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1PANGEA PROPERTY PARTNERS

FEBRUARY 2018


PANGEA PROPERTY OUTLOOK 2018

SUMMARY 3

MACRO ECONOMY 6

INVESTMENT MARKET 12

1 PROPERTY INVESTORS 19

2 PROPERTY SEGMENTS 26

INDIVIDUAL COUNTRIES 30

INVESTMENT THEMES 2018 35

APPENDIX: PANGEA PROPERTY PARTNERS 37

1

2

3

4

5

8

6

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INTRODUCTION

This presentation is produced by Pangea Research and

presents our view on the Nordic markets in 2018:

» Macro economy

» Nordic real estate

» Investor outlook

» Segments outlook (incl. Stockholm resi special)

» Individual countries

This edition is a summary for the entire Nordic market,

and there are separate reports for Sweden and Norway.

BACKGROUND

SWEDEN

» Macro economy; growth rate coming down from very high levels, but still one of the fastest growing economies in Europe. In

2018, housing sector focus and economic stimulations related to the election in September expected

» Property yields; prime yields expected to remain flat, due to strong investor demand and further rental growth, but continued

upward pressure on secondary yields, due to potential interest rate hikes in Q3 2018

» Rental markets; further rental growth in the office sector expected, concentrated to the main cities, but prime rents in

central Stockholm expected to deaccelerate in 2018, after a strong run over several years

» Transaction volume; in line with 2017, around SEK 140-160bn in 2018 and 2019. More foreign investors and potential

opportunities in the residential development sector expected, plus interesting window for larger corporate deals

NORWAY

» Macro economy; strong outlook with GDP growth slightly above 2% going forward as production and oil and gas activity

increase. Real salary growth expected to pick up significantly due to low employment and expected inflation < 2%

» Property yields; Long term interest rates with significant increase since primo December, indicating rent hike expectations

from Q1 2019. However, prime yields not expected to increase relative to the underlying rents, but remain relatively flat due to

strong investor appetite and higher competition among debt providers

» Rental markets; Overall rental markets expected to develop positively driven by positive macro. Office and logistics with the

most positive prospects, while retail is expected to remain flat with secondary assets lagging

» Transaction volume; expect high activity, but lower volume than 2017 as pricing is high, and buyers’ and sellers’ valuation

gaps might be too wide for certain assets

FINLAND

» Macro economy; significant improvement in the Finnish economy, now outgrowing the Eurozone as a whole

» Property yields; decreasing but still attractive yield spread (50-125 bps) compared to the rest of the Nordics, attracting

foreign interest

» Transaction volume; slightly lower than 2017, around EUR 7-9bn in 2018 and 2019

DENMARK

» Macro economy; continued upswing for the Danish economy, with better capacity utilization

» Property yields; stable prime yields in Copenhagen, and continued high interest from international investors

» Transaction volume; in line with 2017, around DKK 55-65bn in 2018 and 2019

Mikael Söderlundh, Nordics

Head of Research & Partner

MOB: +46 73 770 77 90

[email protected]

Sondre Nicander Nilsen

Norway

Head of Research Norway & Associate

MOB: +47 94 36 90 35

[email protected]

CONTACT

mailto:[email protected]

mailto:[email protected]


SUMMARY: PANGEA’S EXPECTATIONS ON 2018

» Generally: markets close to peaking – wider spread between segments expected

» Nordics: remaining one of Europe’s most healthy and well performing regions

• Norway and Sweden close to fully priced, but limited downside risks

• Finland and Denmark later in the cycle, still with upside potential, but less mature

Global economy gaining

momentum – US, Europe and

China all performing well

(3.7% global GDP growth 2018F)

Strong population and

economic growth in

the Nordics

(2.1% Nordic GDP growth 2018F)

Active Nordic transaction

markets, fuelled by large

cross-border capital flows

(43% foreign buyers 2017)

Weaker housing markets

and consolidation among

resi developers

(~10% price drop in Stockholm 2017)

Further office rental growth,

but deaccelerating prime

rents in Stockholm

(1-5% CAGR in Nordic capitals last 10Y)

Reprising of listed sector

and window for large

corporate deals

(2% discount to EPRA NAV on average)

International investments

driven by weak currencies

and low hedging costs

(41% lower USD/NOK rate last 5Y)

Still attractive, but

narrowing, risk-adjusted

returns for real estate

(25-75bp higher interest rates 2019F)


SUMMARY: NORDIC OVERALL TEMPERATURE WATCH

NORWAY SWEDENDENMARK

EUROZONE

SWEDEN

DEVELOPERS

DEVELOPERS

FINLAND

NORWAY

SWEDEN

EUROZONE

DENMARK

DENMARK

FINLAND

LISTED SECTOR

FUNDS/SYNDICATES

PRIVATE COMPANIES

PUBLIC SECTOR

BUY SIDE PROPERTY SEGMENTSSELL SIDE

LISTED SECTORHOTEL

RESIDENTIAL

OFFICE

INSTITUTIONS

INTERNATIONAL

RETAIL

ECONOMIC GROWTH PUBLIC FINANCES TRANSACTION MARKETS

The Nordics outgrowing Europe Healthy governments, Norway in top Transaction volumes historically high

Developers affected by housing prices Momentum in the office market

Source: Pangea Research

EUROZONE

NORWAYFINLAND

PRIVATE COMPANIES

INTERNATIONAL

INSTITUTIONS

FUNDS/SYNDICATES

RENTAL MARKETS

OSLO

STOCKHOLM

Stockholm first in office rental cycle

LONDON

PUBLIC SECTOR

LOGISTICS

COPENHAGEN

HELSINKI

BANK LOANS

ALTERNATIVE DEBT

BOND MARKET

FINANCING

PREFERENCE SHARES

Active corporate bond marketBroad range of active investors

HOT

COLD



SUMMARY 3

MACRO ECONOMY 6







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5

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6

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CALENDAR: FEW CRUCIAL EVENTS IN 2018 (COMPARED TO 2017)

Jan

28 Jan

Presidential

election Finland

9 Sep

Election Sweden

Feb Mar Apr May Jun Jul Aug Sep Oct DecNov

GLOBAL KEY EVENTS

NORDIC KEY EVENTS

20 March

FED meeting

press conference

20 May

Election Italy

8 March

ECB meeting

12 Jun

FED meeting

press conference

6 Nov

US midterm

election

18 Dec

FED meeting

press conference

18 Mar

Election Russia

8 Jun

G7 Summit

Quebec

14 Jun

ECB meeting

11 Jul

Nato summit

Late Aug

Economic forum,

Jackson Hole

13 Sep

ECB meeting

25 Sep

FED meeting

press conference

13 Dec

ECB meeting

12 Oct

IMF & World Bank

annual meeting

23 Jan

World Economic

Forum Davos

13 Feb

Riksbanken

meeting

25 April

Riksbanken

meeting

2 Jun

Riksbanken

meeting

5 Sep

Riksbanken

meeting

23 Oct

Riksbanken

meeting

19 Dec

Riksbanken

meeting

15 Mar

Norges Bank

press conference

21 Jun

Norges Bank

press conference

20 Sep

Norges Bank

press conference

13 Dec

Norges Bank

press conference

Additional FED monetary policy meetings with no press conference: 31/1, 1/5, 31/7, 7/11

27 Mar

Finlands Bank

press conference

Political events/elections

Central bank meetings

Summits and other events

» Many critical elections in 2017,

both in the US and Europe

» Fewer key events in 2018, main

focus on central banks (interest rate

hikes and QE withdrawals)

» General elections in e.g. Sweden,

Russia and Italy in 2018

1 Mar

Amortization

rules Sweden

Additional Norges Bank monetary policy meetings with no press conference: 3/5, 16/8, 25/10


Sweden

Norway

Finland

Denmark

Russia

UK

Austria

Belgium

Estonia

France

Germany

Greece

Italy

Netherlands

Portugal

Spain

Sweden

Norway

Finland

Denmark

RussiaUK

Austria

Belgium

Estonia

France

Germany

Greece

Italy

Netherlands

Portugal

Spain

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

-0.5% -0.3% -0.1% 0.1% 0.3% 0.5% 0.7% 0.9% 1.1% 1.3% 1.5%

5Y average (2013-2017)

5Y forecast (2018-2022)

Latvia,

Lithuania

Source: IMF, Statistics Norway

THE NORDIC REGION SHOWING STRONG GROWTH…

COMMENTS

» All Nordic countries show strong

growth over next 5 years, with Sweden

and Norway leading the way

» Nordics outgrowing the Eurozone in

terms of estimated GDP growth:

1.9% vs 1.6% per year

» Nordics outgrowing the Eurozone in

terms of estimated population growth:

0.8% vs 0.1% per year

GDP Population

Sweden 2.0% 1.0%

Norway 2.1% 1.1%

Finland 1.7% 0.3%

Denmark 1.8% 0.8%

Nordics 1.9% 0.8%

Eurozone 1.6% 0.1%

5-YEAR FORECAST (2018-2022F) GD

P g

row

th, %

Population growth, %

EUROPEAN GROWTH RATES: GDP VS POPULATION, % PER YEAR

STRONG GDP/CAPITA GROWTH STRONG OVERALL GROWTH

WEAK OVERALL GROWTH WEAK GDP/CAPITA GROWTH


0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Sweden Norway Finland Denmark Nordics Eurozone

2018F 2018-22F

GDP/CAPITA FORECASTS (2018-2022F), USD1 GOVERNMENT GROSS DEBT/GDP FORECASTS (2018-2022F)

UNEMPLOYMENT FORECASTS (2018-2022F)

Source: IMF, Statistics Norway

INFLATION FORECASTS (2018-2022F)

… SUPPORTED BY HEALTHY MARKET FUNDAMENTALS

Note: (1) Purchasing power parity adjusted

0

20,000

40,000

60,000

80,000


2018F 2018-2022F

0%

20%

40%

60%

80%

100%


2018F 2018-2022F

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


2018F 2018-2022F


WEAK NORDIC CURRENCIES DRIVING FOREIGN INTEREST…

NORDIC EXCHANGE RATES (2013-2018)

9.84

EUR/SEK

+15%

8.03

USD/SEK

+23%

9.63

EUR/NOK

+32%

7.86

USD/NOK

+41%

Source: Thomson Reuters

» Significant weakening of the local Nordic currencies (SEK and

NOK) over the last 5 years:

• NOK has depreciated 32% against EUR and 41% against USD

• SEK has depreciated 15% against EUR and 23% against USD

• Currently, SEK and NOK are close to par (circa 5-20%

difference historically)

» In addition to historically weak currencies (favouring all

foreign investors), current hedging costs are low too

(favouring in particular core investors)

CURRENT EXCHANGE RATES / 5Y CHANGES

5.0

6.0

7.0

8.0

9.0

10.0

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

EURNOK USDNOK USDSEK EURSEK


… AND EXPECTATIONS ON SLOWLY RISING INTEREST RATES

INTEREST RATE STRUCTURE (JAN 2018)

5Y SWAP RATES (2012-2017) SIGHT DEPOSIT RATES (2013-JAN 2018)

» Current yield curve in the Nordics indicates that the market anticipates

gradually higher interest rates and a strong economy

» First interest rate hike in Sweden expected Q3 2018, driven by higher inflation

stabilizing around the 2% target

» First increase in Norway expected at year-end 2018 or 2019, depending on

stabilization of housing prices, just like Sweden

» Large interest rate spread between Norway and the other Nordic countries

» Overall, expectations on gradually increasing interest rates in the

Nordics, in line with the rest of Europe

COMMENTS

Source: Thomson Reuters (numbers as of January 24nd 2018)

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Sweden Norway Denmark Finland (Euro)

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%


-0.5 %

0.0 %

0.5 %

1.0 %

1.5 %

2.0 %

2.5 %

3m 1Y swap 2Y swap 3Y swap 4Y swap 5Y swap 7Y swap 10Y swap




SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


Sweden

44%

Norway

26%

Finland

16%

Denmark

14%

TRANSACTION VOLUME: CLOSE TO NEW RECORD IN 2017…

NORDIC TRANSACTION VOLUMES (2017) NORDIC TRANSACTION VOLUMES (2007-2017)

Sweden

Norway

Finland

Denmark

160 deals

+10% from 2016

EUR 9.9bn

+34% from 2016

449 deals

(-4% from 2016)

EUR 15.4bn

(-27% from 2016)

266 deals

+9% from 2016

EUR 8.5bn

+12% from 2016

141 deals

+11% from 2016

EUR 8.3bn

+27% from 2016

NORDICS 2017

1,016 transactions

(+3% from 2016)

EUR 42.2bn

(-3% from 2016)

EU

Rbn

Source: Pangea Research. Based on transactions above EUR 5m

VOLUME SPLIT (2017) NO. OF DEALS SPLIT (2017)

Sweden

37%

Norway

20%

Finland

23%

Denmark

20%

0

10

20

30

40

50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sweden Norway Finland Denmark

Three years in a row (2015-2017) with Nordic transaction volumes above EUR 40bn – plus record high number of deals in 2017


-30

-20

-10

0

10

2013 2014 2015 2016 2017

0

10

20

30

40

2013 2014 2015 2016 2017

0

1

2

3

4

5

6

2013 2014 2015 2016 2017

-5

0

5

10

15

20

25

2013 2014 2015 2016 2017

… DRIVEN BY NET INFLOW OF FOREIGN CAPITAL (~EUR 10BN)

FOREIGN NET INVESTMENTS IN SWEDEN

SEK

bn

FOREIGN NET INVESTMENTS IN FINLAND

FOREIGN NET INVESTMENTS IN NORWAY

FOREIGN NET INVESTMENTS IN DENMARK

EU

Rbn

NO

Kbn

DK

Kbn

Source: Pangea Research. Based on transactions above EUR 5m

COMMENTS

» Foreign investors net buyers in all

Nordic countries in 2017

» Net investments of about EUR 10bn (EUR

18bn – EUR 8bn = EUR 10bn)

» Combination of strong international capital

inflow and pan-Nordic asset rotation

» High level of foreign buyers in the Nordics

(43%): really high levels in Finland (76%) and

Denmark (59%), moderate levels in Sweden

(23%) and Norway (22%)

» Large interest likely to continue in 2018

» Stable macro fundamentals in the Nordics vs

Europe and high property market liquidity

» Favourable FX changes in last 5 years making it

15-40% cheaper to invest in NOK/SEK for

Anglo-Saxon investors

» Historically low currency hedging costs

» Decline in housing prices attracting foreign

investors also to the residential sector

(historically main focus on commercial)


NORDIC LIQUIDITY VS THE REST OF EUROPE

TRANSACTION VOLUMES (2017)

>10 EURbn

5-10 EURbn

3-5 EURbn

1-3 EURbn

<1bn

TRANSACTION VOLUMES (2017)1 TURNOVER OF STOCK (10Y)

Source: RCA, Pangea Property Research

# Country EURbn

1 UK 70

2 Germany 67

3 France 34

4 Spain 20

5 Netherlands 19

6 Sweden 15

7 Finland 10

8 Italy 9

9 Norway 9

10 Denmark 8

Total Nordics 42

Total Europe 293

# Country %

1 Sweden 6.3%

2 UK 5.9%

3 Luxembourg 4.7%

4 Norway 4.5%

5 Denmark 4.0%

6 Finland 3.9%

7 Netherlands 2.7%

8 Germany 2.4%

9 France 1.7%

10 Poland 1.7%

Nordic average 4.7%

European average ~2.5%

Nordics accounted for ~15% of the European volume 2017

Note: (1) According to Pangea Research (Nordic countries) and RCA (other Europe), deals above €5m


TOP 10 NORDIC DEALS 2017: OF WHICH 8 CROSS-BORDER

# BUYER SELLER TARGET SEGMENT COUNTRY PRICE CROSS-BORDER

1 Blackstone/Areim Several Sponda Office FI EUR 3.8bn

2 China Inv. Corp. Blackstone Logicore Logistics FI, SE EUR ~1.2bn

3 ATP Ejendomme Danica 50% of 16 shopping centres Retail DK DKK 6.9bn

4 Heimstaden Bostad Several Several residential portfolios Residential SE, NO, DK EUR 0.8bn1

5 Niam HD Ejendomme 2,000 apartments Residential DK DKK 4.2bn

6 SBB Meteva (Trond Mohn) DNB’s HQ in Oslo Office NO NOK 4.3bn

7 Heimstaden Ares Management 1,546 apartments Residential DK DKK 3.0bn

8 TH Real Estate Barings Real Estate 50% of Kamppi centre Retail FI EUR 255m

9 DCC Energy ExxonMobile Esso Retail Norway Other NO NOK 2.4bn

10 D. Carnegie & Co. Akelius 1,420 apartments in greater Stockholm Residential SE SEK 2.5bn

√

√

√

√

√

√

√


√

Note: (1) Adjusted for ownership before and after the transactions


TRANSACTION VOLUME BY COUNTRY (ROLLING 12M), €BN

NORDIC TRANSACTION VOLUME (2008-2018F), €BN NORDIC OFFICE PRIME YIELDS (2007-2018F), %

NORDIC OFFICE PRIME RENTS (2007-2018F), EUR

Source: Pangea Research, Mrec, Lokalebasen

NORDIC PROPERTY MARKET OVERVIEW, INCL. 2018 FORECAST

0

5

10

15

20

25

Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17

Sweden Norway Finland Denmark

0

5

10

15

20

25

30

35

40

45

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F

Stockholm Oslo Helsinki Copenhagen

0

200

400

600

800

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F



0.70%

1.70%

0.50% 0.60%

1.50%

1.75%

1.75% 1.50%

1.30%

0.30%

1.75% 1.90%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%


Yield gap

Bank margin

5Y swap

0.70%

1.70%

0.50% 0.60%

1.50%

1.75%

1.75% 1.50%

0.80%

0.05%

1.50% 1.65%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%


Yield gap

Bank margin

5Y swap

NORDIC OFFICE VS. RESIDENTIAL RETURNS

PRIME OFFICE PRIME RESIDENTIAL

3.5%

3.75%4.0% 4.0%

Prime yield 3.50% 3.75% 4.00% 4.00%

LTV 60% 60% 60% 60%

5Y swap2 0.70% 1.70% 0.50% 0.60%

Bank margin 1.50% 1.75% 1.75% 1.50%

Cash-on-cash3 5.7% 4.2% 6.4% 6.6%

Price, EUR/sqm ~14,000 ~11,000 ~8,000 ~7,000

Prime yield1 3.30% 3.50% 3.75% 3.75%

LTV 70% 70% 70% 70%

5Y swap2 0.70% 1.70% 0.50% 0.60%

Bank margin 1.50% 1.75% 1.75% 1.50%

Cash-on-cash3 5.6% 3.6% 6.9% 7.3%

Price, EUR/sqm4 ~12,000 ~10,000 ~8,000 ~8,000

3.0%

3.5%3.75% 3.75%

Nordic return differences are mainly due to different financing terms – Norway offering the lowest yield spread

Source: Pangea Research. Rental growth not included.Notes: (1) Investment properties, not sales in secondary market, (2) As of 1 Feb 2018, (3) Pre-amortization, (4) Sales prices in secondary market



SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


INVESTOR OUTLOOK: ACTIVE BUYERS AND SELLERS 2018

CATEGORY Sweden Norway Finland Denmark Comment

INSTITUTIONS

• Few sales and selective investments expected

• New investment rules for Swedish AP funds in mid-2018

• Large mergers in Finland (Ilmarinen/Etera) and Denmark (Danica/SEB)

LISTED COMPANIES

• Less focus on NAV growth after sector repricing in 2017

• Valuations at discount could trigger larger corporate deals

• 4/5 of Nordic listed market cap in Sweden (after Sponda delisting)

PROPERTY FUNDS /

SYNDICATES

• SEK 20bn equity raised to Swedish property funds/clubs 2017

• Very active syndicate market in Norway

• Challenging to find opportunistic returns in Sweden and Norway

PRIVATE

COMPANIES

• Record low yields triggering strategic sales

• Consolidation trend with large companies growing larger

• Fragmented group, many small local property owners

INSTERNATIONAL

INVESTORS

• High activity expected, both core and value-add investors

• Attractive fundamentals Nordics vs Europe

• Favourable FX effects and low hedging costs

OTHER

• Significant sales from municipalities and city councils

• High activity among developers and construction companies

• Weak Swedish housing market could accelerate sales of resi projects

Source: Pangea Research. Arrows indicate net buy/sell activity in 2018


1.4

4.0

2.8

5.6

2.6 2.8

8.0

5.95.5

0

2

4

6

8

10

2009 2010 2011 2012 2013 2014 2015 2016 2017

PROPERTY ACQUISITIONS BY NORDIC INSTITUTIONS (2009-2017)

COMMENTS

TARGETED MARKETS AND SECTORS (2017)

INSTITUTIONAL OWNERSHIP BY COUNTRY (2017)

INSTITUTIONS: STILL NET BUYERS IN THE MARKET…

» Nordic institutions still underweighted in property with an average

exposure around 9% of AUM today (up from 7% in 2015)

» Large net buyers in recent years, and some institutions starting to reach

their allocation targets (typically targeting 10-15% in the long-term)

» New investment rules for the Swedish National Pension Funds (AP 1-4)

in mid 2018 providing additional acquisition capacity

» Large recent mergers in Finland (Ilmarinen/Etera) and Denmark (Danica/

SEB Pension) increasing their property portfolios

» Generally, selective acquisitions going forward and few sales expected

Geographical split Sector split

EU

Rbn

Source: Pangea Research, annual reports

Real

est

ate, %

of A

UM

49%

11%

6%

34%Sweden

Norway

Finland

Denmark

13%

29%

30%

16%

12% Residential

Office

Retail

Public sector

Other

9.2%

10.8%

8.8%

7.2%

8.9%

0%

3%

6%

9%

12%

15%

Sweden Norway Finland Denmark Nordics


0

1

10

100

0.01 0.10 1.00 10.00

Sweden

Norway

Denmark

Finland

… WITH A PROPERTY EXPOSURE AROUND 9% OF AUMA

UM

, EU

Rbn

Real estate (EURbn)

Comment: Axles refer to logarithmic scales Source: Pangea Research, based on latest reports

Avg. property

exposure:

~9%

NORDIC INSTITUTIONS – PROPERTY PORTFOLIOS VS TOTAL ASSETS (2017)

Alecta (SE)

AMF (SE)KLP (NO)

ATP (DK)

LähiTapiola (FI)OPF (NO)

Sparebank 1 (NO)

Keva (FI)

VER (FI)

KAW (SE)

LF Liv (SE)

M-Kassa (FI)

Codan (DK)

Danica: after merger

with SEB Denmark

Ilmarinen: before

merger with Etera

LOW PROPERTY EXPOSURE

HIGH PROPERTY EXPOSURE


LISTED COMPANIES: VALUED AT GENERAL DISCOUNT…

» Less focus on NAV growth after sector reprising in 2017

» Listed companies in Sweden valued just below par and general discounts in

Finland and Norway (~20% below EPRA NAV)

» Potential for corporate deals (takeovers, spinoffs, etc.) in 2018 due to less

aggressive valuations and many small companies

» Sweden accounts for 86% of Nordic listed market cap (after the Sponda

delisting) with more than 20 listed property companies, plus another

20 listed companied on alternative growth list First North

COMMENTS

Source: Pangea Research, Thomson Reuters. Figures as of 2 Feb 2018, main list only

0.6x

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

0%

10%

20%

30%

40%

50%

MCAP AND GEOGRAPHIC SPLIT, FEB 2018

12M TOTAL STOCK RETURNS (INCL. DIVIDENDS), FEB 2018P/EPRA NAV, FEB 2018

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500Sweden Finland DenmarkNorway

86% 2% 1%11%

Average: ~13%

Sweden Finland DenmarkNorwaySweden Finland DenmarkNorway

0.97x 0.82x 1.17x0.79x 13% 8% 8%16%

Average: ~0.95x

EU

Rm

Average: ~EUR 1.5bn


-10%

15%

40%

65%

90%

115%

Jul-17 Sep-17 Nov-17 Jan-18

… WITH DIVERGING STOCK MARKET PERFORMANCE

Source: Pangea Research, Thomson Reuters (Share prices as of 1 Feb 2018)

» Overall strong stock market performance

for Nordic real estate in last 3 years

» Logistics/warehouse the by far strongest

segment and retail lagging behind

» Declining housing prices in Sweden and

Norway creates uncertainty primarily for

the construction sector

– Construction stocks’ cash flow directly

exposed to housing prices

– Residential stocks’ cash flow primarily

related to the rental market which is

healthy

» Retail has underperformed other property

segments in last 3 years

– Repricing of secondary assets expected

by investors

LISTED NORDIC PROPERTY SECTOR PERFOMANCE (TOTAL RETURN INDEX)

1) Includes the logistics segment

2015 to H1 2017 H2 2017 to 2018

-10%

15%

40%

65%

90%

115%

Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17

24%

41%

44%

45%

89%

53%

-2%

8%

7%

-5%

8%

-23%

PREX Warehouse1)

PREX Mixed

PREX Office

PREX Residential

PREX Retail

PREX Construction

--% Return in period


INTERNATIONAL INVESTORS: CONTINUED APPETITE

177

224

271 281

0

50

100

150

200

250

300

2014 2015 2016 2017

USD

bill

ions

WORLDWIDE CAPITAL RAISED FOR PE REAL ESTATE1

SHARE OF FOREIGN BUYERS IN THE NORDICS (2017) EXAMPLES GLOBAL FUNDS WITH NORDIC MANDATES (VINTAGE 2016/2017)

COMMENTS

» Foreign buyers accounted for 43% of the Nordic volume in 2017, both

international capital and Pan-Nordic

» Capital inflow from both core investors (German funds, sovereign wealth

funds, separate accounts, etc.) and value-add funds (mainly Anglo-Saxon)

with main focus on large ticket transactions

» Nordics considered a safe haven with strong economic growth, political

stability, healthy banks and a well-functioning property market

» Favourable FX change in recent years and low hedging costs

Source: Pangea Property Research, Pere News

Fund Equity Year Strategy Sector targets

Blackstone Real Estate Europe V EUR 7,800m 2017 Opportunistic Broad

Starwood Opportunity Fund XI USD 6,000m 2017 Opportunistic Office, Residential, Hospitality

Curzon Capital Partners 5 Long-Life USD 750m 2017 Core+ Broad

Blackrock Europe Property fund III EUR 700m 2017 Value add Broad

Ares European PEP II EUR 665m 2017 Value add Broad

M7 EREIP IV EUR 400m 2017 Value add Broad

CBRE European Shopping Fund II EUR 753m 2016 Core+ Retail

BVK Patrizia Private Mandate EUR 400m 2016 Core Residential

AXA IM – Real Assets PEVAV EUR 445m 2016 Value add Office, Retail, Logistics

Note: (1) Equity raised over last 5-year period

23% 22%

76%

60%

43%

0%

20%

40%

60%

80%

100%

Sweden Norway Finland Denmark Nordics



SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


SEGMENTS OUTLOOK: HOT AND COLD SECTORS IN 2018?

SWEDEN NORWAY FINLAND DENMARK COMMENTS

OFFICE POSITIVE POSITIVE POSITIVESLIGHTLY

POSITIVE

• Positive momentum in the office segment

• Rental growth concentrated to capitals and main cities

• Stockholm first in the cycle, Oslo and Helsinki to follow

RETAILSLIGHTLY

NEGATIVENEUTRAL

SLIGHTLY

NEGATIVENEUTRAL

• Hard competition and small margins among retailers

• Growth eliminated by e-commerce

• Large difference prime vs secondary retail

RESIDENTIAL NEUTRALSLIGHTLY

NEGATIVENEUTRAL

SLIGHTLY

POSITIVE

• Pressure on decreasing housing prices in Sweden and Norway

• Sweden: large difference between expensive new production (negative

outlook) and old stock (positive outlook)

• Denmark: positive momentum, especially in Copenhagen

LOGISTICS/

WAREHOUSEPOSITIVE POSITIVE

SLIGHTLY

POSITIVE

SLIGHTLY

POSITIVE

• Long-term trading patterns favouring logistics

• Increasing international and institutional interest

• Limited supply in the core segment

PUBLIC SECTORSLIGHTLY

POSITIVE

SLIGHTLY

POSITIVE

SLIGHTLY

POSITIVE

SLIGHTLY

POSITIVE

• Favourable demographics (growing, aging populations) in the Nordics

• Strong demand for education, elderly care, etc.

• Yields bottoming out, following strong price run in recent years

HOTEL NEUTRALSLIGHTLY

POSITIVE

SLIGHTLY

POSITIVENEUTRAL

• Sweden: large new supply in Stockholm reducing short-term profits

• Norway: continued, but slower RevPar growth after very strong 2017

• Gradually increasing demand for hotel among property investors



STOCKHOLM HOUSING MARKET: SHORT-TERM PRICE PRESSURE…

0

2,000

4,000

6,000

8,000

10,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2017 2016 2015

HOUSING PRICES, STOCKHOLM VS SWEDEN

SECOND HAND UNITS FOR SALE, STOCKHOLM

NEW PRODUCTION, STOCKHOLM VS SWEDEN

NEWLY BUILT UNITS FOR SALE, STOCKHOLM

0

2,000

4,000

6,000

8,000

10,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2017 2016 2015

Index (

2010=

100)

COMMENTS

» Housing prices in Stockholm down almost

10% since peak in mid-2017

» Further price pressure in the short

term (1-2Y) expected, driven by:

• Significant new supply (concentrated to certain

areas in Stockholm)

• New amortization rules (1 March 2018)

• Large inventory and unsold volumes

• Media and psychology

» Moderate price growth expected in

the long term (3-10Y), driven by:

• Population growth

• Housing shortage

• Stable banks and small credit losses

• Lower construction rate

» New amortization rules affecting mainly

young families with high salaries and

expensive housing (~15% of new lenders)

» Main long-term risks associated with

higher interest rates and banks less willing

to finance new lenders

Apar

tments

for

sale

Apar

tments

for

sale

Index (

2010=

100)

80

100

120

140

160

2010 2011 2012 2013 2014 2015 2016 2017 2018

Stockholm Sweden

0

50

100

150

200

250

300

350

2010 2011 2012 2013 2014 2015 2016 2017 2018

Stockholm Sweden

Source: Valueguard, SCB, Booli. Stockholm county.


… BUT HISTORICAL CRISES BOUNCING BACK FAST

HOUSING PRICES AND POPULATION GROWTH IN STOCKHOLM (1986-2018)

Index (

1986 =

100)

1.1

1.2

1.3

1.4

1.5

1.6

1.7

0

200

400

600

800

1,000

1,200

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Housing prices

Population

The 1990 crisis:

Prices -34%

24M downturn

The IT crisis:

Prices -2%

3M downturn

The financial crisis:

Prices -7%

6M downturn

Price correction 2011:

Prices -4%

3M downturn

Popula

tion, m

illio

ns

Source: Pangea Research, SCB. Figures refer to Stockholm county.

(millions) 1990 2010 2017

Population 1.22 1.52 1.70

Housing units 0.81 0.97 1.06

Persons/unit 1.51 1.58 1.60

Stockholm market comparison

Current crisis:

Prices -10% so far

6-12M downturn?



SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


SWEDENCompetitive growth and favourable demographics, but weaker housing market affecting banks and new projects


MACRO ECONOMY

» Reduced but still very strong macro fundamentals,

one of Europe's stable core markets

» Broad-based economic growth (2.5% in 2018F)

driven by job growth, exports and public

stimulations connected to the 2018 election

» Inflation stabilizing around the 2% target

» Expectations on higher interest rates with first

repo rate increase in mid-2018

TRANSACTION MARKET

» Volumes down almost 30% in 2017, but number

of deals still close to record levels

» The slowdown driven by few really sizeable deals

and expectations on higher financing and tax costs

» Weaker housing market affecting investor

sentiment but also triggering new deals and JVs

» Increased spending power among public pension

funds expected, due to new investment guidelines

YIELDS AND RENTS

» Stable and record low prime yields, held low by

exceptional demand and low supply

» Secondary yields starting to increase, particularly

in the retail segment

» Further rental growth in office market, but

Stockholm prime rents starting to deaccelerate

» Regulated market for rental apartments, but

large scale renovation schemes lifting rents

KEY MACRO PARAMETERS (2012-2022F) TRANSACTION VOLUME (2007-2018F) OFFICE YIELDS AND 10Y SWAP (2006-2018)

SEK

bn

-1%

0%

1%

2%

3%

4%

5%

2012 2014 2016 2018F 2020F 2022F

GDP growth Population growth Inflation

0

100

200

300

400

500

0

50

100

150

200

250

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018F

Transaction volume Number of deals

0%

1%

2%

3%

4%

5%

6%

7%

8%

2006 2008 2010 2012 2014 2016 2018


1%

2%

3%

4%

5%

6%

7%

8%

2006 2008 2010 2012 2014 2016 2018

MACRO ECONOMY

» Real GDP back to +2.0 % figures as production and

consumption catches up – increased oil and gas

activity strengthen robustness

» Inflation down to below 2% in 2017 – not expected

to reach target rate (2.5%) within the next 3 years

» Production activity boosts employment from

2015/16’s high unemployment, however levels way

below Nordic and European average

» Relatively high population growth a long term driver

TRANSACTION MARKET

» Transaction volume of NOK 80bn in 2017

– 2nd highest ever

» Slightly less activity level expected going forward

» Majority of volume in Oslo and Akershus, but

increased attention for regions like Rogaland and

Hordaland as the oil and gas sector catches up

» High activity from international investors, with

a ~23 % market share over the last 12 months as

the Nordics is considered a safer haven

YIELDS AND RENTS

» Historically low prime office yields

» Expect flat yield development in 2018-2019 with

an upward pressure on rents; being the driver for

investor returns going forward

» Higher interest rates likely to curb further yield

compression

» However, banks likely to reduce record high

margins to grow lending and limit alternative

funding’s attractiveness (e.g., bond markets)

NORWAYStronger economic outlook, foreign interest, flat yields and higher rent levels – high activity expected to remain

KEY MACRO PARAMETERS (2012-2022F) TRANSACTION VOLUME (2006-2018F) PROPERTY YIELDS AND 10Y SWAP (2006-2018)

NO

Kbn

0%

1%

2%

3%

4%

5%

2012 2014 2016 2018F 2020F 2022F

GDP Growth Population growth Inflation

0

20

40

60

80

100

120

140

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018F

Source: Pangea Research, Statistics Norway, IMF Economic outlook


MACRO ECONOMY

» The Finnish economy has clearly bottomed out and

shows solid growth again, after a long stagnation

» Household confidence is improving as well as

domestic production and exports

» Major economic reforms to be launched concerning

healthcare, social welfare and regional governments

» More focus on the top 15 regions and significant

cost savings

TRANSACTION MARKET

» Record-high transaction volumes reaching almost

EUR 10bn in 2017, driven by foreign investors

» Large capital inflow from Sweden, but also

Germany, China, US and UK

» Focus on HMA and selective regional cities such

as Tampere, Turku and Oulu

» Finnish institutional investors looking for partners

and international diversification

YIELDS AND RENTS

» Still attractive property yields (+50-125 bps)

compared to the rest of the Nordics

» Room for new investors and less competition in

certain sectors such as hotels, logistics, retail and

care properties

» Gradually increasing office rents in HMA, while

stable outlook in most regional cities

FINLANDFast economic upswing and large share of cross-border transactions

Source: Pangea Research, Mrec

KEY MACRO PARAMETERS (2012-2022F) TRANSACTION VOLUME (2007-2018F) OFFICE YIELDS AND 10Y SWAP (2010-2018)

EU

Rbn

-2%

-1%

0%

1%

2%

3%

4%

5%

2012 2014 2016 2018F 2020F 2022F


0.0

2.0

4.0

6.0

8.0

10.0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018F

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2010 2011 2012 2013 2014 2015 2016 2017 2018


MACRO ECONOMY

» Economic recovery continues with expected

GDP growth just below 2% in 2018-2022F

» Low unemployment and increasing private

consumption, while export is still lagging

» Housing prices continue to increase in

Copenhagen, flat development in other cities

» Low repo rate (-0.65%) and public stimulations

TRANSACTION MARKET

» Transaction volume in 2017 exceeding

DKK 60bn, close to all-time high

» Strong interest from international and

Pan-Nordic buyers, targeting both residential and

commercial properties

» Focus on the Copenhagen region accounting for

more than 70% of the investment market, with

Aarhus in a clear second place

YIELDS AND RENTS

» Low rent levels in Copenhagen compared to

other Nordic capitals, both in the residential and

office segments, due to the city dynamics

» Currently, a strong labour market coupled with

low office vacancy pushes rents slowly upwards

» Downward pressure on property yields in recent

years, following a broadening investor demand

DENMARKEconomic recovery continues with foreign investors dominating the property market


KEY MACRO PARAMETERS (2012-2022F) TRANSACTION VOLUME (2007-2018F)

DK

Kbn

OFFICE YIELDS AND 10Y SWAP (2010-2018)

0

10

20

30

40

50

60

70

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018F

0%

2%

4%

6%

8%

10%

2010 2011 2012 2013 2014 2015 2016 2017 2018

0%

1%

2%

3%

4%

2012 2014 2016 2018F 2020F 2022F




SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


EXAMPLES OF VIABLE INVESTMENT THEMES 2018

MARKET DRIVERS

» Increasing supply

» Stricter financing regulations

» Large inventory / unsold volumes

» Financing issues

MARKET DRIVERS

» Reprising of the sector

» From premium to par

» Small cap underperforming

» Variations between segments

MARKET DRIVERS

» Hard competition

» Upscaling and upgrading

» E-commerce

» Mega deals, e.g. Westfield

MARKET DRIVERS

» Institutional interest

» Increasing trading flows

» Last mile deliveries

» Larger new supply

RETAIL – UP OR OUTRESI CONSTRUCTION – DISTRESS LISTED SECTOR – BUYOUTS LOGISTICS – NEW FLOWS

Sponda1), Hemfosa spin-off, SPVs, etc.Oscar Properties, Tobin, etc. Unibail-Rodamco, Citycon spin-off,

Scala, Salto, etc.

SLBs, Logistri, Logicor,

Logicenters, etc.

STRATEGIES

» Sales to strengthen balance sheets

» Teaming up / joint ventures

» Falling share prices takeovers

» General Nordic market consolidation

STRATEGIES

» Large public takeovers

» Spin-offs

» Focus on core business divest odd

portfolios, JVs, etc.

» SPVs / small cap (M&A)

STRATEGIES

» Focus on large / international

centers sale of local centers

» Teaming up to increase competence and

investment capacity

» Third party asset management

» Contrarian investors in secondary retail?

STRATEGIES

» Create new companies /

institutional portfolios

» IPOs of logistics platforms

» Developing and converting

secondary warehouses

» Property sale leasebacks

EXAMPLES EXAMPLES EXAMPLES EXAMPLES

1) Acquired by Blackstone and delisted in 2017



SUMMARY 3

MACRO ECONOMY 6







1

2

3

4

5

8

6

7


Corporate finance

» M&A

» ECM and DCM

» IPO's and buyouts

» Financial restructuring

» Strategic advise

OSLOSTOCKHOLM

HELSINKI

LONDON

Property transactions

» Sell-side and buy-side

» Single assets and portfolios

» Property development

» All property segments

» Strategic advise

Research

» Weekly/monthly updates

» Extensive reports

» Full Nordic coverage

» Capital and property markets

» Customized mandates

Pangea offices – In Finland, Pangea collaborates with Mrec Oy

SERVICE OFFERING OFFICES – FULL NORDIC COVERAGE

Transaction value SEK 11.5bn

ADVISED ON MANY OF THE LARGEST NORDIC TRANSACTIONS

Transaction value NOK 12.3bn

Acquisition of shopping center company Sektor Gruppen in Norway (largest deal in the Nordics 2015)


Acquisition of companies Sveareal in Sweden and Fortin in Norway (largest deal in the Nordics 2014)

Sale of Hemsö (50%) with properties in Sweden, Finland and Germany (largest deal in the Nordics 2013)


Acquisition of Norrporten with properties in Sweden and Denmark (largest deal in the Nordics 2016)

2016

2015

2014

2013

employees+30

+350 dealsin the Nordics

(2010-2017)

+EUR 29bntotal deal volume

(2010-2017)

PANGEA: THE NORDIC TRANSACTION SPECIALIST


DKK ~2.0bn

Seller:

Feb 2017

Acquisition of Hilton Hotel

(382 rooms) at Copenhagen Airport and

development of a new Comfort Hotel

SEK 858m

Buyer:

May 2017

Sale of five office properties

in central Örnsköldsvik

SEK 850m

Buyer:

Jun 2017

Sale of 3 properties located in

Flemingsbergsdalen in Stockholm

Not disclosed

Seller:

June 2017

Acquisition of office building

“Stockholm HUB” in Stockholm CBD

NOK ~600m

Buyer:

Aug 2017

Sale of shopping centre Øyrane Torg

in Bergen, Norway

SEK 675m

Seller:

Jul 2017

Acquisition of 325 apartments (part

of Senapsfabriken) in Uppsala

Not disclosed

Seller: Private investor

Oct 2017

Acquisition of public sector portfolio

in Vänersborg (Vänerparken)

SEK 610m

Counterpart:

Oct 2017

Property swap with office and residential

properties in Uppsala and Gävle

SEK 1,066m

Buyer:

Jun 2017

Sale of 10 office properties in

Halmstad, Sweden

EUR 59m

Seller:

Jun 2017

Acquisition of office property

Mariboes gate 13 in Oslo CBD

Not disclosed

Buyer:

Dec 2017

Sale of five hotels in Sweden

and Norway

SEK ~1bn

Seller:

Dec 2017

Acquisition of 430 apartments under

construction in Hyllie, Malmö

VAULT INVESTMENT PARTNER

SEK 2.3bn

Buyer:

Jan 2018

Sale of Karolinska University Hospital

in Solna, Stockholm

Not disclose

Seller:

Jan 2018

Acquisition of Clarion Hotel Carlscrona

(82 rooms) in Karlskrona, Sweden

Not disclosed

Jan 2018

Establishment of joint venture for

acquisition and development of

Primus 1 at Lilla Essingen, Stockholm

… EXECUTING MORE THAN 60 DEALS (SEK ~30BN) IN 2017/2018


STOCKHOLM

Norrlandsgatan 15, 7th floor,

Box 7740, 103 95 Stockholm, SWEDEN

pangeapartners.se

OSLO

Tjuvholmen Allé 3, 8th floor,

N-0250 Oslo NORWAY

pangeapartners.no

LONDON

Berkeley Square House, Berkeley Square,

London W1J 6BD, UNITED KINGDOM

en.pangeapartners.se

All the information in this publication has been compiled in good faith and is based on sources that Pangea

Property Partners considers reliable. Nevertheless, no guarantee can be given for the completeness of correctness

of the contents, and Pangea assumes no responsibility for actions based on the contents of this publication.

© 2018 Pangea Property Partners KB and Pangea Property Partners AS. All rights reserved.

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