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Sponda Plc Financial Statements Bulletin 1 January – 31 December 2013

February 4, 2014

Sponda Plc Financial Statements Bulletin 5 February 2014 at 8:30 JANUARY–DECEMBER 2013 IN BRIEF (compared with 1 January – 31 December 2012 ) -- Total revenue was EUR 264.3 (264.6) million. -- Net operating income was EUR 190.9 (192.2) million. Net operating income was decreased by sales of properties. -- Operating profit was EUR 153.0 (210.5) million. This includes a fair value change of EUR -14.2 (33.0) million. -- Cash flow from operations per share was EUR 0.40 (0.40). -- The fair value of the investment properties amounted to EUR 3,253.3 (3,261.3) million. -- Net assets per share totalled EUR 4.64 (4.45). -- The economic occupancy rate was 87.9% (88.1%). -- A decrease in the Finnish corporate tax rate from 24.5% to 20% took effect from the beginning of 2014. The change decreased Sponda’s deferred taxes by EUR 36.3 million . -- The Board proposes to the Annual General Meeting that a dividend of EUR 0.18 per share be paid. OCTOBER–DECEMBER 2013 IN BRIEF (compared with 1 October – 31 December 2012 ) -- Total revenue was EUR 65.3 (66.4) million. -- Net operating income was EUR 47.4 (47.4) million. -- Operating profit was EUR 29.5 (69.5) million. The operating profit includes a fair value change of EUR -12.7 (21.3) million. -- Cash flow from operations per share was EUR 0.10 (0.12). KEY FIGURES 10-12/2013 10-12/201 1-12/2013 1-12/2012 2 Total revenue, M€ 65.3 66.4 264.3 264.6 Net operating income, M€ 47.4 47.4 190.9 192.2 Operating profit, M€ 29.5 69.5 153.0 210.5 Earnings per share, € 0.15 0.14 0.34 0.37 Cash flow from operations per 0.10 0.12 0.40 0.40 share, € Equity per share, € 4.64 4.45 Equity ratio, % 40.7 41.2 Interest cover ratio 3.1 2.8 KEY FIGURES ACCORDING TO EPRA BEST PRACTICES RECOMMENDATIONS 10-12/201 10-12/201 1-12/201 1-12/201 3 2 3 2 EPRA Earnings, M€ 27.7 29.7 111.5 111.9 EPRA Earnings per share, € 0.10 0.10 0.39 0.40 EPRA NAV/share, € 5.29 5.20 EPRA Net Initial Yield (NIY), % 5.84 6.61 EPRA, “topped-up” NIY, % 5.84 6.63 EPRA Cost Ratio (including direct 16.27 vacancy costs), % EPRA Cost Ratio (excluding direct 11.37 vacancy costs), % PRESIDENT AND CEO KARI INKINEN We revised our strategy at the beginning of September, simplifying Sponda’s business structure and making our property ownership more focused. For us, it means disposing logistics properties and properties in Russia , and investing the capital thereby freed up through property acquisitions and property development. The strategy will be implemented over a period of three to five years in order to obtain the best possible price for the properties sold, taking the market situation into account. In terms of our financial performance, the year 2013 was stable. We achieved our targets with respect to the economic occupancy rate of our properties as well as net rental income. Although the economic occupancy rate declined slightly compared to 2012, we performed better than the market on average. We estimate that the market occupancy rate declined in all sectors during the fourth quarter of 2013. Our net rental income increased slightly, taking into account the effect of sold properties, which amounted to approximately EUR 2.3 million . The Finnish economy is predicted to take a turn to positive in 2014. This is expected to be first reflected in an increase in the demand for logistics properties, followed by retail and office properties. In the fourth quarter of 2013, the occupancy rate of Sponda’s office properties exceeded 90% for the first time since June 2009 , a level that was clearly above the market average. We also activated our property development operations at the end of the year by signing a preliminary agreement for the construction of three office buildings in Helsinki’s Ilmala district for use by Sweco Oy . Our other property development project, the Ratina shopping centre in Tampere , is still awaiting the decision to invest. BUSINESS CONDITIONS – FINLAND According to an estimate published in December by the Finnish Ministry of Finance , the Finnish GDP declined by 1.2% in 2013. The economy is expected to bottom out and take a turn to slow growth in 2014. The forecast of 0.8% GDP growth for 2014 is based on increasing foreign trade. The current forecast for GDP growth in 2015 is 1.8%. The turn to growth will be supported by the recovery in the eurozone, the strengthening of economic growth in Finland’s key export markets as well as an increase in services and manufacturing. According to KTI Property Information, the fourth quarter of 2013 was very active with a transaction volume of EUR 1.13 billion . This marks the first time the quarterly transaction volume exceeded EUR 1 billion since Q1/2008. The transaction volume for the full year 2013 was EUR 2.38 billion , an increase of approximately 11% compared to 2012. The vacancy rate for office premises in the Helsinki metropolitan area continued to increase in the second half of the year. According to Catella Property Oy , the vacancy rate for offices stood at 12.4% at the end of 2013, up 0.9 percentage points from the midpoint of the year. The recent years have seen a high level of activity in new construction in the Helsinki metropolitan area, but this is now slowing down. According to KTI Property Information, the total floor area of new office projects started in 2013 stood at only 32,500m² at the end of September. BUSINESS CONDITIONS – RUSSIA Russian GDP growth slowed down in 2013. According to the estimate of the Russian Ministry of Finance , GDP growth in 2013 was only approximately 1.4%. The GDP growth forecast for 2014 is 2.5%. Economic growth in the coming years will be based on export growth, higher purchasing power and increased investments. The property transaction market remained active. According to CB Richard Ellis, the fourth quarter volume in 2013 was approximately USD 2.2 billion , and the transaction volume for the full year amounted to approximately USD 7 billion . Office and retail properties remain clearly the most popular investments. At the end of September 2013 , office and retail properties accounted for 85% of the total transaction volume. According to CB Richard Ellis, the average vacancy rate for office premises in Moscow stood at approximately 11% in September 2013 . In the third quarter, the vacancy rate for Class A office space increased, while the vacancy rate for Class B office space decreased. Rent levels have not changed for the past two years. Some 586,000m² of new office space had been completed by the end of September. The estimate for the full year 2013 is approximately 860,000m². OPERATIONS AND PROPERTY ASSETS 1 JANUARY – 31 DECEMBER 2013 Net operating income from all of Sponda’s property assets totalled EUR 190.9 (192.2) million in 2013 and EUR 47.4 (47.4) million in October–December. Of this total, office premises accounted for 55%, shopping centres for 17%, logistics premises for 14%, Russia for 11% and the Real Estate Funds unit for 3%. On 31 December 2013 , Sponda had a total of 176 leasable properties, with an aggregate leasable area of approximately 1.4 million m². Of this, some 53% is office premises, 11% shopping centres and 33% logistics premises. Some 3% of the leasable area of the properties is located in Russia . The fair values of Sponda’s investment properties are confirmed as a result of the company’s own cash flow-based yield value calculations. The assessment method complies with International Valuation Standards (IVS). The data used in the calculations of fair value is audited at least twice a year by external experts to ensure that the parameters and values used in calculations are based on market observations. At the end of 2013, an external consultant assessed the values of Sponda’s investment properties in Finland (Catella) and in Russia (CB Richard Ellis). The change in the fair value of investment properties in 2013 was EUR -16.1 (24.9) million for the full year and EUR -10.1 (18.9) million for October–December. The negative change in fair value in the fourth quarter was attributable to exchange rate fluctuations and negative changes in the fair value of land in Russia . The changes in fair values are itemised in the table “Valuation gains/losses on fair value assessment”. Valuation gains/losses on fair value assessment M€ 10-12/1 10-12/1 1-12/1 1-12/1 3 2 3 2 Changes in yield requirements (Finland) 0.7 22.6 -5.0 20.9 Changes in yield requirements (Russia) 0.0 6.5 0.0 6.5 Development gains on property development 0.0 -0.9 2.2 -0.7 projects Modernisation investments -7.8 -11.5 -22.6 -28.5 Change in market rents and maintenance costs 5.9 5.7 22.1 26.4 ( Finland ) Change in market rents and maintenance costs -6.2 -1.6 -7.1 -0.1 ( Russia ) Change in currency exchange rates -2.7 -1.9 -5.7 0.4 Investment properties, total -10.1 18.9 -16.1 24.9 Real estate funds -5.2 0.0 -8.8 0.6 Realised share of fund profits 2.6 2.5 10.7 7.5 Group total -12.7 21.3 -14.2 33.0 RENTAL OPERATIONS Sponda calculates the growth in net rental yield for its properties according to EPRA Best Practices Recommendations by using a like-for-like net rental growth formula based on a comparable property portfolio owned by the company for two years. Like-for-like net rental growth was 0.5% (5.3%) for office premises, -0.5% (-10.2%) for shopping centres, -6.3% (-3.3%) for logistics premises and 1.1% (3.6%) for properties in Russia . All of Sponda’s lease agreements in Finland are tied to the cost of living index. The economic occupancy rates by type of property and geographical area were as follows: Type of property 31.12.13 30.9.13 30.6.13 31.3.13 31.12.12 Office properties, % 90.1 89.6 89.6 89.2 89.4 Shopping centres, % 89.0 90.8 91.1 94.1 93.0 Logistics, % 75.2 75.6 75.7 74.8 75.6 Russia, % 96.0 96.1 97.9 96.8 95.4 Total property portfolio, % 87.9 88.0 88.3 88.2 88.1 Geographical area 31.12.13 30.9.13 30.6.13 31.3.13 31.12.12 Helsinki business district, % 88.1 88.5 87.9 89.0 88.3 Helsinki Metropolitan Area, % 84.9 84.8 84.9 84.3 85.0 Turku, Tampere, Oulu, % 94.7 94.9 95.9 96.3 95.7 Russia, % 96.0 96.1 97.9 96.8 95.4 Total property portfolio, % 87.9 88.0 88.3 88.2 88.1 DIVESTMENTS AND INVESTMENTS Divestments M€ 1 October – 31 December 1 January – 31 December 2012 2013 2013 -------------------------------------------------------------------------------- Properties sold -------------------------------------------------------------------------------- Selling price 14.5 33.1 61.8 -------------------------------------------------------------------------------- Profit/loss on 0.6 0.8 2.5 sale* -------------------------------------------------------------------------------- Balance sheet value 13.9 31.9 59.3 -------------------------------------------------------------------------------- *) Includes sales costs Investments M€ 1 October – 31 1 January – 31 2012 December 2013 December 2013 -------------------------------------------------------------------------------- Properties acquired 0.0 -3.1 -53.1 -------------------------------------------------------------------------------- Maintenance investments -7.8 -22.6 -28.4 -------------------------------------------------------------------------------- Property development -4.7 -14.0 -47.5 investments -------------------------------------------------------------------------------- Property development investments were mainly directed to the development of an office property in Ruoholahti, which was completed in April 2013 . At the end of 2013, Sponda sold two office properties and one logistics property for a total price of EUR 13.7 million . Sponda recorded a total profit on the transactions of approximately EUR 0.5 million . The selling price of all properties sold was equal to or higher than their fair value on Sponda’s balance sheet. In Helsinki , Sponda sold an office property with a total floor area of approximately 2,800 m². Sponda also sold an office property of 4,250 m² in Turku . The logistics property sold is located at Valuraudankuja 6, Helsinki . The floor area of the industrial and warehouse facility is approximately 2,600 m². The sale of the properties is part of the implementation of Sponda’s new strategy, which was published in September 2013 . PROPERTY DEVELOPMENT The balance sheet value of Sponda’s property development portfolio stood at EUR 108.2 million at the end of 2013. Of this total, EUR 59.6 million was in undeveloped land sites and the remaining EUR 48.6 million was tied up in property development projects in progress. The value of unused building rights is presented in the assets of the segment concerned for investment properties that have a building, and as part of the Property Development segment for building rights for unbuilt land. The value of unused building rights was previously presented in its entirety in the Property Development segment. This change in classification was implemented in the fourth quarter of 2013 and its total amount was EUR 32.1 million . At the end of the review period, the Property Development unit had invested a total of EUR 4.7 million , which was directed to the planning and preparation of future property development projects. Sponda’s property development operations comprise new construction projects and refurbishment of existing properties. In October 2013 , Sponda and Sweco signed a preliminary agreement on a three-building office complex to be constructed in Ilmala, Helsinki for use by Sweco. The construction of the property will start in spring 2014, and the project is estimated to be completed in December 2015 . The project’s investment size is approximately EUR 57 million and the advance occupancy rate for the office complex is approximately 83%. The combined area of the office buildings is approximately 15,000 m² and the project also comprises two underground parking levels with capacity for approximately 277 cars. Sponda has the opportunity to expand the office complex with two more office buildings. Sponda is carrying out development projects for the Ratina shopping centre in Tampere and related areas. The current plans are for a shopping centre with a total area of 50,000 m² and a total investment of approximately EUR 200 million . The decision to invest has not yet been made, but pre-letting for the project has progressed. EVENTS AFTER THE PERIOD In its meeting on 30 January 2014 , the Shareholders’ Nomination Board of Sponda has decided to propose to the Annual General Meeting to be held 19 March 2014 that the Board will consist of seven members. The Nomination Board further propose that Kaj-Gustaf Bergh , Christian Elfving , Juha Laaksonen , Arja Talma and Raimo Valo to be re-elected for the Board of Directors and that Paul Hartwall and Leena Laitinen to be elected as new members of the Board of Directors. The Nomination Board proposes to the Annual General Meeting that the annual remuneration payable to the members of the Board to be elected at the Annual General Meeting for the term until the close of the Annual General Meeting in 2015: EUR 60,000 for the Chairman, EUR 36,000 for the Vice Chairman, and EUR 31,200 for each member. Additional compensation of EUR 1,000 shall be paid for the Chairman of the Board for the Board meetings attended and EUR 600 shall be paid for the members of the Board for the Board meetings attended. The Nomination Board proposes that EUR 600 shall be paid for member of the Board for committee meetings and EUR 1,000 shall be paid for the Chairman of the Audit Committee for the Audit Committee meetings attended. The Nomination Board proposes that 40 % of the fixed annual remuneration be paid in Sponda shares purchased from the market. The shares will be purchased within two weeks from the release of the interim report January 1 – March 31, 2014 of Sponda Plc . The Board of Directors will incorporate the proposals into the Annual General meeting notice which will be published later. The Shareholders’ Nomination Board consisted of three largest shareholders on 30 September 2013 : Oy Palsk Ab, Kaj-Gustaf Bergh ; Mutual Pension Fund Varma, Risto Murto ; and HC LPN Holding Oy Ab, Peter Therman . PROSPECTS FOR 2014 Sponda expects the economic occupancy rate of the Group’s properties in 2014 to remain largely unchanged from 2013. In the first quarter, however, the occupancy rate is expected to decline slightly. This estimate is based on the slow positive development of the Finnish economy as well as current information on expiring leases. Comparable net operating income (excluding disposals) in 2014 is expected to be at the same level as in 2013. This view is based on the current estimate of the development of rent levels and vacancy rates for Sponda’s properties. ANNUAL GENERAL MEETING AND DIVIDEND The Board of Directors of Sponda Plc is convening the Annual General Meeting on 19 March 2014 and proposes to the Annual General Meeting that a dividend of EUR 0.18 per share be paid. 5 February 2014 Sponda Plc Board of Directors Additional information: Kari Inkinen, President and CEO, tel. +358 20-431 3311 or +358 400-402 653, CFO Erik Hjelt, tel. +358 20-431 3318 or +358 400-472 313 and Pia Arrhenius, SVP, Corporate Communications and IR, tel. +358 20-431 3454 or +358 40-527 4462. Distribution: NASDAQ OMX Helsinki Media www.sponda.fi Copyright © 2014 OMX AB (publ).


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