The Logistics Property Handbook 4.0 Investment & Financing Keys 2019

June 2019 Financial Advisory I Real Estate @ 2019 Deloitte Financial Advisory Investment & Financing Market All time record of Take-up figures, where the 6 In spite of the 11% decrease in the logistics rd 3 ring reaches a share of 56% of the total absorbed surface: investment volume in Spain during 2018, the Take–Up: 950.000 sqm (7% YOY 2017-2018). logistics trend continues at highest “Prime Yield: 5.0% (-800bps YOY 2017-2018 and “levels in comparison with the recent years. -1,000bps YOY 2006-2018). Financial terms and conditions in 2018 Prime Rent: €6.60 sqm (6.4% YOY 2017-2018). have remained similar to 2017. Lease KPIs: Supply & Demand Sustainability in Catalonia 7 4A 59% increase of Take-up that encourage the Forecast for 2019 indicates that logistics is & Construction number of speculative projects as future supply: in a sharp rising trend. Despite the Spanish Sustainability has become a must economy shows signs of deceleration, it Take–Up: 715.000 sqm (59% YOY 2017-2018). in the current logistics market. Taking into “is well above the European average. Spain is still “Prime Yield: 5.0% (-700bps YOY 2017-2018 and account every relevant point for new attracting high levels of equity and remains as a -1,000bps YOY 2006-2018). “warehouse developments is key to avoid high attractive market. Prime Rent: €7.00 sqm (3.7% YOY 2017-2018). unexpected costs and leasing limitations. Lease KPIs: Market Supply & Demand Incoming 5in Trends Spain benefits from its privileged location where Increasing activity since Q1 2019 Take–Up figures 8 We believe that the traditional logistics two of the European leading corridors accounts for 60% of 2018 total leased area. will keep leading the supply chain in circulate while boosting its logistics activity. These Take-Up: 180.000 sqm (12% YOY 2017-2018). Spain for the near future living together with good conditions have increased the investors’ Prime Yield: 6.5% (-250bps YOY 2017-2018, reaching punctual urban hubs examples, due to the “demand while rising the and “ “ the historical minimum of 2006). current uncertainly within the circulation capital values above the Prime Rent: €4.50 sqm (5.8% YOY 2017-2018). and sustainability regulations in the city centres. European average. @ 2019 Deloitte Financial Advisory @ 2019 Deloitte Financial Advisory Spanish economic fundamentals: GDP

GDP YoY Variation (%) 06 07 08 09 10 11 12 13 14 15 16 17 18 19F 20F 21F The Spanish 6% economy growth has

4% experienced a gradual 2.6% After three 2.2% slowdown. 1.9% 1.8% 2% “years of GDP growing above 3%, the economy is - entering a less expansive phase in the economic (2%) cycle. Growth is

(4%) Forecast expected to decelerate further to (6%) Spain Italy Germany France Euro Area-19 United Kingdom 2.2% in 2019 and 1.9% in 2020, as the cycle Spanish GDP YoY Variation 2018 matures. GDP Volume GDP Evolution: (Base 100 = 2006) 120 1.200 bn 2017 120 116 2016 Nevertheless, the 1.150 bn 2008 115 111 111 2007 2010 2009 2011 2015 International Community 1.100 bn 107 107 107 107 110 106 2012 2014 2013 keeps placing Spain as one 103 103 1.050 bn 102 105 2006 of the leading economies 1.000 bn 100 Main within EU.

950 bn 95

1.116.225 1.080.935 1.025.693 1.079.998 1.208.248 1.079.052 1.070.449 1.039.815 1.037.820 1.118.522 1.166.319 1 1.080.807 Economic 900 bn 90 Drivers Source: INE (Spanish National Statistics Institute), IMF, BdE @ 2019 Deloitte Financial Advisory E-commerce E-commerce shows an unstoppable growth and presents big room for improvement.

E-commerce market in Spain experiences a rapidly expansion. 2018 E-commerce revenues in Spain grew by 27.1% compared to the previous year period. The tourism represents the highest turnover sector, followed by air transportation and hotels or similar lodging. E-Commerce Turnover and YoY Variation Source: CNMC 10,500 50% 9,750 Yearly growth rate 9,000 8,250 Sustained growth of 13.8% and 27.1% since 2012 40% 7,500 6,750 25.9% 27.1% 6,000 30% 5,250 4,500 20% 3,750 13.8% 3,000 2,250 10% 1,500 750 Main 0 0% 1 € millions Economic Drivers Turnover % Var. Y. o Y. Source: CNMC @ 2019 Deloitte Financial Advisory KPIs: Europe & 2Spain

@ 2019 Deloitte Financial Advisory European logistics market snapshot European corridors. Main European Corridors Helsinki Baltic-Adriatic

European corridors Oslo Stockholm North Sea-Baltic Two of the most Mediterranean relevant European East-East Mediterranean logistics corridors are Scandinavia-Mediterranean Copenhagen as follows: Rin-Alps Mediteranean and Dublin Atlantic Atlantic. Amsterdam Berlín North Sea-Mediterranean Spain takes part in London Rin-Danubio both of them. Prague

Luxembourg

Vienna Paris Stuttgart Bern Budapest

Bucharest Milan Venice

Zagreb

Sofia Oporto Rome Madrid Barcelona

Seville Athens KPIs Valencia Lisbon 2 Nicosia Europe & Spain Source: Deloitte @ 2019 Deloitte Financial Advisory European logistics market snapshot Capital values in the main European Cities.

Average EU Prime Rent 6.5 (€/sqm/mth)

Average EU Prime Yield 6.00 (%)

Average EU Cap. Value 1,450 (€/sqm)

Capital Prime Prime City Values yields rents (€/sqm) (%) (€/sq.m/mt) London (West End) 4.347 4,50 16,30 Oslo 2.640 5,00 11,00 Munich 1.950 4,00 6,50 Oslo Capital values (€/sqm) Barcelona 1.680 5,00 7,00 2,640 Dublin 1.670 5,75 8,00 Stockholm 1.636 5,50 7,50 >3,000 Stockholm Paris 1.600 4,50 6,00 1,636 2,500 – 3,000 Madrid 1.584 5,00 6,60 Vienna 1.364 5,50 6,25 London 2,000 – 2,500 4,347 Moscow Amsterdam 1.260 5,00 5,25 524 Brussels 960 6,00 4,80 Amsterdam 1,500 – 2,000 Warsaw 950 6,00 4,75 1,260 Warsaw 1,000 – 1,500 Prague 939 5,75 4,50 Munich 950 Milan 916 6,00 4,58 Dublin Brussels 1,950 Prague 500 – 1,000 Budapest 697 7,75 4,50 1,670 960 939 Lisbon 672 6,25 3,50 Budapest <500 Vienna Zagreb 660 9,10 5,00 697 1,364 Moscow 524 11,45 5,00 Paris 1,600 Milan Zagreb 660 916 Spain VS Europe Barcelona Madrid 1,680 KPIs Lisbon 1,584 Madrid and Barcelona logistics capital values stands 2 660 above the European average. Europe & Spain Source: Deloitte @ 2019 Deloitte Financial Advisory Lease KPIs: Supply & Demand 3in Madrid

@ 2019 Deloitte Financial Advisory Key performance indicators: Madrid MADRID | 2018 Madrid average vacancy rate has increased 130 bps YoY (2017-2018) due to the large number of speculative projects in the market (125,000 sqm).

2014 2015 2016 2017 2018 Vacancy Rate 11.8% 9.1% 7.0% 6.2% 6.5%

Prime Rent (€/sqm/month) 5.00 5.75 6.20 6.30 6.60

Prime Rental Growth (%) - 15.0% 7.8% 1.6% 4.7%

Take-up (sqm) 395,000 380,000 404,000 890,000 950,000*

*Take-Up Growth 7% (YOY 2017-2018)

TOTALTOTAL INVENTORYSTOCK €6.60/sqm/month 2018 Investment volume 9.612,942,997 m sqm sqm €30.5/m2/month VACANT STOCK Macro Economic VACANT SPACE 5.00% 2018 Openings 3 620,0001,320,287 sqm sqm Lease KPIs Context Overview

in Madrid Source: Deloitte @ 2019 Deloitte Financial Advisory Main logistics & industrial areas The main Industrial & Logistics areas of Madrid Region are gathered adjoining to the A2 and A4 highways axis. Supply

A1 Burgos A1 A2 200 km Zaragoza A6 A-2 240 km

Cabanillas Guadalajara A-1 del Campo A5 A3 A4 Azuqueca 1st First Ring (14 - 25 km) San Sebastián El Corredor Meco de los Reyes del Henares nd

R-2 A2 2 Second Ring (25 - 45 km) Demand

Alcalá de Torrejón 3rd Third Ring (> 50 km) de Ardoz Henares M30 Barajas M50 M40 San Fernando Madrid de Henares Industrial & Logistics Main Areas

A2 A2 Axis 1st San Fernando / Coslada / San Alcorcón Fernando de Henares / Torrejón de Ardoz / Meco / Alcalá de Henares / A4 Guadalajara Leganés 2nd A4 A4 Axis Talavera R-5 / Getafe / Pinto / de la Reina / / Seseña Pinto 70 km / Illescas / Ontígola Griñón A-5 Locations R-4 Valdemoro A5 A5 Axis Alcorcón / Leganés / Griñon A5 Ciempozuelos A-42 3rd A1 A1 Axis A-4 Illescas Pharmatheutical industry 3 Seseña Lease KPIs Toledo 40 km

in Madrid Source: Deloitte @@ 2019 2018 Deloitte Deloite Financial Advisory Ontígola Lease KPIs: Supply & Demand 4in Catalonia

@ 2019 Deloitte Financial Advisory Key performance indicators: Catalonia CATALONIA | 2018 Average Catalonia Logistics Market vacancy rate has decreased -550 bps YoY (2014-2018) due to the strong increase of the demand and the lack of a quality supply.

2014 2015 2016 2017 2018

Vacancy Rate 9.0% 5.0% 4.6% 3.8% 3.5%

Prime Rent (€/sqm/month) 6.00 6.25 6.75 6.75 7.00

Prime Rental Growth (%) - 4.2% 8.0% 0% 3.7%

Take-up (sqm) 315,000 520,000 780,000 450,000 715,000*

*Take-Up Growth 59% (YOY 2017-2018)

TOTALTOTAL INVENTORYSTOCK €7.00/sqm/month Investment volume 2018 5.3012,942,997 m sqm sqm €30.5/m2/month VACANT STOCK Macro Economic VACANT SPACE 5.00% Openings 2018 4 176,7501,320,287 sqm sqm Lease KPIs Context Overview

in BCN Source: Deloitte @ 2019 Deloitte Financial Advisory Main logistics & industrial areas The main Industrial & Logistics areas of Catalonia Region are gathered in Barcelona’s Metropolitan Core Zone and three rings which are defined by the distance (km) to Supply Barcelona’s port.

C-17 C-16 Berga Ripoll Gerona AP-7 First Ring (0 - 30 km) rd 3 113 km 122 km Vic 110 km C-17 A-2 Second Ring (30 - 60 km) C-16 AP-7 AP-2

Third Ring (> 60 km) nd AP-7 2

Vallés Manresa Occidental

Vallés Baix Demand A-2 1st Igualada Llobregat Oriental Lliça de Tarrasa Munt Granollers Sant Esteve de Sta Sesrovires / Abrera Perpetua Mataró Martorelles Castelbisball

AP-2 Penedés Martorell CZ Industrial & Logistics Main Areas Subirats Barcelona Core Zone: Metrop. Area Sant Boi CZ Villafranca El Prat del Port Area & El Prat de Llobregat Valls del Penedés Vilarodona Llobregat st 1st 1 Ring La Bisbal del Baix Llobregat (Interior), Valles Penedés Occidental & Vallés Oriental

nd Locations 2nd 2 Ring Constantí Villafranca del Penedés Tarragona rd 90km 3rd 3 Ring Tarragona, Gerona & Bages 4 AP-7 Lease KPIs

in BCN Source: Deloitte @@ 2019 2018 Deloitte Deloite Financial Advisory Lease KPIs: Supply & Demand 5in Valencia

@ 2019 Deloitte Financial Advisory Key performance indicators: Valencia VALENCIA | 2018 Average Valencia Logistics Market vacancy rate has decreased -320 bps YoY (2014-2018) due to the strong increase of the demand and the lack of quality supply.

2014 2015 2016 2017 2018

Vacancy Rate 6.2% 4.0% 3.5% 3.1% 3.0%

Prime Rent (€/sqm/month) 3.25 3.50 3.75 4.25 4.50

Prime Rental Growth (%) - 7.7% 7.1% 13.3% 5.9%

Take-up (sqm) 140,000 122,000 100,000 162,000 180,000*

*Take-Up Growth 12% (YOY 2017-2018)

TOTALTOTAL INVENTORYSTOCK €4.50/sqm/month Investment volume 2018 1.7012,942,997 m sqm sqm €30.5/m2/month VACANT STOCK Macro Economic VACANT SPACE 6.50% Openings 2018 5 50,0001,320,287 sqm sqm Lease KPIs Context Overview

in Valencia Source: Deloitte @ 2019 Deloitte Financial Advisory Main logistics & industrial areas The main Industrial & Logistics areas of Valencia Region are gathered adjoining to the A3 and A7 Highways axis Supply Tarragona 260 km A-7 A-23

CV-35

2nd Sagunto AP-7 Madrid 360 km North

A-3

1st Demand CZ

Paterna Cheste Central area Ribarroja Chirivella Valencia del Turia V-30 Torrente AP-7

Almussafes South

Industrial & Logistics Main Areas 2nd Core Zone Ribarroja del Turia, Paterna and Cheste AP-7

Massalavés Locations 1st Ring Almussafes

2nd Ring Sagunto and Massalavés 165 km 5 Bellreguart Lease KPIs A-7 74km

in Valencia Source: Deloitte @@ 2019 2018 Deloitte Deloite Financial Advisory Investment & Financing 6Market

@ 2019 Deloitte Financial Advisory Logistics Investment Volume European and Spanish Logistics Investment & Financing Share

Germany 24% Netherlands United Kingdom 11% 28% France 10%

Russia 0.9% Spain is ranked Belgium Spain 0.9% 5.1% the fifth in the Finland Denmark 1.2% Sweden 1.7% Italy European raking of Switzerland 2.9% 4.2% 9% Czech Republic Poland 2.2% Norway 20% Logistics Investment 2.1% 3.3% 2.8% 23% “Volume, totaling Logistics investment over total Commercial Real Estate investment in each country. €1,452m.

Total Investment Logistic (%) Logistic Investment Volume # European Country (€m) over total (€m) per country 15% 1 United Kingdom 50,513 16% 7,968 20% 2 Germany 46,660 14% 6,707 Logistics 3 Netherlands 11,322 27% 3,030 Investment Volume (€m) 4 France 28,694 10% 2,778 16% 27% 14% 5 Spain 15,118 10% 1,452 14% >4000 7% 6 Sweden 5,427 22% 1,193 26% 2000 - 4000 7 Poland 6,517 14% 944 8 Italy 6,847 12% 820 10% 1000 - 2000 9 Norway 3,493 23% 804 22% 500 - 1000 10 Switzerland 2,827 22% 629 12% 11 Czech Republic 2,233 26% 586 200 - 500 12 Denmark 2,387 20% 469 13 Finland 3,697 9% 329 <200 14 Belgium 3,671 7% 264 10% 66InvestmentInvestment 15 Russia 1,640 15% 245 && FinancingFinancing TOTAL 191,045 28,218 Source: Deloitte, Real Capital Analytics DriversDrivers @ 2019 Deloitte Financial Advisory Logistics Investment Volume in Spain Logistics Investment share of total Commercial Real Estate investment volume

Total Investment volume by Asset Class (€m)

16,000 15,118 Total (€m) Commercial Real 1,524 14,000 Retail High Street Estate investment

Retail Shopping Centre 12,398 volume increased by 11,845 12,000 660 2,765 Offices 40% over the last 1,263 10,834 “year. Corporate Deals Hotels 651 10,000 3,769 returned in 2018. 1,894 Logistic 8,587 3,168 4,527 8,000 2,242 Logistics 6,000 5,313 2,295 4,895 investment volume has 2,297 4,470 decreased during 4,000 1,467 4,850 3,189 3,151 2018 by 11%. 3,090 644 591 751 2,520 2,087 “ 687 2,000 571 867 2,702 2,145 1,460 1,056 365 807 932 544 1,630 1,452 750 576 519 607 596 674 930 - 150 279 88 120 66InvestmentInvestment 2010 2011 2012 2013 2014 2015 2016 2017 2018 && FinancingFinancing Source: Deloitte DriversDrivers @ 2019 Deloitte Financial Advisory Financing Market Yielding assets

2013-14 2015 2016 2017-18 2019

Credit Financing Framework Access Upturn Constraints

Upfront Fee n/a 125-175pbs 100-150pbs 100-150pbs 100-150pbs

Spread n/a 250-300pbs 200-250pbs 200-250pbs 175-225pbs

LTV n/a 50% 50-55% 60-65% 50-60% Main Main Conditions

Balloon n/a 65% 80% 80%-100%(1) 80%-100%(1)

(1) Debt could be structured as bullet for investments with relevant covenants and long-term contracts. 66InvestmentInvestment && FinancingFinancing DriversDrivers Source: Deloitte @ 2019 Deloitte Financial Advisory 7Sustainability & Construction

@ 2019 Deloitte Financial Advisory Certification Value

Less structural Access to 1 vacancy financing 6

Higher 2 incomes CSR 5

Comfort and Less operating Health of its 3expenses 7Sustainability Occupants 4 & Construction Source: Deloitte @ 2019 Deloitte Financial Advisory

Source: Deloitte Construction Key Points What to take into account when constructing a warehouse.

Urbanization works Geotechnical survey

If the plot of land is not Sewage network A difficult land Foundations urbanized, that High voltaje can increase Water table cost should be Services construction Structural stability costs “assumed by the Easements Soil contamination “ remarkably. owner.

Slabs Fire protection

The level of Slab Loading capacity Risk level characteristics protection Lay-flat Fire sectors could have direct developed will Durability Installations impact on tenant’s condition the “ activities. Operational maintenance “activities in the Future tenant 7Sustainability warehouse. & Construction Source: Deloitte @ 2019 Deloitte Financial Advisory Market Incoming 8Trends

@ 2019 Deloitte Financial Advisory Future of logistics The increasing trend of the e-commerce directly impacts on the traditional distribution chain. Operators need more specialized last mile units to supply the demand; consumers rule the distribution chain.

Shops Pickup points

Homes

Shops

Shops

Homes

Pick-up points 8Market Incoming Trends Source: Deloitte @ 2019 Deloitte Financial Advisory Alberto Valls, MRICS Javier Zambrana Managing Partner Associate Financial Advisory ‖ Real Assets Financial Advisory ‖ Real Estate [email protected] [email protected] Rafael Arcas Ignacio Herrero Partner Associate Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate [email protected] [email protected]

Joaquín Linares, MRICS Agustín Manzano Partner Associate Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate [email protected] [email protected] José María Espejo Pablo Valles Director Analyst Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate [email protected] [email protected] Lorena Juriol Eric Heyder Senior Manager Analyst Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate [email protected] [email protected] The Logistics Property Luis González Martino, MRICS Alejandro Castillo Senior Manager Analyst Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate Handbook 4.0 [email protected] [email protected]

Miguel Ochoa, MRICS María Beunza Senior Manager Analyst Investment & Financing Keys Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate Spain 2019 [email protected] [email protected] Francisco Astorga Rodrigo Magán #TheLogisticsPropertyHandbook Manager Analyst Financial Advisory ‖ Real Estate Financial Advisory ‖ Real Estate www.deloitte.com/es/financial-advisory/the-Logistics-property-handbook [email protected] [email protected]

@ 2019 Deloitte Financial Advisory