Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Pandox Q2 report for 2017 conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. I would now like to hand the conference over to your speaker today, the CEO of Pandox, Anders Nissen. Thank you. Please go ahead.
Well, good morning, everybody, and welcome to this presentation of Pandox Interim Report for the second quarter of 2017. As said, my name is Anders Nissen. I am the CEO of Pandox. And with me I have Liia Nõu, the CFO in Pandox, and Anders Berg, Head of Communications and Investor Relations. This presentation will be, as always, divided into two parts. We start with presentation, then we are open for Q&A session. We turn to page number two. A good growth and a dynamic quarter, if you ask me. We report continuously growth in total cash earning and a good return on equity. The total cash earning increased by 20% and the same number on return on equity on an annual basis. This development explained by three main drivers. Good growth in both large and regional cities in terms of demand.
High occupancy and average rate, which increase and strengthen the underlying hotel business, which is good for us. Continuous improvement in Brussels. Like-for-like property management increased net operating income by 2%, and like-for-like operated activities increased net operating income by 29%. During the quarter, we completed also the reclassification of seven hotel properties to property management, followed by the lease agreement with Scandic Hotels Group, which we have reported before. We also completed acquisition of Hotel Berlaymont in Brussels. Next page, please. This is the Hotel Berlaymont, an excellent location in the middle of the EU quarters. Next door, you can say to the parliament. This is a 212 room hotel and a strong city center or strong location with a business profile, which we then acquired in 2017. The strategy is to reposition the hotel to an independent profile to keep full flexibility for the future.
We will also install new management to include increased quality in the hotel operations, but also implement our standard procedures in terms of how we operate hotel and management. We have, at the moment, hotel closed for a renovation. It is a very slow summer in Brussels in that location, so we have closed hotel for eight weeks, and we do all these rooms now so we can start in September with a totally new hotel rooms product. That is one part of the strategy. Another one is to then implement our productivity program, which we started here later after summer and that will continue for a couple of years. That is Hotel Berlaymont, a 212 rooms hotel in a city center location. Next page, please. If you then look at the solid increase on the NOI, that is several positive factors supported it.
First of all, acquisitions were well-performing. The seven hotels in Europe we did in December. They were the Hilton Brussels Grand Place and now also Hotel Berlaymont. The three are performing as planned or slightly better. That, of course, boosts the NOI. There is also a broad-based positive underlying demand in the industry that all our market has a good stable trend and continued recovery in Brussels as we had communicated before. The red part of it is, of course, can be the realization of the Easter effect. If you adjust with Easter, you can see that Q1 and Q2 has a similar growth, and that is stronger than we expected at the end of last year. Next page, please. The end of the quarter, Pandox hotel property portfolio comprised of 121 hotels with a total market value of SEK 39.9 billion.
106 of these hotel properties were owned and leased, representing around 83% of the total property value. 15 of hotels are owned and operated, representing around 70% of the total portfolio value. You can also see that 41% of the business is coming, generating outside of the Nordic region. Even in Sweden, it continues still is the largest region. Yes, we are very proud of this. We have a well-diversified portfolio in terms of countries, cities, locations, and guest segment, which give us an access to a strong underlying hotel market, but also limit the risk, of course. Next page, please. We are at page number six. Before we start to talk about market, I will say, unfortunately, we cannot give you public official market data for more than a couple of markets because we are reporting also early in July.
However, we know, of course, all these numbers. Please ask question afterwards if you are interested. Stockholm, - 4%. That is due to new capacity coming into Stockholm. The underlying is positive, is + 2%, but all in all, it is - 4%, and that is, of course, a negative effect as we had reporting about before due to, as I said, the new hotels coming into the city. But again, the underlying is positive. Copenhagen, continuously strong at 2%. This quarter, it was more of volume, and it was leisure who growth, and we hear it is a strong market this summer in Copenhagen in front of us. Oslo, very strong at 10% due to a big exhibition, a shipping exhibition, so it was not that last year, and also that two large hotel is closed for renovation.
The underlying is something around 4%-5%, which is, of course, very strong. Other strong market is Helsinki and Cologne, where there had been couple of big sport events, and Brussels, of course. Last but not least, Montreal, which has an anniversary this year and had more than 100 big events, and that give us, of course, also a strong increase of the revenue and cash out of these two hotels. Please come back if you have any question regarding market. Sorry that we could not give you any more public data, but that is how the system works. Next page, please. With that, I hand over to our CFO, Liia Nõu, for the financial highlights.
Thank you, Anders. The second quarter continued along the lines seen in the first quarter. Property management continued to perform well, and operating activities saw further improvements on the back of a better hotel market in Brussels. Some key numbers for the quarter, starting with property management. Rental income amounted to SEK 568 million, an increase of 22%. Net operating income amounted to SEK 485 million, an increase of also 22%. For operating activities, net operating income amounted to SEK 139 million, an increase of 11%. Like-to-like, property management reported an increase in rental income and net operating income by 3% and 2% respectively. As Anders said, the positive calendar effect from the first quarter was neutralized in the second quarter. Like-to-like, operating activities reported an increase in revenues and net operating income of 14% and 29% respectively.
For the quarter, the financial net amounted to SEK -131 million, reflecting a larger loan portfolio and fees tied to unutilized credit facilities. For the quarter, total cash earnings amounted to SEK 425 million, an increase of 20%. Measured from year-end 2016, the unrealized value increase for investment properties amounted to 3.1%. For operating properties, the unrealized value increase amounted to 0.2%. End of quarter, the FML per share was SEK 132.6. Adjusted for dividend and proceeds from the directed share issue, the annualized increase was 20%.
Next page, please. In the quarter, property management benefited from well-performing acquisitions and broad-based positive demand. Underlying demand in the lease portfolio remains strong, with good hotel markets in both larger and regional cities. For the quarter, Germany accounted for 19% of total rental income. Please note that seven hotel properties in the Nordics were reclassified from operating properties during the second quarter.
Next page, please. In the quarter, profitability and operating activities continued to improve, mainly driven by the ongoing recovery in Brussels. Brussels aside, operating activities benefited from a stable, positive development in Canada and Germany. As I said earlier, seven hotels were reclassified in the quarter, and also the operation of Grand Hotel Oslo was transferred to Scandic on April 25. Next page, please. For the period, total unrealized changes in value amounted to SEK 956 million, of which SEK 942 million for investment properties and SEK 40 million for operating properties. For the quarter, the value increase is basically explained in equal parts by lower yields, as well as favorable market developments and high cash flow from previous acquisitions and investments, especially in Germany. Year-to-date, a total of eight hotels have been reclassified from operating properties to investment properties, explaining SEK 1.7 billion of assets being reclassified.
The new agreements thereafter have resulted in an initial unrealized value gain of more than SEK 100 million. End of period, the average valuation yield for investment properties was 5.7%. For operating properties, it was 7.3%. Next page, please. On this page, my favorite page, we illustrate Pandox track record in creating value and our financial flexibility. End of period, FNO per share amounted to SEK 132.6, corresponds to an increase of 20% on an annualized basis, and as I said before, adjusted for dividend and proceeds from the directed share issue. Loan-to-value net amounted to 47.7%, and liquid funds and long-term unutilized credit facilities amounted to around SEK 1.4 billion. To summarize, Pandox financial flexibility remains strong. With that, I hand over to Anders for some final words.
Yeah. Thank you, Liia. Yes. A couple of strong drivers for future growth for Pandox. The market is still very solid. We expect a strong summer. We do not see any decline from current level after summer as well, which is slightly better than we expected at beginning of the year. With that strong market, our high-quality portfolio will continue to perform well. We do also a lot of the portfolio investment. We have done SEK 360 million over the first two quarters, SEK 160 million in each quarter. Those investment are very profitable for us. We expecting them to have something between 8%-12%, and they will come out then step by step later this year. Operation is a strong boost this year because of the attack in Brussels, sadly.
The attack in Brussels last year in March, which meaning that Q2, the rest of the quarter will be stronger versus 2016, which will of course increase our operation result in Brussels a lot. We are still below 2015, which was a very strong year. We believe that in Q4, with the current trend, we will be in the same level, and then we are up to full speed in the market again. Of course, as always, opportunistic acquisitions is there for us. We are active as we always are, but we have nothing to report. With this said, thank you very much, and welcome to Q&A session.
Thank you. As a reminder, if you wish to ask a question, please press star and one on your telephone, and please wait for your name to be announced. Should you wish to cancel the request, you may press the hash key. We have your first question from the line of Erik Granström from Carnegie. Your line is now open.
Thank you. Good morning. I have a number of questions, and perhaps we can start off with the market development. If we look at the table of the RevPAR development in Q2, obviously some ups and some downs, but maybe you can start off talking a bit about Stockholm. A bit surprising that Stockholm actually falls year-over-year in Q2, even though, I mean, understandable Q1 was rather strong. Could you say anything of what is the outlook for the summer months in specifically? Are there any changes compared to last year? As you know, at least we are halfway into July already.
Well, Erik, good morning. I think we had the report before that we have expecting a decline or at least less strong growth in Stockholm due to new capacity. That is coming in, I do not really have the 100% number in my head, but I think it is 4.5% already this year. If you take that also for the last year, it is even more than that. That is, of course, big numbers to compare to. These new hotels, of course, taking down the expectations for Stockholm. If you have of those, I will say that they will continue this year and next year. However, the underlying market is continuing to go up. The underlying trend is positive. You maybe should also remember that none of these new hotels are involved in.
We have a very solid performing in our hotels, but the market as a whole, specifically in the city, is down.
Okay. Thank you. It seems that you are at least sort of a little bit concerned about the fact that a number of rooms are coming to the market in Stockholm. Have you seen any similar trend in any of the other cities in the Nordics or in Europe for that matter?
Now, the two market in Scandinavia now has been having a lot of new capacity. Stockholm one and Malmo is one. That was last year. Then they have level out in Malmo, and we continue to see, I will say, at least level out for this year. If you look out of Europe, you have a lot of new capacity coming into Frankfurt and to Hamburg. We have not see all those capacity coming into those markets. But in general, it is limited new capacity.
Okay, thank you. I would assume then that you do expect the RevPAR development, at least for the majority of your portfolio, to continue to be rather solid for the second half of this year. Is that correct?
That's correct.
Okay, thank you. My other question was actually regarding the paid tax in the quarter. It seems that if we look at the first half of the year, your current tax was SEK 68 million. Is that a figure that we should look at when we think about the actual tax for the second half of 2017 and then the full-year? Is it something that we could use as a guidance, or are there any specialties in there?
Well, as you know, we have deferred tax assets in the Nordics, especially in Sweden, so we're not a tax position in Sweden. As we grow and have had quite a successful development in especially Germany and our new markets or outside Nordic, where we do pay tax, and depending on how these are growing, of course, then you will pay more or less taxes. The number of 38 was the search in the first quarter is a reflection of that these markets are actually going better than the first quarter. What we expect to see for the year, as we said before in previous calls, it will be double digit or triple digit. Sorry. But in the lines of Q2, I would assume.
Okay, thank you. My final question is, if we look at the valuation of properties, have you had any discussions with external valuators of where the markets have been moving during Q2 2017? In that case, what seems to be the prevailing consensus among the external evaluators of where the hotel property market tends to move, both in the Nordics but also for Continental Europe?
You're meaning from a yield point of view?
Exactly. Yep.
Well, as you know, we do apply external yields every quarter. So we have this ongoing discussion every quarter and even in Q2 2017. What we have seen, the value increases in Q2 2017 is basically equal parts driven from yield and then improved cash flows. The yields have come down, especially what we saw in the second quarter in Sweden, to some part a little bit in Norway, but also in Germany. It hasn't moved at all in Finland. It's basically been steady state since a couple of years now. But it's to smaller part, again, continuing to decrease, especially in the major cities and in good locations. I don't have any indications of what will happen going forward, of course.
Okay, thank you. My final question then, I have a question on rental development, basically. It's, I know you talked about the fact that when you do start to see RevPAR developing in the right direction, first you start to see rooms filling up, and then you start to see the rents for rooms start to trending north. Is that prevalent in the markets that you're operating in now, or is that still to come in your view?
Now what? Sorry, I don't get.
Well, basically that is if available rooms are starting to fill up. Usually what you start to see is that you can get more for each room, and you start to see
Oh, you mean
revenue trending in terms of pricing. Is that something you are seeing now?
Yeah, in some markets you see you have a strong rates increase. That is Amsterdam, that is Vienna, that is some of those more larger regional markets in Germany. That was also before in Stockholm, before all the new capacity coming in. But the rest of the market has still more volume to do. This is a combination. A very strong rate growth in Montreal.
Okay, thank you. Those were my questions.
Thank you. Your next question is from the line of Albin Sandberg of Handelsbanken. Your line is now open.
Thank you. Just start off with the comments you are making, Anders, that you think the market is doing better than you thought going into the year. Could you just clarify a little bit what it is you are seeing that is better compared to your expectations?
Yeah. There was a combination of a couple of different drivers. One is that what we read and understand that the macro is, the global economy is better than it was for one year ago, and that has a positive effect on demand in the industry. We also see that the leisure continues to go up, maybe coming from also this activity that people are more wealthy than for one year ago or whatever. I do not know what the major reason is, but people are traveling more. Then the third one is that those meetings, as we have had in our books, have became larger, more participants, and they stay more days. This is three strong positive drivers. I would say it is coming from a very strong economy in general.
Yep. Thank you. A follow-up just on the Stockholm supply situation. If you look at it from a historical point of view, do you think that is this an increase in supply that should be expected given where we are in the cycle now? Or do you see that the supply is sitting excessive? Or how should one view it?
No, I would say it is rather normal that the new supply coming in when the market has growth for a few years and the underlying market is stronger. Then the operators see a possibility to increase the rate and convert a lot of cash into their operations so they can afford to sign a higher lease agreement. When these opportunities is coming out, you also see a lot of new hotels there. I am not surprised that all these new hotels coming in because Stockholm is a very strong international and Scandinavian hotel market with high rates. We can live with this. You should not take too much of as a threat. It is more a confirmation that Stockholm has been developed into an international hotel market. The number of room in Stockholm is about 30,000 now.
When it is coming in like 1,000, as you can see, it is not so much in terms of new percentage coming into the market. However, it is a financial player who is there. People who normally do not invest in hotels, they do it now, and then they step out, and then they always coming back when it is a good day. To sum up, I am not surprised.
If you look acro
Yeah.
If you look across the rest of the portfolio, do you see any kind of trends or risk for speculative construction now happening?
I do not think so because what I understand, and I am not expert on that, is that the rent for office building is also going up in the city, and that is, of course, more profitable for a normal property owner to rent out for office building, I suppose. So no, you do not see any overcapacity situation at the current market status more than you see now a decrease in RevPAR, but an increase in demand.
Okay, thanks. I have two financial questions on the numbers. One was just on your interest rate maturity schedule. It seems like you have one more rather expensive swap period coming out within a year. I just wonder if you could say whether that is due in the second half of 2017 or is it into 2018?
Let me come back to that. I don't have those numbers in my head for time being.
Okay. No, that's fine.
We can get that afterward. Yeah.
Yeah. The final question is basically on those white papers on taxations in Sweden. If you have done any kind of sensitivity analysis, both based on a cash income basis and also a potential deferred tax basis, or if you kind of sit and wait and see what is happening there.
We are waiting to see what the different instances will come out with before we actually go out with something.
Yeah. All right. Well, thank you very much.
Thank you.
Thank you very much. Your next question is from the line of Tobias Kaj from ABG. Your line is now open.
Thank you. I would like to follow up regarding the supply situation, and ask whether you see the current increase in supply in Stockholm and maybe also Copenhagen as temporary, or will we continue to see as much supply in next year and 2019 as well?
Yeah. In Stockholm, you see a lot of growth in capacity, 2016, 2017, 2018, and slightly it is 2019 with the information we have today, meaning that this is three and a half year with new supply. That will, of course, have an effect on RevPAR, and you should not expect that the RevPAR should be stable maybe over these years, but maybe not have any strong growth potential. We have that in front of us in Copenhagen. The new capacity coming in Copenhagen is from next year, and that will also coming in 5,000 rooms over three years. That meaning 3%, 4% each year coming in. I will also expect that Copenhagen will have a similar pattern as Stockholm has today with a decrease in RevPAR or hopefully stable RevPAR, but an increase in demand. We are not involved in any of these new hotels coming into the market.
We don't have any other threats of this than maybe a little bit less rent. We don't see any big change in our profile.
Okay, thank you. If I can ask regarding the value revision, did I understand it correct that a bit more than SEK 100 million of the value uplift in Q2 2017 was related to the reclassifications?
Yes. The seven hotels that were reclassified, that mechanically moves from operating to investment properties. But then when we revalue the new agreements on those bases, there was a value uplift of around SEK 100 million. Yes. That is part of the SEK 942 million.
Okay. Can you specify how much of the value uplift for property management properties was relating to the Nordic, and if it was a big deviation compared between the Nordics and rest of Europe?
You mean in the quarter?
Yeah, both in the quarter and the first half. If it is a big deviation in value growth in the Nordic countries compared to in Europe.
What I have on top of my head is the second quarter and around SEK 600 million. We have the uplift in the second quarter. As said, basically half come from yield and the rest coming from cash flow. Yields have come down more in the Nordics than in the rest of Europe. But we have had very strong cash flows, especially from Germany and our fantastic acquisitions. We did the Leonardo portfolio, et cetera. So, basically in equal parts, I would say that also half coming from Nordic, but a lot driven by yield. The remaining half coming from non-Nordic, but very much driven by strong cash flows. Yield to some extent also, but more cash flow.
Okay, thank you. Regarding outlook for acquisition, if you look in the past two years, you made a large acquisition late 2015 and another one late 2016. Should we expect that you are able to do one more late this year as well? Or are you fully occupied with the consolidation of the two you have made already?
Tobias, you should expect that we are very active and evaluate the possibilities daily. If that means that we will finally having a fish there, we do not know. But we are very active.
How has the competitive landscape changed? If you look at Northern Europe, do you believe that you can make acquisition at roughly the same yields as you have made in the past, or has the yield level changed a lot?
You can say in general that Scandinavia has a lower yield than Europe. That is why we have done all our acquisition out of Scandinavia in the last two years. But of course, to buy a single hotel in Amsterdam and London is not easy because there is a lot of competition. If it come to portfolio acquisition or hotels which is underperforming, or you need to do renovation or maybe change brand, or that is something is more complicated, then it is more or less the same competition as it was for one year ago, and we have a very strong position there. So that is the same. We avoid at the moment looking at single hotels in larger city locations, and we more focus on portfolio and underperforming hotels in the same city perhaps, but more that it should be some sort of complicated element into the deal.
Okay. Thank you for taking my questions.
Thank you.
Thank you. We have your next question from the line of Niclas Höglund from Nordea. Your line is now open.
Yes, good morning. Just a couple follow-up questions, if I may. We talked in length about Stockholm, but the magic word is probably if you expect the prices of the hotels to come down year-over-year now. You said that you were wearing to a mode where prices for the rooms were increasing pretty much. The volumes coming in and coming in for the next couple of years. Is there room for price decreases in that sense and hence, well, only volume then to support the ramp up? What's your thoughts on that?
You mean when we acquire?
No, I meant
The rate
the room rates. Sorry.
Yeah. The circle is, of course, if I understand your question right, at first volume is coming in, and after that, sometime you can maybe increase the rate if you're lucky. That is also the tricky part. The volume is normally in the market, but the tricky thing is to yield the price every day so you can get it up. When that's happened, it means that you have more cash into the operations, and that means that you have better circumstances to do investment, which also increase the value. Then you're on the positive circle. We are in that phase now that the operator like Scandic, can increase their rates, and they have more profit out, and then they see more opportunities to do internal investment in existing hotels. Then, of course, interested for us to follow them.
Or if we come to suggest, then they are more positive than maybe they were two years ago. That is very positive. On the other hand, you don't want to do too much investment when the market is strong because you don't want to lose any revenue as well. So it's something you need to balance. But in general, we are in a positive phase at the moment in terms of doing investment in the sales upgrade and coming up to another price level. If that was your question.
Yeah, it was more specifically because we are seeing now that there are coming a lot of new volumes, as you mentioned, which is putting somewhat of a pressure from a high level, of course. I was more thinking that in that kind of environment, it's strict to get the same kind of returns out of the investments and maybe you have to do investments in order to keep pace and to keep the quality up rather than to support RevPAR growth. But maybe the market is still as strong as you mentioned, and then it's no major issue.
No, I mean, - 2% for Stockholm, when you're coming in 7% on your capacity, that is not a lot. It's just saying that over a period now, that it's coming in more capacity. If you look at the last three, four years, the growth has been phenomenal in Stockholm and have been very strong. So you need to look at it a little bit longer period, of course. But as you also say, timing is very important. When you should do acquisition or if you do investment, you should have the timing of that underlying market help you. Not only you can rely on your own capacity of create new concepts. Of course, we are a little bit more easy in Stockholm, and we are a little bit more optimistic in Germany at the moment.
Okay. Going on to Frankfurt, it's early days, so we don't have all of the numbers. But the sort of April to May numbers looks pretty bad in Frankfurt. Could you elaborate a little bit on the trends in June? You also mentioned that there are also some supply coming into the market there. Have the market beaten your expectations and what's your thoughts of the remainder of the year?
Now, these larger market in Germany, like Hamburg, Hanover, Cologne, Dusseldorf, Munich, and Frankfurt, are market who has large exhibitions and big international meetings. That calendar is not similar every year. So some year, like last year, it was fantastic for Dusseldorf and had start also very strong, meaning that they have had a lot of meetings and exhibitions in Dusseldorf, the same in Cologne. In Frankfurt, they have had less. So you can expect to see that they most likely will be stronger than maybe Cologne or Dusseldorf the end of the year. So that is the exhibition calendar and the congress calendar is changing every year for this large hotel market as you have in Germany. That been so always, and that will be so also in the future. So - 9% is a big number, agree, but I'm not afraid of the total market.
Then you are right, it is coming new capacity into the market as well, but then not so much as it will be having any dramatic effect on the underlying hotel market.
But do you think that the RevPAR for Frankfurt will end up in a positive number for the full-year? We saw some decline last year.
Yeah, some segment will definitely go up. I would say out at the airport, you can see an increase. And then you maybe have on larger meeting hotels in the city level out and mid-market is slightly up. So it is different in different segments. It is large markets in these big cities. So it is like Stockholm, that can be that south of Stockholm is very strong and north is weak, but that not means that Stockholm as a whole is bad.
And my final question comes related to the average financing costs coming down a little bit in the end of the quarter, and you are also reducing your capital duration a little bit. Could you discuss what is your thoughts, the availability to financing in this kind of a market? Do you see opportunity in the capital market? I mean, issuing bonds. What is your thought on financing opportunity? And then how much would you be willing to stretch your LTV if you find these birds flying around?
Yes. Good questions. We are looking at this, of course, all the time, and we are working actively with our loan portfolio. As I say, we bought one hotel in Q2 2017, which we bought out of our existing credit facilities. We expect that over time to, of course, be financed by bank debt or other debt. We also, of course, as we do large investments in existing portfolio, we have room for refinancing. We actively discuss with banks and other parties all the time. And the LTV being on the lower range, but that automatically happens as long as we sort of with our strong cash flow. I do not expect, as I previously have said, that we be on the upper range of the 45%-60%. In good times, it is very good to have the war treasure when you want to acquire hotels in worse times.
The appetite from banks, we have not seen it being very much different. I think banks are there for good opportunities and good acquisitions. We do have a lot of solid bank institutions with us when we do look at our acquisitions. But whether we would have a mark-to-market program or a bond program in the future, it is to be seen. For the time being, the bank market is working well for us.
Okay. Thank you very much.
Thank you very much. And once again, if you wish to ask a question, please press star one on your telephone and the hash key to cancel the request. The next question is from the line of Simon Mortensen from DNB Markets. Your line is now open.
Yeah, hello. Thank you. Most of my question has been answered already. I have one question. In terms of the yields that you see in the operator activities and knowing that most of this segment is actually in Brussels, I just find the yield to be very high at 7.2%, I think it was. You are stating that the market is also recovering in Brussels. Can you just tell us how have you come forward and what is put in the book values in terms of expected recovery in the rents in Brussels, et cetera, for this yield seems very high in a market that is down 30%.
Well, as we said, we do have external evaluations on the yield for every quarter, and this is the assessed yields we have from external parties. The yields haven't come down very much, or they didn't come down much at all during this period for two years, or particularly the last year when these awful terrorist attacks have occurred. Of course, the cash flows have come down, but the yields as such have not come down very much at all. Thus, the increase is not obviously then also any part. Yields outside the Nordic, we do see them higher than in the Nordic.
I am just thinking, especially on the Brussels market in terms of the operator activities, given that the Brussels market has come significantly down, and as you say, it's moving a bit up. I just wondered what rents are put into valuation on these assets.
Well, obviously, what you do put in the valuations is the forecast on the actual underlying cash flows. That's what goes into the models every time, and to the actual yields, they have remained pretty flat.
Okay. In terms of the market actually recovering to the pre-terrorist attacks, how you see that one progressing, and are you seeing that being on track with your early guidance for this market that you had some effects guided last year, and are things progressing in line with those forecasts?
I think I mentioned something in my earlier presentation, so I just repeat that, and that is that we are, as you see, much better than last year, of course, but we are still under 2015. Semester one, we are at 3.5% in terms of market, in terms of RevPAR under. We see the gap is sinking, and I think that Q4 this year, we will be in the same level or slightly under 2015, and 2015 was a very strong year. This is good news for us.
Okay, thank you. My other question has been asked already.
Okay.
Thank you very much. At this time, there are no further questions.
Okay. Thank you very much from Pandox side. I wish you all a nice summer, and looking forward to meet you again after the holidays. Thank you very much. Bye-bye.
Thank you very much. That does conclude our conference for today. Thank you for participating. You may all disconnect.