with an extension investment program. Of course, we get a German footprint as well. We have a massive program this. 3,000 room of 3,400 had been refurbished in some way, and we had extended the hotel in Wolfsburg with more rooms and a bigger meeting center. The beauty for us is that investment mostly had been done by the tenant.
So far, the rent has gone up by 14%. You should remember, we're starting this at the beginning of 2016. We had done a lot in 2016 and 2017. Mostly had done 2016 and 2017, and now we see a strong increase of hotel rental. That being market value gone up by 29%, and the yield on cost is today 7.5%. It was 6% when we entered this portfolio for three and a half years ago. A good example of things we can create together with our partners. Value. One of the hotel in this portfolio is Leonardo Royal Hotel Frankfurt with 450 rooms located in the central, in a very regional market with lot of international guests, but also strong German footprint.
Another one is a premium hotel in Düsseldorf, Leonardo Royal Hotel in Königsallee, which are there for all of you who know Düsseldorf, it's the premium area of Düsseldorf. 253 rooms, has been totally renovated. We have here four mid-market German hotels also including in the portfolio. Mönchengladbach, Leonardo Hotel Hannover, Karlsruhe, and Hamburg City North. These are great mid-market hotel, just renovated in Germany for German guests. The next big portfolio acquisition we did was seven hotels in Europe. We bought it from Invesco in 2016. For EUR 415 million, we get 1,700 rooms in brands with NH, Radisson, and Park. We could expand the Pandox in Germany, of course, but also in new countries, Austria and Netherlands. The driver was that we're showing an improvement potential because of the prime location. All of these hotel is high-quality hotels, have very strong local location, premium product.
We saw that they will not have taken all out of the potential. We signed up these with profitable lease. We are taking a lot of actions. The Radisson Blu has been totally renovated. NH Vienna Airport Conference Center and Park Centraal Amsterdam is ongoing. Three hotels, Salzburg, Frankfurt, and Munich are pipelines that we will start beginning of next year. This is the portfolio which under development, what we see a good potential. So far, the market value has increased by 8%, and we see potential already this year with EUR 3 million compared to last year. There is more to come. This hotel in Cologne, 393 rooms, city center Cologne, close to the exhibition center, very close to Lanxess Arena, which is the largest indoor arena in Europe. Totally renovated, fantastic, strong location.
Now this hotel has coming back at the beginning of this year and is pumping in new cash for us. The NH Vienna Airport Conference Center is ongoing, big renovation. That was the 499 rooms hotel. The same as Park Centraal Amsterdam. As I said, we have three more hotels in pipeline of this portfolio. The third big portfolio acquisition we have done was December 2017, just before Christmas, that we announced that we bought 21 hotels in U.K. and Ireland. We bought Jurys Inn, 4,300 rooms of the brands of Jurys Inn and Hilton Garden Inn for GBP 680 million. The driver here was that we saw improvement potential, but also was a complicated transactions that very few can do. They give us an excellent footprint in top locations in U.K. London, Manchester, Birmingham, Belfast, Dublin, Glasgow.
It is just amazing that we could in one piece having a total footprint in the Europe's second biggest market. What we have done, work a lot with the reorganization. What we did, we acquire a fully platform of 36 hotels and 21 properties. We had reorganized it, so we had sold out the platform to Leonardo Hotels, to Jurys Inn. We had signed 20 new leases with the Jurys Inn, and we have taken over Hilton Garden Inn in Heathrow in own operations. That took some time to complete. That is done. We are focused on segmentation and pricing in the hotels to make sure that we are taking out the full potential, and we start now with renovations together with the operator and extensions possibility as we see the next couple of years. Growth potential from previous renovations that we now working with the pricing and segmentation.
Last year, the RevPAR growth was 8% compared to market 1.5%. We see some growth potential even for this year. That takes me over to the single transactions, which Jonas will take. Thank you.
Thank you, Anders.
Thank you.
I will just lead you through the single assets that we acquired. Very interestingly so. Sorry. Do you want to say something about that?
Nice hotels.
Nice pictures.
Jurys Inn.
In late 2016, we acquired the Hilton Brussels Grand Place. Absolutely sweet spot in Brussels between the central station and the famous square, Grand Place. The plan was basically to firmly position the hotel in the premium segment, by a refurbishment of rooms. The rooms were good, but in order to get the price we wanted, we had to upgrade the rooms. We put in new management, and we introduced some productivity systems. This is an operating hotel, I would say. Productivity systems for accurate forecasting, for the right manning, for the right planning, and to be able to follow up on that. Very important. We also discovered some unutilized areas that we leased out to a retailer, and we made the public areas more attractive. Between 2017 and 2018, we increased NOI with 41%.
Okay, in a good market environment, that you can see really what productivity measures can do to the profitability. Still strong profitability opportunities in this hotel and development. We have a potential to flip this currently management contract into a franchise contract later this year. It makes us having even more control over daily operations. Nice hotel. The next one, this is very interesting. Silken EU Berlaymont. Silken was a Spanish operator that went bust. They had one asset in Brussels. It was auctioned by the administrator. It's a very strong location. It's next to the famous Berlaymont building in the EU district. This came to be a very fast round trip in the integrated business model of Pandox. First, we bought the operations as well as the property.
We had to revitalize management because they had been really without compass for a long time with the mother company went bust. We refocused the business towards the business segment and the governmental segment that's just around the corner. To support that strategy, we did a refurbishment of rooms better catered for the business guest. In parallel, we started discussion, Martin, wherever you are. We started discussions with NH, another Spanish operator, for a variable lease contract, and that did materialize in February 2018. Now we have a very profitable lease together with NH. We share risk, we share upside, and we share investments. This is kind of nice picture you have. To the right, a couple of 100 meters, you have the Berlaymont building. It's a very strategic location in that area. Next one, the Hilton London Heathrow. Anders mentioned T4.
That stands for Terminal 4. It marked our re-entry into the U.K. market before Jurys Inn, after exiting the Hilton Docklands in 2014. Very good size, 400 rooms, basically. Direct access to the Terminal 4 at one of the busiest hotels of the world. Very tempting. Operations, Hilton is operating, very well-performing, strong guest scores. Very strong guest scores. It came with a variable lease contract. It ticked basically all the boxes, even though we know there was a lot of supply coming into the market. This is a long-term play for us. It's in good state of repair. We don't have to do anything, basically, but there are some planned renovations for public areas. With plans of Heathrow, future plans of Heathrow, this is a very good position to be in the long run. Yeah, nice. We have a small pond there, as you see.
This exciting hotel, this one of the grand old ladies of the U.K. hotel market, The Midland Hotel Manchester. We bought the same style together with Fattal and the Jurys Inn team, and we created same style. We took over the property, they took over the operational assets, and we set up a new variable lease contract between ourselves. This is a very strong case for value-add investment for repositioning of the hotel in the very prime part of the market in Manchester. Increase market penetration or increase market shares through higher pricing, higher ADR. We will support this with a joint investment together with Jurys Inn, GBP 11 million, starting in Q3, to become one of the best or if not the best hotel in Manchester. You see this grand old lady from 1901, I think it was finished.
You see the openings here are actually where the horses and carriages came through to drop them off. This is part of the restaurant where Charles Rolls met Mr. Royce and formed Rolls-Royce in this restaurant. It's a very interesting history, as well as a ghost in one of the rooms. I don't know which one, actually, but I know there's a ghost. At the same time, we acquired this one, the Radisson Blu in Glasgow. Compared to The Midland Hotel, this is a very modern property with landmark architecture, very efficient hotel, great logistics for meetings, for business guests, for leisure guests. Prime location in the city, shopping area just around the corner, as well as the central station. We have some rate potential here, maybe on select room refurbishment. We will see. Yeah, this is a long play also in Glasgow.
The city has exploded in the capsule of 15 years, is in total revitalization of the city, and that will continue. This is what's also, should we say, a complement to the Jurys Inn we have as well in the city. Really nice hotel, I would say. It's very good. Anders.
Yeah. Well, thank you, Jonas. You see, nice hotels.
Yeah.
You know the first I get an SMS from after? You have to know this as someone from Hammarby, Tobias, who sent me the first SMS and congratulate me when we bought this hotel in Glasgow. There can only be one. Staffan Olsson, will it be? Henrik Larsson. Henrik Larsson, of course. Who's that? Who's that? Well, conclusion from this. We are a larger company, more diversified, and we have a stronger market position, at least if you ask us in Pandox. Now we will take a break. 15, 20 minutes, and then we'll come back to more future drivers. Coffee, don't leave, come back. Exciting second half. Thank you very much.
Okay. It's the old fox again. Next section. The key growth driver for Pandox. We have divided into three pieces. The hotel market in itself, value-adding investments, and acquisitions. I will start talking about the hotel market in a bigger picture. This is the long trend, European RevPAR trend since 2007 up until first quarter of 2019. 2007 marks, first I would say that this is the RevPAR growth on this axis, and you have also supply and demand on this axis. You can see this bearish is the supply side, meaning "utbud," and the demand side, this one. 2007 was the last year of the previous cycle. We had the great financial crisis, '08, '09. Since 2010 in Europe, we have had RevPAR in a positive territory. Two hiccups, basically.
One in 2012, spelling Euro crisis, and 2016, unfortunately, terror-related, Paris and Brussels mainly, really affecting the total European performance that year. If we look at the dotted line, this is the average RevPAR annual growth that we have seen from 2007 up until 2018. If you take out the two big outliers in 2009 and '10, we have a RevPAR growth annually of approximately 3.3%. Looking at the start of '19, it's a bit softer start with a bit higher pace of new supply coming into the market. I know this is a very blurry picture, but these are the other drivers of demand that I was speaking about earlier. I will just briefly run through this.
We have, actually, in the annual report, a very good section, thank you, Mr. Berg, that covers trends and drivers. I think if you want to read more about that, you can do that there. Just going to mention the growing middle class is a very strong key growth driver for the industry. As economies and countries climb up the ladder of spending, you start with, obviously, what you need: food, housing. You buy cars eventually, then quite high up, you start consuming travel and tourism. First domestically, then when you're very high up on the ladder, international demand. I would say together with increased connect Oops. Oh, fuck. Sorry. Sorry for that. Increased connectivity, that's one thing. There's an obvious driver of more and more people traveling.
You can fly longer and cheaper nowadays. I put up disposable time here because in the Western world, this is sick. Money is not the constraint, time is the constraint. Many people are consuming differently, the travel and the hospitality services, meaning that they travel more often, but when they do, they tend to spend a lot of money, and that's a key driver also in the industry. People that has more time, older people, affluent people, has also become a very much stronger part, a much bigger part of the travel and tourism market. The feeling of an ageless mind, stay healthy, live longer, has a very strong impact, actually, on travel and tourism spending. The purposes of travel today, there's many ways a reflection of your lifestyle. There are more and more reasons for traveling.
Looking 10 years ahead, the number of households that will start consuming travel services or hospitality services is quite a lot. This gives you an idea of the strength of the future demand. These are new traveling households by 2029. It's not only China and India driving this demand. It's also mature markets such as Germany, U.K., and U.S. is going to provide a lot of new households that will start traveling. Also interesting to see Mexico and Brazil is going to chip in as well. This lays the very foundation for solid growth prospects for the industry on a global basis. If you look at, with that background, the total global passenger numbers are predicted to increase by 4.1% over the next 10-year period.
At the same time, WTTC is expecting spending or travel or tourist spending of pretty much the same growth rate, 3.6% annually. GDP, at the same time, is predicted at around 3%. You can see it's a clear premium to that compared to the global world in a bigger sense. With that said, I'll turn over to Anders again.
Thank you very much.
Talk about our value-added investments.
Thank you. Another strong driver, we talk about it where we have coffee, is own operations. What will it get? First of all, as Jonas was into in the hotel business cycle, at the beginning, at the recovery and growth phase, the market are strong but not so strong that operator would like to do a lot of investment and upgrade hotels because they can't see the potential or they're afraid of it. When they come into the end of the growth phase or into maturity phase, then the rate is driving their revenue, and they see a big potential of continuously increase quality, better rooms because they see that the rate are driving a strong conversion. That's why we are so active now, because we are coming a bit in the business cycle that we can sign up lot of good agreement with our partners.
We will cover it by recently completed, ongoing, and pipeline. Pipeline means decided but not started. These are value-adding investments for an average return of something around 8%-12%. Otherwise, we don't do them. Let's start with recently completed. Here is 10 example for approximately SEK 800 million, which is done. Some of this was done last year, or most of this was done with work with last year. That have, of course, some sort of press on our RevPAR. Leonardo portfolio in Germany, we have been talking about. Very strong growth in rental income. Radisson Blu, Budapest, we are talking about upgrade with higher standard of rooms. The same with these five hotels with Scandic. Elite, Park Avenue, and Stay hotel in Sweden is the same. We upgrade hotels, more meeting rooms, more funky lobbies, better food and beverage activities.
All in all, investment that we believe with the current trend, they will give the hotel more rate, and more rate means a strong conversion into cash. Let's look at them more in detail. One of the hotels that we have done and were ready last year in December was Hotel Hubert in Brussels. This is a hotel that was a boring mid-market hotel, and we had converted the reposition into a cool, funky hotel, more design, more lifestyle. EUR 3.4 million investment, 100 rooms. Market value has increased by 40%. The rate has gone up from EUR 79 to EUR 125. In a strong market, yes, but also because this hotel is talking to a totally new segment, which we now fill up the hotel. I think it was in March, we had something like 94% occupancy. It was fantastic. This hotel we operate ourselves.
The next example is the Leonardo Wolfsburg, which we do together with Leonardo Hotels, investing EUR 11 million for having 130 more rooms and a new meeting center, and positioned the hotel as one of the leading hotels in Wolfsburg. The return on equity expected to be 10% already this year. Jurys Inn Belfast, same story. Investment in more rooms that we add. That's a no-brainer if you have that possibility. 30% expected rent growth this year compared to last year. This is also property management as Wolfsburg. Hotel Berlin, we have done phase one. Phase one means 500 refurbished rooms for EUR 10 million. NOI has increased by EUR 1.3 million. Call it half of it is market and half of it is our own performance. It's a fantastic investment.
We are now looking for the phase two, which means event areas, meeting areas, and do it a little bit more funky and this more urban style that very few hotels have in Berlin. Operator activities is a 700-room hotel. As I said, we have done 500 of them. Let's go over for growth drivers. Let's go over for something that we are doing at the moment. Park Centraal Amsterdam, NH Vienna Airport Conference Center, Hilton Stockholm Slussen and Vildmarkshotellet are hotels that are coming back now in Q2 and Q3. We have been working with them for more than a year, and now they are coming back and will give us a good rental income the rest of the year.
Radisson Blu Hotel, Basel, DoubleTree by Hilton, Scandic Molde, and these two airport hotels in Finland, Airport Hotel Bonus Inn and Airport Hotel Pilotti, that will be something we will end up in Q1 or Q2 next year. It is ongoing. These are representing EUR 500 million, and again, of return expectation in range of 8%-12%. Then pipelines. All these are decided, and we are gradually starting in 2019 and 2020. More rooms in Clarion Collection Hotel Arcticus, more rooms in Scandic Luleå, more rooms in Quality Hotel Park Södertälje. We will upgrade The Midland Hotel, Manchester, Hilton Garden Inn London Heathrow Airport, and just spoke about Hotel Berlin. We will do NH Brussels. We will change brand to nhow, and we will do these three NH Hotel Group hotels: Salzburg, Frankfurt, and Munich. We are starting beginning of next year. Have a look at these two hotels from Brussels. This is Hilton Brussels City, a 285-room hotel.
We own and operate it under a franchise with Hilton. We will change brand to Indigo. Indigo is a lifestyle brand, belong to the InterContinental Group. That investment has already started, and it will be funky, cool, little bit about Hotel Hubert, but bigger. In a fantastic location. You see all these big meeting areas for business and leisure district, which Crowne Plaza has developed into the next couple of years. We believe that the Hilton brand, the Indigo will more match the consumer trend in this local part of Brussels. This hotel, we also own and operate. That is the Crowne Plaza, 360 rooms and a big meeting center. We will starting the renovation of this hotel already this year, and hopefully extend it with this building.
That is a land we already own. We have a very positive discussion with the city that we can do another 150 rooms, and we can do more meeting center. Given this, it will be the largest hotel and meeting center, one of the largest in Netherlands. Here you see it from the other side. Here you can see example of two great value-driving project that we are. We have start with the Hilton. We will start here this year, and this is something we hopefully will start with 2021. Now we come to the final phase, final part, and then we need the best of team has.
Yes. Okay. Some conclusions. Let's look at growth. Growth since 2013. This is a plus six-year period. We look at, over this cycle, the average GDP growth in Europe has been 1.8%. The hotel market has, over this period, grown with 3.7%. Ta-da, Pandox has, over this cycle, over since 2013, grown with 4.5%. When we look at property management, 3.8%, and operating activities, 5.5%. So the hotel market has grown more than GDP. Pandox has over this period, on average, grown more than the hotel market. This like-for-like growth is like-for-like base growth. It includes hotel markets in different phases of the cycle. It includes effects of new capacity coming in, and it includes investments, both positive and, or negative initially and positive effects. This is base growth over the cycle or over this period.
It's not plotted in here, but if you would, then like-for-like growth in net operating income, it would have been a percentage point or so even higher the growth rate for Pandox. What is not included in this number is, of course, the historical acquisitions we have done. We have, as I said before, acquired since 2015, SEK 19 billion of assets. Going forward, we do expect to further accelerate this basic growth, which we showed on the other page with further acquisitions. We're looking for single assets, we're looking for smaller portfolios, but also large portfolios. As a conclusion, I love this model. This is how we create a lot of value. It's a sort of ongoing machine.
This starts with profitable operations, increased growth in cash flow, meaning increased values of the property, giving a sound financial platform, being able to refinance, having solid LTVs, giving opportunities for profitable investment and development in the existing platform, in the existing portfolio, and giving opportunities for profitable acquisitions as well as distribute some dividend to the shareholders. This goes on, and the more cash flow, the more value it refinances and et cetera. On and on and on and on it goes. With the risk of repeating myself, Pandox has a proven and profitable model for value creation. The conditions for base growth are at least to be in line with the hotel market over the cycle. On top of that, there are good opportunities for accelerated growth above the base growth supported by new acquisitions. Crystal clear?
Let's open up for questions.
Yes. That concludes the presentation part, we now open up for questions. If you have a question, please wait so I can hand over this microphone to you, sort of for respect of the web audience that we have. Maybe you could please state who you are and then of course, go ahead with your question. Yes. We start with Albin Sandberg.
Thank you, Albin Sandberg, . The first question on the dividend, obviously, I just wanna make sure, are you trying to signal a slower economic cycle so you need to keep more cash in the operations, or is it simply because you want more firepower for acquisitions?
It is simply because we want more firepower.
And-
It is. Wanting the flexibility. It takes some time. Of course, we need to be planning. We wouldn't change the dividend just by that. It gives some flexibility. As you've seen, it has been increasing. It's nothing dramatic, actually, going from 40%-60% with an average of 50%. We're going to 30%-50% with an average of 40%. It's signaling that we want a flexibility to finding good growth opportunities, and we want to make sure that it's also creating value for the shareholders.
Also, how committed are you to keep the dividend in absolute terms?
I think it's a question for the board. As you've seen, we have every year had an increase in the absolute term.
My final question is just, for us who are listening to your conference call and connection with Q1, it seemed to me like you gave a little bit more downbeat view maybe on the market than what you are kind of giving here. At least that is my impression. Let's say over the next one, two, three years, Anders, what do you see in terms of base growth rates for hopefully Pandox specifically, but maybe then the market?
I think the trend that Liia shows there will continue. There will be a good hotel market. Maybe slow in Scandinavia than have been a couple of other years, and maybe a little bit stronger out in Europe. That will be something where we benefit because of our diversification portfolios we have today. Big acquisition is coming not every year. 2019 maybe a little bit slower in terms of large acquisitions. It's smaller single acquisitions is there all the time. I think the growth perspective, as I said in the business case, there is a good market and there is possibility for us to expand also with acquisitions as we have done the last couple of years. Maybe not the big portfolio every year, but the rest of it will definitely will be there.
Thank you.
Fredrik Cyon, Carnegie. Starting off with acquisitions. Do you want to expand into new geographies primarily, or is it more broadening your footprint in some markets? Any particular markets you would want to highlight?
My favorite sentence: it can be anywhere as long as it's profitable. Profitable properties.
Yeah.
Of course, it's easier when you dig where you're actually standing, but profitable properties rather than special footprint, or was it?
Kära vänner hotell," as our chairman said, hotels that really are very famous and in the luxury market, we don't like. Those we can buy tomorrow. We like to buy profitable hotels. Where they are is not so important. Of course, we don't want to buy 150 rooms hotel in Madrid if we don't have another couple of hotels in Spain as well.
I'll try to rephrase the question and see if I get another answer. Basically, what I was looking for is, in the transaction market, are you seeing any larger opportunities in any specific geographies or expect any opportunities to arise in the next 12, 24 months?
I will say that we have inquired the last couple of years out of Scandinavia, Germany, and U.K. are the best opportunities. They are also the two biggest hotel markets, so that is more hotels to buy for us. That is quite simple when you look at it from that way. Spain, yeah, maybe. Portugal, start to be expensive. Italy, maybe, not super enthusiastic. Afghanistan, not. Canada, love to, if we have a chance.
My final question on, comparing Pandox now with what it was connection with the IPO, it's a lot more international these days. Do you see any obstacles entering new markets, given that you don't really have a knowledge edge when you enter new markets?
The knowledge is not linked by countries. The complicated by stepping into a new country is that you need to have a new legal setup, and you need to have the infrastructure country by country. The knowledge in the industry is coming from all the categories. Stockholm's hotel market look more like Copenhagen and Munich and Frankfurt than it look like Örebro and Jönköping. When you have all the three categories, you more or less can buy hotels everywhere in Europe today, I would say.
Thank you.
Stefan Anzenberger. Going back, follow up on Albin's question on the dividend there. Two parts of the question. First, what triggered you to actually make this decision? It must be some opportunity that arose that said, "This is why we do it." What's the background? Secondly, connected to that, the opportunities that you see is offensive, as you say. Are they on the M&A side primarily, or is it what you presented here on investing in your current portfolio primarily? Or is it an even split? Thank you.
On the first question, I think it has been discussed. As you said, we've been very active company at a fast business tempo, there has been a lot of profitable investments and acquisitions to be done. I think the board thought together with the management of Pandox that this would today, and this would be a good setting of actually explaining how we look at dividend and capital allocation and between investments, between acquisitions, as well as shareholder value. It's nothing dramatic. It's nothing urgent. It's more to align what maybe we've seen already the last two years, where we've actually been around 40%. Not too dramatic. The second question, I can't remember.
That was about investments.
Okay.
I can take it if you want. Stefan, we have never invested so much money in existing portfolio as ever, and that is two reasons. The first one is that we have a larger portfolio than ever. When you have more hotels and big hotels, then you have more opportunity to constantly develop and taking more market shares. That's a daily game, that's an active ownership we do every day. The second reason why we also do it, why we really can sign so many deals that we do at the moment, is the phase in the business cycle. As I said before, the rate is more driver stronger now than the occupancy. We, when we operate, and our partner, when they lease hotels, they see a good return on this sort of investment.
That is very typical for this phase in the business cycle, and I tried to say that before, but maybe I didn't explain myself good enough. You will see that this investment will continue so long as the business cycle is strong. That will be more important. If you maybe have a little bit less market growth compared to recovery or growth phase, if you remember how it looked like, because of new capacity. That will be compensated by better investment in existing hotels. You will see that this year, and you will see that even more next year. Hammarby.
Björn Skaj from ABG and from Hammarby. I would also like to ask a couple of questions regarding the dividend policy, the first one is, should we read this as that you're less willing to issue more shares if you find acquisitions going forward?
No. We see a lot of opportunities to expand the company, we would like to take every opportunity that we can see to make sure that the firepower is as strong as possible.
Regarding the dividend policy, we've seen that in the past two years, you've been in the lower range of your old policy. Should we expect you to continue to be in the lower range of this newer policy, or is the policy more of an adjustment to the reality we have seen in the past couple of years?
I think it's an adjustment to what we have seen. As I said, as expected ratio over time is to be 40%. That's the target ratio. Of course, the main purpose is to have the financial flexibility.
Remember that it is right that we were in the lower range. In absolute term, it grow every year. That is, of course, the target for us to continue to have that. We want the range low, we want more flexibility. In absolute term, continue to grow the dividend. That's absolutely target that we have. Some years, maybe not, but we want to have flexibility if there's something big coming in front of you, in front of us, and we can take the bite.
One question regarding your growth outlook. Can you give us an indication of how much lower the yields are today compared to when you came to the stock market, and whether you think that will make it harder to continue to grow in the same way you've done in the past few years?
Yeah. The yield had definitely come down. You see the Eurocin deal, what we did for 5.6%, 5.7%, that will be 40, 50 points lower today if they were coming out. I'm quite sure it would have been. Also, you also are a little bit more upper in the business cycle, so you also see less acquisitions that we did for one year ago. That may be signal that the seller think that the yield will continuously to go down, and the buyers would like to have a premium on the yield side now because they can see that the risk of maybe a little bit more than for two years ago. There had to be some sort of balance in the market between these two. I don't think the yield will come down more.
To add to that, with our specialist focus, yield, of course, is important, but the potential to actually sign what kind of agreement. The more complex the setting is, the better for Pandox actually, because then there are fewer buyers, and we have the possibility to increase the yield and the value, as you've seen the value of the portfolio. It comes from our cash flow and from our investments and our expertise.
Yeah. You see that on the Leonardo portfolio that we're working on for three years. Tremendous good growth in rent. It take a few years before you're there. That was a portfolio that a lot of people laughing about us and said, "Why are you buying that sort of bad hotels?" We said, "Because we like bad hotels, because we think we can do them better." We have done. Of course, the growth we have had and continue to have in that portfolio is much larger than this deluxe hotel that everybody's looking for. You should not buy the one who is good. You should buy things who is not so good. Then, of course, the yield, then because of that, you maybe can have an aggressive yield, but you can increase the cash, and that's more important.
If you say that the yield today would have been 30-40 basis points lower for Eurocin, that would imply some 6%-7% higher property value, not taking into account any value creation from you. Have you seen that kind of value uplifts in your book for that portfolio? We haven't seen that big revisions on a group level.
No. You're right. I think you're more an expert than I am, you can say that the valuation market is slowly coming after maybe the cash.
Yeah
what's happening on the revenue side.
Yeah. Also external evaluators with Brexit, with all the anxiety around U.K., et cetera, they are not so willing to increase. There is some [Foreign language]tröghet.
[Foreign language]Tröghet, yeah. [Foreign language]Tröghet, yeah. What is that?
Whatever is that in English?
Tröghet.
Tired.
Look at Brexit as an example. Everybody had tell us since the first day that it's crazy to buy in a Brexit land. That had been the best deal we have done.
Yeah.
Come on, change attitude. Where is a risk is an opportunities.
Yeah.
Where is no risk is no opportunities. That, of course, have been fantastic. We have bought 23 hotels for SEK 10 billion in price that had been 30% more expensive in Sweden, if we had bought it in Sweden. Or in Norway, that had been 50% more expensive. Then good football on the top.
Thank you.
Niklas Hagglund, D.A. I just have a follow-up. You talk about the pipeline of investments, you didn't share any numbers with us. You talked about the ongoing and the completed, and now you're alluding to that you're seeing acceleration in the potential here from then. Could you share some numbers on maybe return on-
500 is ongoing pipeline, including extension, excluding extension of Crowne Plaza is SEK 400.
Okay, it's slowing then.
What we said in the Q1, that we have, if you look at what's ongoing, what we haven't done yet, put in the books, which is ongoing, half of the middle box, as well as the pipeline, which is decided but not started. That together is SEK 1.1 billion, SEK 1,103, which we stated in the Q1 report. Every time we have a board meeting, or when we have all these people sniffing out new good investments, as soon as we decide something, we add to this SEK 1.1 billion. We have. We constantly add to that number. We constantly work with that number. Crowne Plaza would be another big chunk-
Yeah
added to this SEK 1.1.
When we end up on the end of this year, what do you think the chunk will look like? We're at SEK 1.1 billion now. Will you keep that level constant through the year, or you see acceleration here, looking at this potential of the potentials?
We will invest about SEK 750 million this year.
This year, which we actually will do.
Yeah.
We'll add a pipeline. They will be added for more.
The same number or more. Yeah.
You're bigger now.
Yeah, we are bigger now. That's why we are adding more into it, and we are in that phase in the business cycle. It is very attractive for us to do these sort of investments.
When you look at returns right now, you gave us a span of 8%-12%, which is pretty healthy levels.
I must admit, given the interest rate environment and what have you, and low yields. In a normal business cycle, should we expect that you are in the lower end of the returns, given that also the op I mean, that cost is coming up and you're all chasing those kind of investments? Or should we What's your feeling on this sort of return outlook for those investments right now?
It's pretty stable. Then again, the investments, the big chunks of investments, if you talk about Crowne Plaza, SEK 500 million or SEK 200 million. The SEK 500 million Crowne Plaza hasn't been decided yet. It's still in a very planning phase. They are long-term projects, takes years to plan. It takes some years to actually implement. This is ongoing all the time. We haven't seen, actually, that change. It's still the 8%-12%. Of course, it's a little bit more expensive to build when it's [Foreign language]högkonjunktur.[/Foreign language] I lost my English now.
Well, yeah.
No, you understand.
Yeah.
Yeah. It's marginally changing that return.
Okay. I have a question of financing. We haven't touched that much about it. We're talking about growth, it's, I guess we need to finance it as well. You have to. What's your?
You can if you want.
Yeah.
Please.
What's your thoughts right now? We're seeing that long interest rates are coming down again, or more. Will you go out to the curve here and secure on the credit side in order to reduce risks and enable you to be on a slightly higher LTV? Are you seeing that financial cost is gradually coming down also for Pandox because you're on a slightly elevated level compared with peers?
We have 44%, I think, out of Q1, if I don't remember wrong, which is non-hedged. Everything else is long-term. We typically go for five or even 10 years. We sort of use a long maturity profile on our interest hedging. I think we actually will continue to be, of course, that may change, but we are pretty happy to be around the 50%. We see actually interest margins coming down in countries like Germany, for example. Cheap financing in Germany, which is good. I happen to find more hotels in Germany. It's balancing out. It's been pretty stable at 2.6 for some time. The repayment of three years may look scary. We don't think actually so because we continuously refinance all the time. We have a good relationship with our banks. We refinance constantly around 60, 65% LTVs.
We invest a lot in our hotels, so of course, the LTVs automatically comes down. Boring answer, no real change.
Okay. If you were to take on a portfolio today, the financing leg of that without these derivatives or what have you to limit, what would you be paying all in a three-year duration portfolio?
If you were buying in the U.K., because the Libor is about 1% higher, then you may be at 3%, if you hedge half or et cetera. If you buy in Germany, maybe you are all in hedged at 2%.
One and a half?
Two.
Okay. Sounds great.
Even lower.
Thank you.
One more from Stefan Anzenberger.
Thank you. You've been rather positive about the opportunities in the U.K. going back, and you made some acquisitions there as well. In the first quarter, the regional RevPAR was rather weak. Have you had any other thoughts? Have you changed your mind, or do you see this as more a temporary situation?
You're right that the first quarter was, in U.K. regional, was under expectation, and London was above expectation. You never know what's happened for a quarter. You have to see that over the next two, three quarters to understand if there will be gradually RevPAR press. It is on good levels in 2018, so we are not surprised that one of two quarter maybe can come down, and of course, there is some uncertainties linked to Brexit as well, and we see maybe some sort of government business coming down. The ordinary business like functions and leisure is looking more or less the same as last year. We are not negative. We are observing it. We are looking at it. We speak to our partners who have the same view.
In Heathrow, which is part of this, there is a lot of new capacity coming in. Of course, that gives a very strong pressure on those numbers. We need Manchester United in the Champions League, or Tottenham, but not Leeds. We need Manchester United in the final of the Champions League. That's better for us. Or we need a match in U.K., not in Madrid. That's maybe more important.
Okay.
Yes.
All right. I guess that concludes the Q&A session. It actually also concludes this Capital Markets Day, which was not really a Capital Markets Day, but rather two intense hours. I hope you have enjoyed it. We have. Thank you for all the intelligent questions. We hope that we were able to answer at least some of them partly. We will travel to London later today, meet with the investors and other business partners tomorrow, and I'm sure that we will get a number of tough questions there as well. Thank you very much for your attention. Next date in the calendar for Pandox is 12th of July, when we will publish our second quarter earnings report. Looking forward to hearing you and seeing you then. Thank you.
Don't forget, the 19th of November is the next Hotel Market Day. Welcome, all. 19th of November.