CapMan establishes EUR 835 million hotel real estate fund and buys 39-hotel portfolio

Fund structure

CapMan Hotels RE Ky fund reached EUR 835 million at first closing and the maximum fund size is EUR 1.1 billion. 17 Finnish institutions have committed EUR 292 million of equity into the fund to date, with the balance comprising senior debt. The fund is open to new investors for twelve months and the maximum amount of equity capital will be EUR 400 million. CapMan Hotels RE Oy, which is 80% owned by CapMan Plc and 20% owned by Corintium Oy, acts as CapMan Hotels RE Ky’s management company. The management company’s own commitment into the fund is EUR 5 million.

The fund has acquired a portfolio of 39 hotels

CapMan Hotels RE Ky’s investment focus is on hotel real estate especially in Finland and Sweden. The fund invests both in existing hotel properties and in new hotel development projects. In the transaction agreement signed today, the fund has acquired four holding companies from NEPR. The holding companies own 39 hotel properties, which had a total value of EUR 805 million in the transaction. The transaction is subject to approval by competition authorities and pending compliance of the assets’ technical standard with preliminary studies. The transaction is expected to be closed by 29 February 2008. Of the acquired hotels, 38 are located in Finland and one in Sweden. The hotel chains operating in the hotel properties are, among others, Rantasipi, Cumulus, Sokos Hotels, Scandic and Holiday Club and the hotels are principally leased to hotel operators Restel, SOK and Scandic. The gross lettable area of the hotels totals 408,994 m² with 6,477 hotel rooms in all. The largest hotels in the portfolio are the Crowne Plaza Hotel in Helsinki and Holiday Club Åre in Sweden. The cash flow weighed average maturity of the hotels’ lease agreements exceeds 14 years and the hotel premises are fully let.

The hotel industry has developed well in Finland in the last few years and growth is expected to continue also in the future. The acquired portfolio comprises assets in good condition with central city locations or leisure destinations. A team of 10 people responsible for management and development of the hotel portfolio will transfer to work for CapMan with the transaction.

”The acquired portfolio offers a good diversification and has substantial earnings potential through rental income, development projects and property value appreciation. CapMan Hotels RE Ky fund will be a leading player in Nordic hotel real estate investment markets. Our objective is to complement the portfolio with new investments,” states Markku Hietala, Head of CapMan Real Estate.

Private equity real estate funds are an important business line for CapMan

CapMan Hotels RE is CapMan’s third private equity real estate fund. CapMan’s first real estate fund, CapMan Real Estate I, was established in 2005 and the second fund, CapMan RE II, in 2006. Commitments in the three funds total EUR 1.9 billion overall.

”The establishment of the hotel real estate fund is an indication of the wide growth opportunities in Nordic real estate investment. Subsequent to the transaction, the CapMan Real Estate team gains leading positions in real estate investment and development of different commercial, logistics and hotel properties in Finland,” states Heikki Westerlund, CEO of CapMan Plc.

NEPR is a real estate investment firm quoted on the AIM market of the London Stock Exchange and on the Euronext Amsterdam Stock Exchange. The company has sold its Nordic portfolio of hotel properties to focus its real estate investment business on Russia and the Baltic countries.

Fund management fees and carried interest

The management fee for CapMan Hotels RE Ky is based on acquisition cost of the current portfolio. The management fee percentage in private equity real estate funds is typically lower than in funds making direct investments in portfolio companies. The fund will begin to generate carried when investors have regained their investment and a preferred annual return of 8%, after which the division of cash flows will be 80% for investors and 20% for the management company. After the annual return to investors has exceeded 10%, the division of the funds cash flows will be 70% for investors and 30% for the management company.

CapMan Plc’s share of the possible carried interest from CapMan Hotels RE is 60% and the combined share of the fund’s investment team and Corintium Oy, the management company’s other owner, is 40%. The establishment of the fund is estimated to have a slightly positive impact on CapMan Plc’s result for 2008.

Press Conference:
A press conference on the establishment of the CapMan Hotels RE fund will be held in Finnish for the media and analysts today, 18 January 2008 at 12.00 p.m. in CapMan’s premises at the address Korkeavuorenkatu 32, Helsinki. Light lunch will be served. Presentation material from the press conference will be available in Finnish and English at the same time on CapMan’s Internet pages at www.capman.com.

For further information, please contact:

Markku Hietala, Head of CapMan Real Estate, Senior Partner, tel. +358 500 405 879

Heikki Westerlund, CEO, Senior Partner, CapMan Plc, tel. +358 50 559 6580

Thomas Lindeborg, Managing Director, L&R Nordic Properties AB, tel. + 46 70 624 8503

Appendix: The hotels acquired to CapMan Hotels RE Ky’s portfolio

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CapMan  www.capman.com  
CapMan is one of the leading alternative asset managers in the Nordic countries and manages Nordic funds with approximately EUR 3 billion in total capital. CapMan has four investment areas (CapMan Buyout, CapMan Technology, CapMan Life Science and CapMan Real Estate), and each of them has a dedicated team and funds. Altogether CapMan employs around 100 people in Helsinki, Stockholm, Copenhagen and Oslo. CapMan was established in 1989 and its B shares are listed on the Helsinki Stock Exchange since 2001.

Northern European Properties Limited

Northern European Properties Limited is a Jersey incorporated company which invests in real estate opportunities in the Nordic and Baltic Regions and Baltic Russia. The company has been listed on AIM, a market of the London Stock Exchange, since 15 November 2006 and on Euronext Amsterdam since 18 December, 2007. The company has an experienced board of six non-executive Directors, chaired by Jens Engwall and has appointed LR Real Estate Asset Management (LR REAM) to manage its assets and to pursue investment opportunities.

Appendix: The hotels acquired to CapMan Hotels RE Ky’s portfolio