2017 a n n u a l r e p o r t OLAV THON GROUP

2017 a n n u a l r e p o r t Contents 04 Olav Thon Group 2017 Group structure 07 Key figures 08 The Olav Thon Foundation The Olav Thon Foundation 10 This is Olav Thon Group 12 Thon Eiendom 100% 28 Thon Hotels 32 Financial matters Olav Thon Gruppen AS 34 Other operations

100% 72%

Olav Thon Thon Holding AS Eiendomsselskap ASA

100% 100% 100%

Thon Eiendomsdrift Thon Hotels AS Amfi Eiendom AS AS

Executive management team

olav thon ole-christian dag tangevald-jensen morten thorvaldsen arne b. sperre CEO/President hallerud Executive Vice President Executive Vice President and Executive Vice President Deputy CEO/Executive Vice and CEO OTE ASA CEO Thon Hotels Finance President Property

2 3 OLAV THON GROUP OLAV THON GROUP Olav Thon Group 2017 GEOGRAPHICAL SCOPE SHOPPING CENTRES AND 1,010 HOTELS 80 flats hotels In 2017, 171 flats were completed for sale in Lillestrøm and a total of 839 flats were Central/Northern Book equity increased to NOK 16.2 At the end of the year, under construction in and Akers- billion, while the equity ratio was 30%. Thon Hotels had 11,338 hus. Thon Eiendom's rental portfolio of 35 · 19 The net asset value is considered to be rooms in 80 hotels. around 1,450 flats makes it one of the significantly higher. NET INVESTMENTS largest rental players in Oslo. TOTALLED NOK Sweden 2.9 BILLION 11 · 0 AT THE END OF AROUND 5,500 Western Norway THE YEAR, CASH TENANTS IN OUR 25 · 19 Southern/ RESERVES WERE SHOPPING CEN- Eastern Norway NOK 12.3 BILLION Thon Eiendom is Norway's lead- TRES IN NORWAY 38 · 34 ing property company and had 98 shopping centres and around 500 commercial properties in its NINE OF THE TEN portfolio at the end of 2017. 2.3 LARGEST + % Shopping Hotels The Group's property portfolio 1.5 Brussels/Rotterdam billion centres The Group either owns or manages saw annual rental income increase Retail sales for the shopping cen- nine of the ten largest shopping by 3.3% to around NOK 5.5 billion, Profit before tax amounted tre portfolio owned by the Group in 109 80 · 8 centres in Norway. while the vacancy rate was 2.5%. to NOK 2.3 billion. Norway increased by 1.5% to NOK 67 billion.

shopping centres commercial properties residential properties

4 5 Thon Hotel Alta OLAV THON GROUP OLAV THON GROUP

KEY FIGURES

Figures in NOK millions 2017 2016 2015

PROFIT Operating income 10,935 10,172 9,383 Operating profit 3,213 2,775 2,668 Net interest expenses 1,003 1,031 1,011 Profit before tax 2,314 1,668 1,667

FINANCIAL STRENGTH Book equity 16,173 14,557 13,382 Equity ratio 30% 28% 29% Total assets 54,713 52,054 46,764

LIQUIDITY Net cash flow from operations1) 3,037 2,606 1,998 Cash reserves 2) 12,284 7,173 6,892 Amortisation next 12 months 10,682 6,928 3,872 Net interest-bearing debt/Net cash flow from operations 10.4 11.3 13.5 Interest coverage ratio 3) 4.1 3.5 3.3

FINANCING Interest-bearing debt 32,817 32,163 28,616 Share of foreign currency loans 22% 23% 21% Average duration debt (years) 2.6 2.7 3.1 Interest rate at 31 Dec 3.00% 3.29% 3.63% Interest rate hedging (> 1 year) 56% 52% 60%

PROPERTY Net investments 2,892 7,294 4,406 Annual rental income 4) 5,500 5,275 4,900 Vacancy rate 2.7% 2.9% 2.5% Book value of property portfolio 48,720 46,684 42,177 Shopping centre sales 5) 80,179 79,190 74,047

HOTELS 6) Hotel rooms 11,338 11,610 11,482 RevPAR (revenue per available room) 516 477 476 Room rates 891 837 835 Occupancy rate 58% 57% 57%

1) Net cash flow from operating activities – Change in working capital 2) Bank deposits etc. + Undrawn borrowing facilities 3) (Operating profit + Depreciation/write-downs) / Net interest expenses 4) Includes market rents for vacant premises 5) Owned and/or managed shopping centres 6) Thon Hotels

6 7 OLAV THON GROUP OLAV THON GROUP

The Olav Thon Foundation The Olav Thon Foundation was established in December 2013. All of the shares in Olav Thon Gruppen AS were transferred from Olav Thon to the foundation upon its establishment. The foundation's purpose is to own and operate Olav Thon Group's business activities. The foun- dation can also make donations to non-profit causes.

Olav Thon's goal throughout his entire career has been to create value and establish secure jobs. Olav Thon, personally, and Olav Thon Group have increasingly become active contributors to changing society for the better.

LONG-TERM OWNERSHIP OF OLAV THON GROUP The job of the foundation's board is, through its management of Olav Thon The Olav Thon Foundation Group, to ensure that the Group develops in line with the values, vision and awarded its first research prizes and research funding ideas on which Olav Thon has based his business career. on 5 March 2015 and will do so at the same time each year. The awards were The foundation will continue to own all of the shares in Olav Thon Gruppen presented in a ceremony in AS, which will remain domiciled in Norway. The Group's largest business the University of Oslo's great hall, which was followed area will be property management and acquisition. A substantial part of its by a banquet in honour of operations will take place in Norway. The aim is to grow the business. Priority the winners at Hotel Bristol. will be given to ensuring that the Group is in an unconditionally strong Other donations to causes are made on a more informal financial position at all times. basis by the foundation over the course of the year. SUPPORT FOR NON-PROFIT CAUSES The foundation can provide support within the fields of mathematics/ science and medicine. This may be provided both by awarding prizes to Norwegian and international researchers and through direct support to research projects.

Support may also be provided both for general non-profit causes and for the construction of properties for use for non-profit purposes in Norway.

In addition to this, support may be provided to promote outstanding entrepreneurship in Norway.

8 9 OLAV THON GROUP

Olav Thon Group Olav Thon Group is owned by the Olav Thon Foundation and is primarily involved in the property and hotel business.

Thon Hotel Alta

In 2017, Olav Thon Group's operating income amounted with a total of around 9,800 rooms. Abroad, Thon Hotels to around NOK 11 billion and it employed around 3,160 has around 1,581 rooms in five hotels and two apartment FTEs. The Group consist of two divisions: Thon Eiendom hotels in Brussels, Belgium and one in Rotterdam, the and Thon Hotels. Netherlands. Thon Hotels is the dominant player in the metropolitan regions of Oslo and . THON EIENDOM Thon Eiendom is Norway's leading property company In addition to Thon Hotels' food and beverage services, and had 109 shopping centres and around 500 Olav Thon Group operates a number of separate bars commercial properties in its portfolio at the end of and pubs under the Resthon name. These include 2017. Thon Eiendom includes the listed company, Olav places such as Scotsman and Tostrup Uteservering in Thon Eiendomsselskap ASA. Annual rental income level Oslo. amounted to NOK 5.45 billion at 1 January 2018. Retail Olav Thon Group consists of the Thon Hotels and Thon Eiendom divisions. properties account for the largest segment of the OTHER OPERATIONS Thon Eiendom is a market leader within property and is involved in residential property portfolio at 67% of annual rental income. Other operations encompass all of the companies that properties, commercial properties and shopping centres. At the end of the fall outside the property and hotels business areas. The year, the shopping centre portfolio consisted of a total of 109 centres, of Thon Eiendom's shopping centre portfolio consists of: largest unit is the industrial company Unger Fabrikker in which 31 are managed for external owners. 11 of the shopping centres are Norway: Fredrikstad. located in Sweden. Olav Thon Group also includes other operations, the Total 98 largest of which is the industrial company Unger Fabrikker in Fredrikstad. Wholly/partly owned 68 THE OLAV THON FOUNDATION Managed 30 The Olav Thon Foundation was established in December 2013. Upon its formation Olav Thon transferred all of the Sweden: shares in Olav Thon Gruppen AS to the foundation. Total 11 Wholly/partly owned 10 The purpose of the foundation is to exercise stable, Managed 1 500 long-term ownership of Olav Thon Group and its subsidiaries. The foundation can also distribute funds to Thon Eiendom is a market leader within THON HOTELS property with around 500 commercial Thon Hotels is one of Norway's leading hotel chains. non-profit causes. 109 SHOPPING CENTRES AT properties and 109 shopping centres At the start of 2018, the chain had 72 hotels in Norway THE END OF THE YEAR

10 11 OLAV THON GROUP OLAV THON GROUP

TOTAL RENTAL INCOME LEVEL (NOK MILLIONS) Thon Eiendom 6.000 5.000 Olav Thon Group started its commercial operations with a single investment in Karl Johans Gate in 1950. The city block 4.000

Karl Johans Gate 5-7 is today the site of a shopping centre, 3.000 Arkaden, and a modern office building. 2.000

1.000 Storotunet, Oslo

0 2014 2015 2015 2017 2018

HandelRetail KontorOffices

HotellHotels DiverseMiscellaneous

The properties in Olav Thon Group are managed by the property TOTAL RENTAL INCOME BY SEGMENT division, Thon Eiendom, and consist of residential properties, 8 % shopping centres and commercial properties. The Group practises a strategy of 'Acquire, Develop, Own'. 14 %

THE PROPERTY PORTFOLIO IN 2017 43 % Thon Eiendom is Norway's leading property company and had 109 shopping centres and around 500 commercial properties in the 9 % portfolio at the end of 2017. Thon Eiendom includes the listed company, Olav Thon Eiendomsselskap ASA. 13 %

Measured in terms of annual rental income level, the property portfolio 13 %

is distributed as follows: Handel Oslo-regionen og storby Handel øvrig by • Retail 67% Retail – Oslo area and major cities Kontor Oslo-regionen og storby Hotell Oslo-regionen og storby • Offices 14% Retail – other urban areas 2 • Hotels 12% Utland Øvrig M • Other 7% Offices – Oslo area and major cities Hotels – Oslo area and major cities Geographically, the property portfolio is distributed as follows: 109 owned and 1,450 flats for rent Around 300,000 Abroad Other • Oslo area 50% managed shopping and more than 1,900 sq. m. of office • Other major cities in Norway 20% centres in Norway residential units sold in premises in the • Other urban areas in Norway 16% and Sweden Oslo and Akershus in centre of Oslo • Abroad 14% the last 12 years

12 " 13 OLAV THON GROUP

SHOPPING CENTRES AND OTHER RETAIL SHOPPING CENTRES IN SWEDEN OFFICE PROPERTIES PROPERTIES IN NORWAY In 2017, the company acquired Tanum Leasing office premises generates At the start of 2018, Thon Eiendom owned Shoppingcenter in Sweden. Thon Eiendom now income of around NOK 760 million, which stakes in 78 shopping centres in Norway. has 11 centres in Sweden, which achieved retail accounts for approximately 14% of the It also managed 30 shopping centres in sales of just over SEK 13.3 billion in 2017. Group's rental income. Thon Eiendom offers Norway for other owners. Its portfolio includes around 300,000 sq. m. of office space in nine of the ten largest shopping centres in HOTEL PROPERTIES centre. the country, which affords it a solid market At the end of the year, Thon Eiendom owned position as Norway's largest shopping centre 62 hotel properties. Most of the hotels are in Construction of the office property at player. Including shopping centres managed metropolitan areas in Norway, with the highest Youngstorget 3 began in 2017. This will have for other owners, retail sales amounted to density in Oslo and Bergen. a total of 4,600 sq. m. of floor space on NOK 67 billion in 2017, which represents year- five floors, with a canteen on the ground on-year growth of 1.5%. Eight of the hotel properties are in Belgium floor. Olav Thon Group (50% stake) and HAV and the Netherlands: seven in Brussels and Eiendom (50% stake) have built the Diago- Annual rental income from retail premises one in Rotterdam. Thon Hotels is the largest nale buildings in Bjørvika, Oslo. The property amounted to around NOK 3,650 million at the hotel chain in Brussels in terms of total rooms. consists of an office building and a building end of the year, i.e. 67% of the Group's annual containing student flats, with commercial rental income. Thon Hotels has carried out several major premises at street level. The property's total refurbishment projects in recent years and a floor space is approximately 38,000 sq. m. SHOPPING The shopping centre properties generate significant proportion of the hotel portfolio and the premises and student flats will be CENTRE SALES annual rental income of approximately NOK has now been fully refurbished. More hotels rented out by Thon Eiendom. TOTAL 3,450 million. In addition to the shopping are being upgraded and will be completed (NOK MILLIONS) centres, Thon Eiendom owns a number of in 2018. Several of the hotels will be expan- RESIDENTIAL PROPERTIES separate retail, bar and pub premises, most of ded with increased room capacity and In the last few years, Thon Eiendom has built 79,854 which are in the centre of Oslo. upgraded fitness facilities. and sold more than 1,900 residential units, mainly in Oslo and Akershus but also else- Thon Eiendom again made major investments in In March 2018, Thon Hotel Europa reopened where in the country. It always has a current shopping centre properties in 2017 in the form of in Oslo following extensive refurbishment. A portfolio of attractive residential projects for both upgrading and expanding existing centres. new conference hotel in Storo in Oslo will be sale (see all of the projects on pages 18-19). AMFI Kanebogen was expanded and completed completed in September 2018 with 321 rooms in the second quarter of 2017. Jessheim Storsent- and a modern conference centre. The pro- Thon Eiendom also has a rental portfolio also include a conference hotel, Thon Hotel er opened on 31 October 2017 following major perty will also house a cinema complex, flats, of approximately 1,450 flats. Most of these Storo, Norway's largest cinema complex, GROUP'S building and expansion work. Development restaurants, cafés, bars and parking facilities, properties are centrally located in Oslo city Odeon Oslo, an XXL sports store, parking ANNUAL RENTAL INCOME projects are taking place in several locations and which are under construction. centre. New rental projects include Diago- facilities, health services, restaurants, cafés, TOTAL in autumn 2018 both in nale in Bjørvika which will house 308 student bars and a kindergarten. The project's total (NOK MILLIONS) Bergen and AMFI Moa in Ålesund will open flats. 149 flats for rent are being built in Oslo floor space is approximately 60,000 m2. 5,450 following major expansions of their retail space. near . This development will

14 OLAV THON GROUP OLAV THON GROUP

Cinema complex, Åsane Thon Eiendom Shopping centres Åsane Storsenter celebrates its 10th anniversary The two shopping centres Arken and Åsane Senter were merged into one and renamed Åsane Storsenter in 2007. The 10th anniversary was celebrated with all-night offers for cus- tomers on the 10 November 2017.

When the centre was purchased by Olav Åsane Storsenter wants to expand the Thon Group in autumn 2016, it was merged shopping centre by an additional 70,000 with Åsane Stormarked and is now the sq. m. and has many new plans. third largest centre in Bergen. In 2017, the Group focused on enhancing the range of "Olav Thon Group wants to develop the shops with many new concepts, which has centre further as part of a district with had a positive effect on both sales and great potential and many exciting plans. number of visitors. More than 41,000 people live in Åsane today and the district is growing steadily. Åsane Storsenter is located in the district Our plans, therefore, include 35,000 sq. of Åsane, about 15 minutes north of m. of flats above the shopping centre. Bergen city centre. In addition, a further 20,000 sq. m. of retail space and 1,300 indoor parking "Åsane Storsenter offers customer spaces will be built. We are also analysing everything in one place. We have a wide what other needs the area has and what range of shops and services, including services are in demand. For example, the public services. This helps to make Åsane planned urban railway has been taken BYBANE BOULEVARDEN Storsenter an important hub and central account of in our plans for the future Total expansion 70,000 sq. m. location in Åsane. We also have unique development of Åsane Storsenter. The first shops not found elsewhere in Bergen. The phase of the plan involves a new cinema centre's 40-year retail history has made complex with six screens and 448 seats, it an important meeting place for the as well as a large restaurant and event P people who live in Åsane and many feel a centre, which hopefully will be completed connection to the centre. It has given us in November/December 2019," said a unique position and strong roots in the Dag Helge Setekleiv, the development 1,300 INDOOR 20,000 SQ. M. OF 35,000 SQ. M. OF SIX CINEMA 4,000 SQ. M. OF district," said Nina Schanche Nilsen, the manager. PARKING SPACES RETAIL SPACE FLATS SCREENS RESTAURANT, EVENT centre's manager. CENTRE AND FITNESS SPACE

16 17 OLAV THON GROUP OLAV THON GROUP

Thon Eiendom Shopping centres Thon Eiendom Residential property sales Nine of the ten Modern homes for largest shopping all generations Thon Eiendom has many exciting residential projects in, for example, centres Lillestrøm, Lørenskog, Strømmen and Drøbak. The properties are centrally Olav Thon Group is the dominant shopping located and the flats being built will suit all types of people in different centre player in the Nordic region. In Norway, phases of life – from young, first-time buyers to older couples. Thon nine of the ten largest centres are owned Eiendom's vision is to create modern homes suitable for all generations. or managed by the Group.

#4 AMFI MOA

#8 SARTOR STORSENTER

#6 #2 STORO STRØMMEN #3 STORSENTER STORSENTER LAGUNEN STORSENTER

#10

#5 SØRLANDSSENTERET #7 KVADRAT #1

18 19 Terrace, Wendts Hage " OLAV THON GROUP OLAV THON GROUP

115 flats

Thon Eiendom Residential property sales Skovly, Jessheim Skovly is located right in the centre of Jessheim and is a joint project with HK Eiendom AS. The flats are located on the roof of Modern flats for the expanded meaning that the flats are on the third to the seventh floor.

Fully developed, the Skovly residential project will consist of up sale to 115 flats distributed between four buildings. In 2017, two of the buildings were started with a total of 92 apartments scheduled for completion in 2018.

Parkodden, Strømmen Thon Eiendom’s Parkodden residential project in the municipality of Skedsmo consists of 166 flats in a total of seven buildings. The flats range in size from one room to five rooms, with parking in the cellar.

The highest building is five floors and there will be two commercial premises for rent at street level. Parkodden is located close to Strømmen Storsenter.

flats166

20 21 OLAV THON GROUP OLAV THON GROUP 170 flats

Wendts Hage, Lørenskog Engebrets Promenade, Lillestrøm Wendts Hage consists of 51 flats distributed between two seven-floor In the middle of Lillestrøm, Thon Eiendom and AF Gruppen have buildings. There is a shared parking cellar with lifts to the floors. built 170 new flats of a high standard. The flats are distributed between four buildings of differing heights with communal roof The flats range in size from 41 sq. m. two-room flats to a 143 sq. m. terraces and cellar garages. There are commercial premises at four-room flat with a 70 sq. m. rooftop terrace. There will be two street level facing a communal square. commercial sections on the ground floor of one of the buildings. The flats range in size from 35 sq. m. one-room flats to 135 sq. m. Wendts Hage is centrally located close to the Triaden shopping The courtyard in Wendts Hage will centre, but at the same time secluded in green surroundings. be an inviting green area for the use four-room flats. of the residents.

Lehmanns Brygge, Drøbak Lehmanns Brygge in Drøbak consists of a total of 14 exclusive, west-facing flats situated on the waterfront. There are two three-floor buildings with seven flats in each building. All of the flats have a balcony or terrace and garden. A parking garage provides on-site parking.

The flats are five different sizes – ranging from 54 sq. m. two- room flats to 152 sq. m. four-room flats.

22 23 Diagonale 308 flats

Student flats and office 1. premises in Bjørvika, Oslo

2.

1. Illustration: student flat 2. Employee restaurant Olav Thon Gropup and HAV Eiendom are developing 3. Stairwell in the office building Diagonale – a unique office and residential building in Bjørvika

The Diagonale project totals around The office building has nine floors above "Diagonale is a unique office building with Oslo Central Station and Jernbanetorget 38 000 sq. m. and is very centrally located ground and two floors below ground a fantastic location in Bjørvika. We believe where you can easily catch public trans- 3. in Bjørvika, with the Norwegian National level. The ground floor is reserved for Bjørvika will become one of the city's most port to various colleges and universities," Opera & Ballet and soon the new retail and food and beverage, while the attractive office districts when everything is says Torill Larsen, the head of flat rentals. Deichmanske Main Library and Munch other eight floors will become offices for completed at the end of 2019, start of 2020. Museum as its nearest neighbours. TV2, Advokatfirma Ræder, Vinmonopolet This will be reflected in the rents and property HAV Eiendom and Olav Thon Group each (new head office) and Vipps/BankAxept/ values - says property manager Eirik Kildal. own 50% of the property company A9 Diagonale consists of two buildings — one BankID. De 3 Stuer will run an employee Palekaia AS which is the titleholder. The office building and one building with restaurant on the ground floor. Both the "Thon Eiendom will rent out 308 new Diagonale office building's address will be student flats. The buildings were designed office building and the student housing student flats in one of the buildings. It Dronning Eufemias Gate 11. by Lund Hagem Arkitekter, who also building will have roof terraces with views is a short distance from the Barcode to designed the Deichmanske Main Library. of Bjørvika and the fjord. Sørenga where you can swim and kayak. THE PROJECT The project is scheduled for completion It is also only a couple of minutes' walk to TOTALS AROUND at the end of 2018/start of 2019. 38,000 SQ. M.

24 25 OLAV THON GROUP OLAV THON GROUP

Amfi Kanebogen, Harstad

Major construction and development projects

Completed 2017

PROJECT LOCATION COMPLETION SEGMENT EXPANSION 1) Amfi Kanebogen Harstad 2017 Shopping centre 10,000 sq. m. Jessheim Storsenter (34%) Ullensaker 2017 Commercial 18,000 sq. m. property Engebrets Promenade Lillestrøm 2017 Residential units 171 flats

Under construction

PROJECT LOCATION COMPLETION SEGMENT EXPANSION 1) Amfi Moa Ålesund 2018 Shopping centre 24,000 sq. m. Amfi Steinkjer Steinkjer 2018 Shopping centre 3,400 sq. m. Haugesund 2018 Shopping centre 4,200 sq. m. NET INVESTMENTS Vitaminveien 11 Oslo 2018/2019 Commercial/ 60,000 sq. m. (NOK MILLIONS) residential properties 8 000 Jessheim Storsenter (34%) Ullensaker 2018/2019 Residential properties 129 flats 7 000 Lagunen Storsenter (42%) Bergen 2018/2019 Shopping centre 40,000 sq. m. 6 000 Dr. Wendts Hage Lørenskog 2018 Residential units 51 flats

5 000 Parkodden Strømmen 2018 Residential units 166 flats

4 000 Lehmanns Brygge Drøbak 2018 Residential units 14 flats

3 000 Grønlandsleiret 27 Oslo 2019 Residential units 35 flats

2 000 Bergstien 1/Akersbakken Oslo 2019 Residential units 136 flats

1 000 Diagonale, Bjørvika (50%) Oslo 2018/2019 Offices/retail/resi- 38,000 sq. m.

0 dential properties 2013 2014 2015 2016 2017 Youngstorget 3 Oslo 2019 Offices/retail 6,800 sq. m. Töcksfors Shoppingcenter Årjäng, Sweden 2019 Retail 9,000 sq. m.

1. Expansion shows the new rentable space (excl. parking) due to the project.

26 27 OLAV THON GROUP

Thon Hotels 2017 Thon Hotels has climbed the ranks of the Norwegian Customer Barometer, won prizes for its breakfasts and signed an agree- ment to reduce food waste by 20% by 2020.

In 2017, the proportion of the target group that liked Breakfast", a competition to find Norway's best hotel Thon Hotels rose by 18 percentage points and Thon breakfast. Hotels climbed 68 places on the Norwegian Customer Barometer. "The food we serve at our hotels is an important and major focus area for Thon Hotels. We would like to say "We would like to congratulate Thon Hotels on a big thank you to our incredibly talented staff who significantly improving satisfaction levels. A score get up early every morning and serve our guests what of 74.8 points tells us that Thon Hotels has satisfied is considered one of Norway's best breakfasts," said customers and that the hotel chain has made Morten Thorvaldsen. substantial progress year-on-year," said Assistant Professor Bengt Gunnar Lorentzen, who works with THON DISCOVERY AND THE GLOBAL HOTEL the Norwegian Customer Barometer research project. ALLIANCE The worldwide loyalty programme, which Thon Hotels Industry results from the Norwegian Customer is part of, had around 11 million members in 2017. The Barometer show that Thon Hotels was ranked second Global Hotel Alliance (GHA) is one of the world's among Norwegian hotel chains in 2017. largest hotel alliances of independent hotel chains. GHA consists of 35 different hotel chains and the 550 "As well as focusing on the guest experience, Thon hotels involved operate a joint loyalty programme Hotels has invested heavily in design, food and called DISCOVERY. Thon Hotels has been a member technology in recent years. We've spent more than of the hotel alliance since 2014 and there are around NOK 1.3 billion on refurbishments and the feedback 700,000 Thon DISCOVERY members. from our guests on our interiors, the food we serve and our facilities has been good," said Morten Thorvaldsen FOOD WASTE ROOMS IN NORWAY the CEO of Thon Hotels. In 2017, Thon Hotels signed up to an industry agreement with the Norwegian Ministry of Climate and 9,757 Sissel Berdal Haga, Olav Thon Group's design Environment on reducing food waste. The goal is to cut manager, and interior decorator Trond Ramsøskar were food waste in the food and beverage sector by 20% in charge of the refurbishment. by 2020.

DIGITALISATION "The hotel industry is now working together to reduce A lot of work was done on updating Thon Hotels' food waste and that is very important. We have already websites with user-friendly solutions. Guests could introduced a number of measures in Thon Hotels to cut pay by using Vipps in 2017. food waste and we will continue to focus on this work OPERATING INCOME going forward," said Thorvaldsen. (NOK MILLIONS) TWO HOTELS AMONG THE TOP THREE In 2017, Thon Hotel Lofoten and Thon Hotel Rosenkrantz (Source: Market surveys conducted by Perceptor in 2015 and 2017 and the Norwegian Customer Barometer at BI Norwegian Business 3,546 Bergen both reached the final three in "Twinings Best School)

28 29

Thon Hotel Orion OLAV THON GROUP OLAV THON GROUP

The Norwegian hotel market in 2017

The number of overnight stays in the THE HOTEL MARKET IN THE OSLO AREA Norwegian hotel market grew by 3.0% in (OSLO AND AKERSHUS) 2017. The international market has slowed The market in the Oslo area saw RevPAR somewhat with a slight decrease of 0.4%. growth of 8.4% in 2017, driven by an The average occupancy rate rose by 1.5 average price rise for rooms sold of 5.1%. percentage points to 56.0%, while the Hotel capacity was reduced by 0.8%, average room rate increased by 4.7% to while rooms were taken out of NOK 945. The key figure RevPAR (revenue production for refurbishment. per available room) for the Norwegian The average occupancy rate hotels thus increased by 7.6% to NOK 529. was 64.5%, up 2 percentage points. There was a slight reduction in available rooms in the Norwegian hotel market in THON HOTELS NORWAY 2017, by approximately 0.3%. The trend is In 2017, the average occupancy rate was towards more larger units in primary de- 60.6%, while the average room rate was stinations and fewer hotels in the districts. NOK 877. RevPAR thus amounted to NOK There were 26 fewer hotels in the market 563, an increase of 9.9% compared with in 2017 than in 2016. (Source: Statistics Norway) 2016, which is 1.6% more than the market in similar destinations. Thon Hotels is a dominant player in the (Source: Hotel Trends) ROOM RATE AND REVPAR THON HOTELS metropolitan regions and plays a major (NOK) role in hotel accommodation in Northern THON HOTELS INTERNATIONAL Norway. In total, Thon Hotels has 11,338 The hotel operations in Brussels and 1 000 rooms, of which 9,757 are in 72 hotels in Rotterdam saw turnover growth of 12.2%. 44 destinations in Norway. In addition, The average occupancy rate was 59.1%, 800 Thon Hotels has approximately 1,600 while the average price was EUR 105. rooms outside Norway in five hotels and RevPAR was thus EUR 62, a year-on-year two apartment hotels in Brussels and increase of 10.7%. 600 one in Rotterdam. The Group's turnover in the hotel business area (incl. internal FOOD AND BEVERAGE ACTIVITIES sales) was NOK 3,546 (3,397) million. The The Group owns and operates seven 400 turnover figures also include operating bars and pubs outside the hotels. The income from separate restaurants and total turnover from these amounted to pubs totalling NOK 137 million. NOK 137 (158) million in 2017. The 200 decrease was due to operational With higher room prices and occupancy changes on one of the food and 0 rates in both Norway and Brussels, Thon beverage locations in 2017. 2013 2014 2015 2016 2017 Hotels's financial performance was significantly better in 2017. (Source market figures: RoomRompris rate RevPAR RevPAR Statistics Norway 2016/TH data equivalent to source (Inntekt per material) tilgjengelige rom)

30 31 OLAV THON GROUP OLAV THON GROUP

INTEREST RATES (%)

5 %

4 %

3 %

2 %

AMORTISATION (NOK MILLIONS) 1 % des. 12 des. 13 des. 14 des. 15 des. 16 des. 17 12 000 Average interest rate NOK SEK EUR Gjennomsnittsrente NOK SEK EUR 10 000 Financial matters

8 000 FINANCIAL STRATEGY The average remaining term of the INTEREST RATES THE CREDIT MARKET INTEREST-BEARING DEBT Olav Thon Group operates in a credit facilities was 2.6 (2.7) years. The average interest rate at the end The credit margin indicated for (NOK MILLIONS) 6 000 capital-intensive industry in which of the year was 3.00% (3.29%). For new loans issued by the Group fell 35 000 the financial strategy you choose is DEBT PORTFOLIO loans in NOK the average was 3.42% gradually during the year. At year 4 000 extremely important. One important At the end of the year, the Group had (3.78%), while for loans in SEK and EUR end, the credit spread for Olav Thon 30 000 element of the Group's financial a total of NOK 43,744 (38,267) million it was 1.40% (1.50%) and 2.39% (2.27%), Eiendomsselskap's 5-year secured 25 000 2 000 strategy is the goal of maintaining a in loans and undrawn credit facilities. respectively. bond issues was indicated at 0.75%

solid financial position, characterised Interest-bearing debt amounted (0.90%), while 12-month unsecured 20 000 0 by a high equity ratio and substantial to NOK 32,817 (32,163) million and At 31 December 2017, the average certificates were indicated at 0.35% 2018 2019 2020 2021 2022 senere cash reserves. undrawn credit facilities NOK 12,283 remaining term of the fixed-rate (0.50%). 15 000 (6,182) million. 20% (18%) and 3% (4%) periods was 3.7 (4.0) years. 44% (48%) Bank loans Bond issues Banklån Obligasjonslån The strategy is intended to help of the total loans were in SEK and end in 2018, while 39% (36%) end in 5 INTEREST RATE TRENDS 10 000 Certificates Other reduce financial risk and ensure EUR, respectively. years' time or later. The short-term Norwegian money Sertifikatlån Annet 5 000 financial freedom of action so that market interest rate (3-month NIBOR)

investment opportunities can be Of the interest-bearing debt, NOK MARKET TRENDS fell throughout the year to 0.81% 0 acted upon quickly. The financial 13,821 (18,853) million was financed in The most significant financial risks (1.17%) at the end of the year. The 2013 2014 2015 2016 2017 risk factors, liquidity, interest rate, the banking market, NOK 18,159 (12,513) are considered to be the Group's long-term money market interest Bank loans NOK Certificates NOK CASH RESERVES AND AMORTISATION currency and credit risks, are million in the Norwegian and Swedish access to financing in the banking and rate (10-year swap rate) was relatively Banklån NOK Banklån valuta Obligasjonslån NOK (NOK MILLIONS) Bank loans FCY Certificates FCY

described in more detail in the capital markets, and NOK 718 (719) capital markets and the price of that stable throughout the year and listed Obligasjonslån Sertifikatlån Sertifikatlån valuta 15 000 valutaBond issues NOK Other Directors' Report. million via other lenders. The split in the financing. Access and prices depend at 1.94% (1.95%) at the end of the year. capital markets was NOK 12,609 (9,886) on factors such as the competition in AnnetBond issues FCY FINANCIAL STRENGTH million in the bond market and NOK the Nordic banking sector and liquidity In Sweden, both the short-term and 12 000 At the end of the year, book equity 5,549 (9,886) million in the certificate in the Norwegian and Swedish capital long-term market interest rates were amounted to NOK 16,173 (14,557) market. 79% (82%) of the capital market markets, Norwegian and Swedish relatively stable, but with a slight INTEREST RATE ADJUSTMENT million, while the book equity ratio debt was raised in Norway, while 21% market interest rates, and the Group's upwards trend. The short-term market 9 000 was 30% (28%). The net asset value is (18%) was raised in Sweden. creditworthiness expressed by the interest rate (3-month STIBOR) rose considered to be significantly higher offered credit spread. from -0.59% to -0.48%, while the 39 % than book equity. AMORTISATION long-term Swedish market interest 6 000 At 31 December 2017, the Group's debt The competition situation in the Nordic rate (10-year swap rate) rose from CASH had an average remaining term of 2.6 banking sector improved somewhat in 1.10% to 1.20%. 44 % The Group's cash reserves ended the (2.7) years. 37% (22%), i.e. NOK 10,682 2017, with reduced credit margins and 3 000 year at NOK 12,283 (7,173) million and (6,928) million, falls due in 2018, while a greater willingness to lend. In the eurozone, the short-term consisted of short-term investments 11% (4%) of the debt falls due in 5 years' market interest rate was very stable of NOK 1,237 (991) million and undrawn time or later. Financing options in the Norwegian and was listed at -0.33% (-0.32%) at 0 capital market were very good in 2017. the end of the year. The long-term 2013 2014 2015 2016 2017 long-term credit facilities of NOK 17 % 11,046 (6,182) million. market interest rate (10-year swap CashLikvidi treservesetsreserver AvAmortisationdrag neste 12 mndnext 12 months rate) rose from 0.67% to 0.88%. < 12 months‹ 12 mnd 1-51-5 years år › 5> år 5 years

32 33 OLAV THON GROUP OLAV THON GROUP

Olav Thon Group Other operations Service company for the centres Time Park offers parking solutions at Thon's shopping centres. We want to introduce a technology that meets the customers' needs and is suitable for the shopping centres' general operations.

This technology is number plate recognition, which allows customers at the shopping centres with a worry-free, easy cars to enter the parking facilities without customers having parking experience and they will not have to worry about to get a ticket or register a payment card. Customers can overstay fees. then drive out again and be scanned. If a customer has parked for longer than the free period, they will automa- Time Park AS is a privately owned company and part of Olav tically receive an invoice for the amount. We also have Thon Group. With the 45,000 parking spaces or so it offers an app, Parklink, and customers can use this to pay for in central parts of Eastern Norway, it has been the fastest parking directly. This digitalisation will provide our driving growing parking company in the last few years.

FOLLO FJERNVARME AS NORSK PANTELOTTERI UNGER FABRIKKER CONRAD LANGAARD AS The company's operations involve AS (60%) Unger Fabrikker AS is a chemical Conrad Langaard AS sells and the production, sale and distri- The company runs the industrial company in Fredrikstad distributes various tobacco bution of district heating. In 2017, Pantelotteriet, a lottery that is that produces and sells products. In 2017, the company the company saw turnover of NOK available via around 2,200 bottle intermediate products to the saw turnover of NOK 94.4 million 42.7 million and employed 3.5 return machines in supermarkets. soap and cosmetics industry. In and employed 19 FTEs. FTEs. The company achieved a The money raised from these 2017, the company saw turnover very environmentally friendly pro- return deposits goes to the of NOK 649 million. The company duction profile for heating in 2017. Norwegian Red Cross, which to employed 114 FTEs. Only 3.9% of the heat was sup- date has received more than NOK plied using fossil fuels, while the 200 million. The Norwegian Red rest was supplied using renewable Cross received around NOK 40 resources. million in 2017 alone.

DESIGN Amfi Kreativ AS | PHOTOS Olav Thon: EvenFoto | PRINTER Kraft Digitalprint

34 35 OLAV THON GROUP

Stenersgata 2 Postboks 489 Sentrum | 0105 Oslo Telephone +47 23 08 00 00 [email protected] |olavthon.no