Results

‘Too early to buy,’ says Pandox

Pandox CEO Anders Nissen told us that it was “too early” to look to acquire assets, describing it as “a big risk”.

The CEO added that it was not the group’s strategy to take back hotels and operate them as it had done with two sites in the first quarter, but “if someone doesn’t fill their obligations then we have the flexibility to do so”.

Nissen said: “We will try to work together with our business partners throughout this and come out of the other side. I don’t see any reason to change our strategy.

“It’s too early to think about acquisitions. People are talking about a big wave of distressed assets, I think that could happen, but I don’t see that now, most of the companies are not public so they don’t have to do market valuations every quarter, I don’t think that the banks are asking for that. If the banks don’t see it they don’t want to know.

“It’s only a few quarters - or five or six or seven - the valuations model will take that into account in a 10-year model.” Nissen remained supportive of the lease model and said: “You share the upside and the downside. We love the lease model, even if it’s hurting us at the moment.”

Pandox has previously expressed an interest in moving into Spain, but for the Nissen the time was not now. “Yes, if there was an opportunity, but we are not actively looking. Our focus is to manage this first save and we expect to see more the light in the tunnel later in the year. We are still in the Respond phase of our Respond, Restart, Reinvent strategy. We are working to secure our liquidity and working with banks.There are still uncertainties  - it would be a big risk to get into acquisitions. We are keeping our feet on the ground.”

Commenting on assistance from the brands, Nissen said: “They try to help. We normally have franchise agreements with them. They lower their fees, but 4% of nothing or 3% of nothing doesn’t make much of a difference.”

Nissen said that times were better for domestic brands at the moment, adding: “Global brands have a challenge in front of them, they need stronger meetings business and more global travel.”

Looking at the forecast phases of recovery, Pandox said that, for May to August it had already seen domestic individual leisure return, with a good trend in Nordic region, with 40% occupancy and in Germany and the Netherlands, with the UK to follow.

Given no second wave, with restrictions continuing to ease, the company expected to see the hotel market in the fourth quarter at 25% to 55% occupancy, supported by a longer leisure period and business domestic travel returning. It also expected to see the first pick-up in meetings and international travel, with economy, midscale and resort hotels the winners.

The group thought that indicative occupancy of 30% to 60% was possible in the first half of 2021.

The comments came as the company released its second-quarter results, which the group described as “a quarter to forget and remember”. Pandox said that the market bottomed out April and gradually improved from May, with domestic demand driving recovery. The group’s main source of income was minimum and fixed rent, which was expected to continue into the third quarter, at a figure of around SKr500m (€48m).

Pandox’s total property portfolio market value was SKr6.2bn, with the average valuation yield for investment properties close to flat on the year at 5.42% and slightly lower to 6.39% for operating properties.

At at 30 June Pandox had SKr5.52bn in liquid funds and utilised credit lines. Loan to value was up two percentage points from 46% last year to 48% this year.

 

Insight: The question of whether now is the time to buy is the one most thrilling the sector at the moment, with the eye of the lascivious opportunistic investor desperate to see blood in the water and valuations scythed and pared into delicious lissom bargains. But we’re not there yet, largely because, with markets only just coming back, no one has a clear view on what the new state of play is and because the return of pretend and extend sees lenders unwilling to become owners.

Given Nissen’s comments on private companies and their “what the eye doesn’t see the heart doesn’t grieve over” relationship with lenders, was he wistfully hoping to go private? No. So back in your boxes. Will he buy when opportunity knocks? Of course. The group was able to bolster its portfolio in Brussels relatively recently in just such distressed times.

As for the world of consumer trends, the company was not forecasting the drastic change that many seem set on. We’re not at the flying car stage yet. Instead the group said it didn’t see new consumer trends that would change the fundamentals of the hotel market, “what’s holding back consumers are government restrictions”. This is grist to this hack’s mill that you can’t change behaviour in only a few months. So hold hard, people will conference again.