Sponda Capital Markets Day
21 September 2010
Lauri Ratia
Chairman of the Board
2
Property portfolio focused on prime
locations in the Helsinki Metropolitan Area
Investment properties by location
(excl. Property development & Funds)
Sponda owns a diversified property portfolio with a wide range of space solutions
Helsinki CBD and Ruoholahti areas
HMA
Turku
Tampere
Oulu
Moscow
St Petersburg
EUR 2,798.0 million
84 %
2 %
7 %
1 %
6 %
1 %
3
Strategy
• Sponda’s strategic goal is to seek growth and profitability
through customer-focused operations and active property
development, by purchasing property, and through operating
real estate funds in Finland and Russia.
• Due to economic downturn Sponda adjusted its strategy to
moderate growth and profitability. Growth, mainly property
development, was financed by selling some of the existing
property portfolio.
• Sponda reviews its strategy regularly so that it can adjust its
operations to prevailing market conditions.
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Strategy implemented in 2006-20092006
- First investments in Russia and into property funds.
- Sponda bought Kapiteeli Plc, rights offering for EUR 250 million completed to
fund the acquisition.
2007
- Sale of EUR 400 million property portfolio.
- Number of property development projects started.
2008
- Property divestments started in order to strengthen balance sheet
- All property development projects were completed at the end of the year
2009
- Strategy adjusted to prevailing market conditions.
- Property development activities accelerated at the end of the year.
- Rights offering of EUR 200 million completed to stregthen the balance sheet.
2010
- Property divestments continue to finance the development projects.
5
Activities in H2/2010
• Sponda won the tax case which secures Sponda’s balance
sheet position
• Improving cash flow by– Improving prime rental levels
– Further improving vacancy
– Active portfolio management
• Priority is in cash flow and improving balance sheet but, in the
long-term Sponda will look to– Accelerate property development activities on demand.
– Continue to follow both Finnish and Russian markets with a view to invest.
Sponda Capital Markets Day
21 September 2010
Kari Inkinen
President and CEO
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Agenda
• Finnish property market performance
• Our performance
• Property development
• Summary and prospects
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The Finnish property market
Source: Catella Property
• Transaction volume is still very low
(€0.6 bn), even compared to 2009.
• The office vacancy in the market has
further increased in H1 2010...
• ...however, the amount of new space
that has come to the market is very
limited.
• Market rents have stabilised in prime
markets and in new, modern buildings.
In the secondary market the rents are
still flexible.
Property transaction volume
0
1
2
3
4
5
6
7
bn
. eu
ro
Foreign Domestic
0,5
1,0
1,4
2,42,32,3
3,4
2,0
3,7
6,0
5,5
2,7
3,2
1,6
0,6
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Current office developments in the HMA- in total approx. 60 000 m²
Polaris Business Park Castor
City Center office
building
Falcon Business Park Gentti
Skanska Finland
HQ-building
Quartetto Business Campus H-
building
Keilaranta 1
extension
Alberga Business Park 1st phase
Technopolis 5th phase part 2
Source: Catella Property
Plaza Business Park Pilke
Avia Line 2nd phase
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Prime yields in HMA
Source: Catella Property
11Source: Catella Property
Rental levels in HMA
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Vacancy rate in the HMA
Source: Catella Property
13
Vacancy in office premises in selected areas
Source: Catella Property
14
Agenda
• Finnish property market
• Our performance
• Property development
• Summary and prospects
15
Sponda Q2/2010: Performance highlights
4-6/10 4-6/09 1-6/10 1-6/09 1-12/09
Total revenue, M€* 58.3 60.6 115.9 119.8 237.2
Net Operating Income, M€* 43.0 43.6 83.4 87.2 175.8
Operating profit, M€ 56.7 27.9 93.0 (49.9) (13.3)
Cash flow from
operations/share, €
0.11 0.19 0.19 0.37 0.45
Earnings/share, €** 0.11 0.04 0.15 (0.48) (0.40)
NAV/share, € 3.55 3.54 3.54
EPRA NAV/share, € 4.19 4.20 4.18
Economic occupancy rate, % 87.3 86.8 88.4
*) The company’s share of real estate fund profits in the income statement are presented on the change in fair value line
instead of under total revenue which has altered the company’s total revenue. The share of the profit in January-
June was EUR 2.9 million and in April – June EUR 1.4 million. The figures for comparison have been adjusted accordingly.
**) The figure includes the impact of the interest on the hybrid bond.
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Back to business
• Our priorities will continue to be in property management and
leasing operations:– Securing strong and solid cash flow
– Increasing cash flow with completion of property development in 2011
– Further reducing office and logistics vacancy and
– Completing current property development project as well as looking for new projects.
• Active portfolio management will ensure solid cash flow:– Long-term target is to sell down logistics portfolio with the exception of identified prime
locations
– Share of shopping centres will increase
– Funds business will grow
– Investments into Russia will continue should the market be favourable
• The maintenance costs will be kept below the market average.
• Continue to benefit from low interest levels but also continue to
increase hedging.
• Renewal part of expiring debt in 2011 and 2012.
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• Interest-bearing debt EUR 1,597.7 million
• Unused financing limits EUR 375 million
Loan maturities 30 June 2010
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How has Sponda’s portfolio performed in
the market?
Office
and
Retail
Logistics Shopping
Centres
Russia
Occupancy rate was up by
1.2 % -points since last
quarter.
Manufacturing and exports
are recovering resulting in
increase in demand for
logistics space.
Occupancy rate stayed at
high level with a small
increase.
Occupancy was up by 4
%-points, 91.5 %, since
the previous quarter.
Lease expiries and new
leases are at the same
level q-on-q in 2010*.
Average rents have
decrased 5 % q-on-q in
2010*.
Rents on average have
increased approx. 3 % q-on-
q in 2010*
Cash flow has increased
5 % q-on-q in 2010.
Property values have
bottomed out and yields in
prime properties will start
to decline in 2010.
Yields have leveled out,
improved market
conditions should turn the
values as well.
Values of shopping centres
in prime locations have
started to slowly increase.
Yields from peak to
trough fell over 20 % but
have now stabilised,
especially in Moscow.
* The figure refers to average rental levels in new agreements compared with rental levels in expired leases in
Sponda’s portfolio.
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Economic vacancy rate 2007 - 2010
Office & Retail vacancy restated from 31 Dec 2008
0
5
10
15
20
25
30
Office & Retail 12.3 %
Shopping Centres 3.3 %
Logistics 24.1 %
Russia 8.5 %
Total property portfolio 12.7 %
HMA market office vacancy 12.9 %
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Agenda
• Finnish property market performance
• Our performance
• Property development
• Summary and prospects
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Property development
• Expertise in property development:- First-class, sustainable buildings with low-energy consumption;
- Long-term partner and property owner;
- Sizeable landbank enables tailored construction;
- Experienced project managers who ensure that projects are completed on time and
on budget.
• The value of development portfolio was EUR 230.2 million – Land sites: EUR 88.1 million;
– Development projects: EUR 142.1 million;
– Development investments include mainly investments to City-Center project and
production plant in Vantaa.
• Development projects can be started once the required level of pre-
letting, over 50 %, has been achieved.
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Property development projects
Project Existing sqm Additional
sqm
€ to be invested Profit on
investment
Use
City-Center 41 000 office
and retail
15 000, of
which 4 200
office and
rest retail
EUR 125
million
Target is to
value City-
Center project
in Q4/2010
Retail
Hakkila 12 000 office 22 000
logistics
EUR 40 million At least EUR 6
million
Production/ren
ovation of
office space
New projects
“ready-to-go”
150 000 > EUR 300
million
Office, retail
Development
pipeline
350 000 At least 15 %
on top of the
development
cost
Office, retail,
logistics
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Hakkila, Vantaa
• New production plant for
22 000 m² being built
• In addition, Sponda will
lease 12 000 m² of office
and warehouse space in
the adjacent office building.
• Construction started,
completion estimated end
2010-beginning 2011.
• Total investment EUR 40 million.
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City-Center, Helsinki CBD
Inner Courtyard with new office building
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Agenda
• Finnish property market performance
• Our performance
• Property development
• Summary and prospects
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Activities in H2/2010
• Making use of signs of improvement in office and logistics
markets– Improve prime rental levels
– Further improve vacancy
• Accelerating property development activities
• Continue to look at disposing of non-strategic assets– In 2009, Sponda sold properties for EUR 40 million and booked a capital gain of
EUR 4.3 million.
– In H1/2010, Sponda sold properties for EUR 20 million and booked a capital gain
of EUR 10 million.
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Prospects and financial targets
Prospects
• Sponda estimates that the positive development in occupancy rates, which
started in Q2 2010, will continue for the rest of 2010. This assessment is based
on the lease agreements that the company knows are expiring and on the
forecast growth in Finland’s economy in 2010.
• The net operating income in 2010 is estimated to be lower than that in 2009.
The reasons for this decline are the strategic sale of property and the fall in
occupancy rates that began in 2009 and continued in the first quarter of 2010.
Financial targets
• Long-term equity ratio target is 40 % .
• Dividend policy is to pay approx. 50 % of the operational cash earnings per share, taking into account of the economic situation and company’s development needs.
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IR contact:
Pia Arrhenius
Senior Vice President, Corporate
Communications and IR
Tel: +358-20-431 3454