Financial Year 2005 Kari Inkinen CEO
Strategy Target: to increase business volume and profitability Possible development projects are approximately 300 000 m² Development target 50 meur/year Profitability enhanced by more efficient property management and by improved maintenance quality New business areas: Russia, Baltic states and asset management Investments in Russia due to start in 2006 Maximum exposure 10 20 % of balance sheet City-Center, Helsinki
Major events in 2005 Acquisition of logistics and office building in Ruosilantie 16, Helsinki Investment 28.4 meur Leasable area 32 800 m² Economic occupancy rate 100 % Disposal of Karjalan Kauppakeskus in Lappeenranta Selling price 7.2 meur New CEO Kari Inkinen started 1 June 2005 New organisation 1 Sep 2005 Two new business units: Property Development and New Business Areas City-Center, Helsinki
Events after end of 2005 Partnership in real estate fund Sponda holds 20 % stake Sponda will manage the fund Acquisition of office building in Kalkkipellontie 6, Espoo Investment 11.2 meur Total leasable area 8 800 m², building rights for 3 450 m² Net yield for purchase price 6.6 %, fully leased 8.1 % Economic occupancy rate 83 % City-Center, Helsinki
2005 in brief Total revenue, Me Operating profit, e EBITDA, Me Profit for the year, Me Earnings / share, e Operating cash flow / share, e Market value of the portfolio, Me NAV / share, e Return on investment, % Return on shareholders equity, % Economic occupancy rate, % 1-12/2005 103.1 65.5 70.6 29.6 0.37 0.57 1 259.7 7.25 5.57 5.10 87.7 1-12/2004 99.2 17.0 67.9 3.2 0.04 0.53 1 221.5 7.44 1.50 0.54 87.5
Dividend 1,2 1 0,97 0,90 0,8 0,6 0,4 0,2 0 0,50 0,50* 0,39 0,39 0,04 0,37 0,30 0,30 76,9 % 92,8 % 76,9 % 1250 % 135,1 % 2001 2002 2003 2004 2005* EPS Dividend Pay-out ratio The EPS for 2004 and 2005 is calculated according to the IFRS. * Board proposal
Market review
Business conditions Finnish GDP growth just under 2.0 % in 2005, growth estimate for 2006 is 3.0 % Inflation 1.0 %, unemployment 8.4 % Growth in purchasing power estimated to be 2.0 % in 2006 Growth in private consumption estimated to be 2.5 % in 2006 Source: Statistics Finland, ETLA
GDP growth, Finland Euro area % 7 6 5 Finland Euro Area 4 3 2 1 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005* 2006* Source: Statistics Finland, Ministry of Finance, KTI
Prime office rents Q3, Europe LONDON PARIS MOSCOW DUBLIN STOCKHOLM MADRID AMSTERDAM HELSINKI BRUSSELS OSLO BERLIN COPENHAGEN BUDAPEST 0 200 400 600 800 1000 1200 1400 Source: KTI, Jones Lang LaSalle e/m²/year
Office vacancy rates Q3, Europe AMSTERDAM STOCKHOLM DUBLIN BUDAPEST BRUSSELS BERLIN WARSAW OSLO HELSINKI COPENHAGEN LONDON MADRID PARIS MOSCOW 0 5 10 15 20 25 Source: KTI, Jones Lang LaSalle, Catella Property Group
Vacancy rate, HMA % 14 Helsinki metropolitan area 12 10 8 6 4 2 0 90 90 91 91 92 92 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 Retail Office Warehouse&Industrial Source: Catella Property Group
Rental levels, HMA /m²/year 1600 Helsinki metropolitan area, prime rents 1400 1200 1000 800 600 400 200 0 89 89 90 90 91 91 92 92 93 93 94 94 95 95 96 96 97 97 98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 Retail, Helsinki CBD Office, Helsinki CBD Warehouse, Ring Road III Retail: Average area 150 m 2, Office: Average area 500 m 2, Gross rent /m²/year excl. VAT, New agreements Source: Catella Property Group
Net take up, office premises m² 350 000 Helsinki metropolitan area 300 000 250 000 200 000 150 000 100 000 50 000 0-50 000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-100 000 Initiated constructions Net take-up Completed building projects Net take-up forecast Source: Catella Property Group
Transactions 3,5 domestic international international portfolio 1000MEUR 3 2,5 2 1,5 1 0,5 0 2001 2002 2003 2004 2005 / (preliminary) Stock trading of listed property companies not included Source: KTI
Operational review
Property Development City-Center project proceeding as planned Development due to start in the summer of 2006 depending on the ratification of the zoning plan First phase includes expansion of the technical space in levels -5 and -4 and restaurants in the first floor In 2006 amount to be invested is estimated to be 20-25 meur of the total 110 meur Honkatalo in Hakkila, Vantaa 10 000 m² new logistics space Construction to start 2006
Modernization of office buildings In 2005 Sponda has put a lot of emphasis in modernizing its office buildings Largest projects in Bulevardi 1, Korkeavuorenkatu 35 and 37, Havis Business Center and City-Center in Helsinki Miestentie in Espoo Total amount invested in 2005 in property maintenance and quality improvements 20.7 meur
Acquisitions and disposals 2005-7,2 28,4 2004 2003-34,6-16,8 25,5 56,2 Acquisitions 2002 2001-329,3-21,9 79,5 13,2 Disposals 2000-44,9 45,7 1999-42,4 340 1998-12,8 17,2-400 -200 0 200 400 Meur
Cash yield for market value Business unit Geographical area 10,0 % 12,0 % 9,0 % 8,0 % 10,0 % 7,0 % 6,0 % 5,0 % 8,0 % 6,0 % 4,0 % 3,0 % 2,0 % 1,0 % 0,0 % Office & retail Logistics Total 4,0 % 2,0 % 0,0 % CBD HMA HMA Logistics Other Total 5.6% 9.1% 6.4% 5.3% 6.5% 8.9% 10.1% 6.4%
Lease contracts 31.12.2005 18,0 % 16,0 % 14,0 % 12,0 % 10,0 % 8,0 % Future cash flows 461 meur Average length of contracts 4.3 years 6,0 % 4,0 % 2,0 % 0,0 % 2006 2007 2008 2009 2010 2011 2012- Openended
Customers by sector 31.12.2005 633 customers 1070 lease agreements 0,20 % 7 % 12 % 26 % Retail Manufacturing/R&D Healthcare/Education Bank/Investment 11 % Public sector 9 % 5 % 6 % Building/Logistics/Transport IT/Media/Publishing Hotel/Restaurant 5 % 18 % Energy Other services
Economic occupancy rate 2003-2005 Sponda 31.12.2005 30.9.2005 30.6.2005 31.3.2005 2004 2003 % % % % % % Office & retail 86.2 84.9 85.0 85.3 86.1 88.2 Logistics 91.9 92.8 92.4 93.8 92.0 89.7 Total property portfolio 87.7 87.2 87.2 87.8 87.5 88.6
Vacancy rate 2003-2005 Sponda 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 2003 2004 2005 Office & retail Logistics Total property portfolio
Results 2005
Profit & loss statement /2005 /2004 1-12/2005 1-12/2004 Total revenue 25,6 25,3 103,1 99,2 Maintenance cost -6,8-6,6-25,6-24,8 Net operating income 18,8 18,7 77,5 74,4 Profit/loss on sale of investment properties - -0,2-0,2 0,1 Valuation gain / loss 6,1-30,1-5,1-50,8 SGA expenses -1,5-1,7-7,0-5,6 Other operating expenses 0,1 0,7 0,3-1,1 Operating profit/loss 23,5-12,6 65,5 17,0 Financial income and expenses -6,7-6,9-26,3-26,6 Profit/loss before taxes 16,8-19,5 39,2-9,6 Taxes -3,7 4,9-9,6 12,8 Net income for the period 13,1-14,6 29,6 3,2
Rental revenue profit Profit from renting : 2005 2004 Profit before tax 39,2-9,5 Revaluation deficit 5,1 50,8 Profit on sale of assets -0,3-1,4 Loss on sale of assets 0,6 1,3 Profit from renting 44,6 41,2 Change in profit from renting: Profit from leasing actitivities 2004 41,2 Net rental income growth 3,0 Marketing and administration -1,4 Interest costs 0,3 Other 1,5 44,6
Tax charge Tax charge (meur) 2005 2004 Profit before tax 39,2-9,5 Expected tax (26%) -10,2 2,8 Losses not deducted (property companies) -0,1 Non-deductible expenses -0,4 Non-taxable income 0,9 3,7 Taxes from previous years -0,1 0,3 Tax loss carryforward 0,2 Change in tax rate (29% - 26%) 6,1 Tax charge for period -9,5 12,7
Changes in NAV Net Asset Value 2005 2004 Net assets at start of the period 586,6 605,3 Net profit 29,6 3,2 Dividends paid -39,4-23,5 Share capital increase 1,6 1,6 Valuation of interest derivatives -4,2 Net assets at end of period 574,2 586,6 Change -2,1 % NAV/share 7,25 7,44
Change in like-for-like rental income Change in like-for-like rental income 2004/2005, Me Rental income 2004 96.5 Acquisitions 2005 3.7 3,9 % Disposals 2005-0.8-0,8 % Indexation 1.0 1,0 % Increase in rents/occupation 0.7 0,7 % Rental income 2005 101 4,7 %
Market value of properties 2001-2005 1600,0 1400,0 1200,0 1420,0 1182,9 1241,1 1221,5 1259,7 1000,0 800,0 Market value, meur 600,0 400,0 200,0 0,0 2001 2002 2003 2004 2005
Balance sheet ASSETS 31.12.2005 31.12.2004 Me Me Long-term assets 1 271,3 1 235,6 Short-term assets 7,4 10,2 Assets total 1 278,7 1 245,8 SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity total 574,3 586,6 Long-term liabilities Interest-bearing debt 549,2 525,0 Pension liability - 0,1 Provisions 1,1 1,4 Other debt 5,8 - Deferred tax liabilities 63,4 56,2 Long-term liabilities total 619,5 582,7 Short-term liabilities 84,9 76,5 Liabilities total 704,4 659,2 Shareholders equity and liabilities 1 278,7 1 245,8
Financing 2005 2004 Equity ratio 45 % 47 % Average interest rate 4,2 % 4,3 % Hedging 76 % 76 % Average loan maturity 3,2 yrs 3,7 yrs Average interest-bearing period 2,1 yrs 2,6 yrs Interest cover 2,7 3,1
Loan maturity 31.12.2005 16 % 11 % 16 % 16 % Total amount of interestbearing debt 617 meur 16 % 25 % 2006 2007 2008 2009 2010 2011
Shareholders 31.12.2005 Number % of shares of shares and votes State Treasury 27 189 642 34.3 Investment Fund Nordea Nordic Small Cap 758 100 1.0 The State Pension Fund 600 000 0.8 Etera Mutual Life Insurance Company 302 070 0.4 Pension Trust of Yleisradio 300 000 0.4 Support Fund for the Commercial and Technical Sc. 267 800 0.3 Icecapital European Property 212 600 0.3 Livränteanstalten Hereditas 210 000 0.3 Nordea European Equity Hedge 201 770 0.3 Foundation of Economic Education 200 000 0.3 Total 30 241 982 38.4 Nominee-registered (foreign shareholders) 41 859 835 (52,9 %) Altogether 5 808 registered shareholders