FOR INFORMATION PURPOSES ONLY. Spanish Version prevails.
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© MERLIN Properties SOCIMI, S.A www.merlinproperties.com
Press release 22 September 2017
MERLIN Properies SOCIMI, S.A www.merlinproperties.com [email protected]
Press release 22 September 2017
MERLIN Properies SOCIMI, S.A www.merlinproperties.com [email protected]
Press release 22 September 2017
MERLIN Properies SOCIMI, S.A www.merlinproperties.com [email protected] 6M 2017 RESULTS PRESENTATION
22 SEPTEMBER 2017 DISCLAIMER
This presentation has been prepared by Certain statements in this document presentation in other jurisdictions may RELIED ON IN CONNECTION WITH ANY MERLÍN Properties, SOCIMI, S.A. (the regarding the market and competitive also be restricted by law and persons CONTRACT OR COMMITMENT TO SELL Company) for informational use only. position data may be based on the into whose possession this presentation OR PURCHASE SHARES. ANY DECISION internal analyses of the Company, comes should inform themselves about TO SELL OR PURCHASE SHARES IN ANY The information contained in this which involve certain assumptions and and observe any such restrictions. In OFFERING SHOULD BE MADE SOLELY presentation does not purport to be estimates. 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ı 2 ı Contents
6M 17 Financial Results
ISMAEL CLEMENTE Office performance CEO Shopping centers performance
Logistics performance
MIGUEL OLLERO Valuation and debt position GM / COO Value creation
Closing remarks
DAVID BRUSH CIO Key highlights |
• +5.7% FFO per share YoY Financial • +12.2% EPRA NAV YoY performance • Highest FFO yield in the market • Significant growth prospects in valuation • Capital structure: longer and more balanced maturity
• Excellent performance in office, shopping centers and logistics, with positive Business LfL growth and release spread performance • Strong increase in occupancy in offices (+132 bps), shopping centers (+68 bps) and logistics (+329 bps)
• Excellent value creation for the assets delivered in the period Value • Development and refurbishment plan being executed on target creation • Significant potential for rental growth
ı 4 ı 6M 17 FINANCIAL RESULTS 6M 17 Financial Results | Profit and loss
+5.7% INCREASE IN FFO PER SHARE AND +37.2% IN IFRS EPS
€ m 6M17 6M16 YoY Total revenues 242.6 158.0 53.5% Office 108.5 57.4 89.0% High street retail 52.1 48.0 8.4% Shopping centers 47.3 20.4 131.6% Logistics 19.5 9.8 98.3% Other(1) 7.7 18.9 n.a. Gross rents 235.1 154.6 52.1% Net rents 208.0 142.3 46.2% EBITDA(2) 198.6 135.5 46.6% FFO(3) 148.6 96.7 53.7% AFFO(4) 142.6 n.d. n.d. IFRS net profit 421.4 211.1 99.6% EPRA NAV 5,585.9 3,423.2 63.2%
€ per share 6M17 6M16 YoY FFO 0.32 0.30 5.7% AFFO 0.30 n.d. n.d. IFRS EPS 0.90 0.65 37.2% EPRA NAV 11.89 10.60 12.2%
Source: Company (1) Including hotels, rented residential in 6M16 (2) Excludes non-recurring ítems (€ 3.0m) plus LTIP accrual (€ 26.75m) (3) FFO equals EBITDA less net interest payments, less minorities, less recurring income taxes plus share in recurring earnings of equity method. FFO reported in 6M16 has been rebased in accordance with this methodology (4) AFFO equals FFO less maintenance Capex
ı 6 ı 6M 17 Financial Results | Bridge gross rents OFFICE AND SHOPPING CENTERS SHOWING ROBUST UPWARDS TREND AND LOGISTICS ACCELERATED GROWTH Primarily (€m) Metrovacesa and Adequa Office+2.7% (1) LfL Shopping centers +3.0% +78.7 235.1 +2.6% Logistics +6.9% H. Street retail +0.9% Other +11.2% 154.6 +3.3 (1.5)
6M 2016 Like-for-Like 4 old Balance 6M 2017 growth leases 6M16(2) acquisitions and disposals
(1) Portfolio in operation for 6M 16 (€ 128.8m GRI) and for 6M 17 (€ 132.1m GRI) (2) Vestas, Endesa-Sevilla, UPS and Logista ı 7 ı OFFICE PERFORMANCE Office performance | Rents bridge and breakdown
Primarily MVC office (€m) and Adequa LfL(2) +2.7% +50.4 108.5
57.8 (1) +1.3 (1.0)
6M 2016 Like-for-Like growth 2 old leases 6M16(3) Balance acquisitions 6M 2017 and disposals Gross rents 6M 17 Breakdown by location Passing rent (€/sqm/m)
1.5 4.4 14.4 4.3% 1.3% 16.9 17.4
13.7% 13.2 10.7 88.2 Annualized GRI 80.7%
Madrid Barcelona Lisbon Other Madrid Barcelona Lisbon Other
(1) Rebased after reclassificationof assets (€ 57.4m reported in 30/06/16) (2) Office portfolio in operation for the 6M16 (€ 48.4m) and for the 6M17 (€ 49.7m) (3) Vestas and Endesa-Sevilla ı 9 ı Office performance | Leasing activity
GOOD PERFORMANCE IN OUR 3 CORE MARKETS, WITH +3.4% RELEASE SPREAD
Contracted Release # Main sqm spread contracts actions
Madrid 200,894 +3.1% 72
Barcelona 34,152 +6.3% 26
Lisbon 1,043 +7.9%. 1
TOTAL 236,089 +3.4% 99
Most meaningful sample in Spain
ı 10 ı Office performance | Occupancy
OCCUPANCY RISING IN MADRID AND BARCELONA
Net Occupancy Change Main Absorption 30/06/17 vs 31/12/16 (bps) actions
Madrid +12,806 88.9% +105
Barcelona +4,191 88.8% +312
Change of perimeter Lisbon (467) 92.7%. (154) (Central Lisbon acquisition)
TOTAL +16,529 89.3% +132
91.1% If we were to exclude from stock 25k(1) under refurb (18k pre-let)
(1) Avda. Europa, Puerta de las Naciones and Eucalipto 33 ı 11 ı SHOPPING CENTERS PERFORMANCE Shopping Center performance | Rents bridge and breakdown
A DOMINANT AND URBAN PORTFOLIO SHOWING STRENGTH
(€m) LfL(2) Primarily MVC +3.0% +27.7 Shopping 47.3 centers
19.0(1) +0.6
6M 2016 Like-for-Like growth Balance acquisitions 6M 2017 and disposals
Gross rents 6M 17 Breakdown by type
12.1 21% 8.5
By GAV 61% 26.8 18%
Urban Dominant Secondary
(1) € 20.4m reported. € 19.0m after reclassification of Plaza de los Cubos as High Street retail (2) Shopping centers portfolio in operation for 6M 16 (€ 19.9m) and for 6M 17 (€ 20.5m). Assuming full consolidation of Arturo Soria SC ı 13 ı Shopping Center performance | Leasing activity and occupancy
MEANINGFUL RELEASE SPREAD (+5.5%)
Release spread #contracts Main actions
All portfolio +5.5% 84
Contracted Net Occupancy Change vs Main sqm Absorption 30/06/17 31/12/16 (bps) actions
All portfolio 71,587 +2,974 89.3% +68
In spite of Shana and Blanco bankruptcies (5,084 sqm)
ı 14 ı Shopping centers | Footfall and sales evolution
OVER 100M VISITORS TO OUR PORTFOLIO
Visitors(1) Sales(1)
+2.7% +3.9% 91.4 787.6 89.0 758.1
Previous LTM LTM Previous LTM LTM
(1) Excluding assets impacted by the “opening effect” of a new shopping center in the previous 24 months (Porto Pi) ı 15 ı LOGISTICS PERFORMANCE Logistics performance | Rents bridge and breakdown
Primarily WIP (€m) +9.8 19.5 LfL(1) program +6.9%
9.8 +0.5 (0.5)
6M 2016 Like-for-Like growth 2 old leases 6M16(2) Balance acquisitions 6M 2017 and disposals
Gross rents 6M 17 Breakdown by location Passing rent (€/sqm/m)
5.4 4.9 25.1% 3.6 3.5 5.0 Annualized 48.9% GRI
9.1 26.0%
Madrid Barcelona Other Madrid Barcelona Other
(1) Logistics portfolio in operation for 6M 16 (€ 7.6m) and for 6M 17 (€ 8.1m) (2) UPS and Logista ı 17 ı Logistics performance | Leasing activity
STRONG MARKET DINAMICS DRIVING A VERY POSITIVE RELEASE SPREAD
Release spread #contracts Main actions
Madrid +16.3% 6
Barcelona - -
Other - -
TOTAL +16.3% 6
ı 18 ı Logistics performance | Occupancy
STRONG LEASING PERFORMANCE: THE PORTFOLIO IS VIRTUALLY FULLY OCCUPIED
Contracted Net Occupancy Change vs Main sqm Absorption 30/06/17 31/12/16 (bps) actions
Madrid 130,952 +49,793 100.0% -
Barcelona 31,102 +26,730 99.1% +1,253
Other 21,066 (2,585) 95.8% (103)
TOTAL 183,121 +73,938 98.6% +329
ı 19 ı VALUATION AND DEBT POSITION Valuation and debt position | GAV summary
LfL growth 4.7% 5.1% 6.0% 0.2% - - -1.5% 3.7% 3.6% 3.7%
Gross yield 4.6% 5.4% 7.0% 4.7% - - - 4.9% 10,459 10,113
4,772 (1)
GAV (€ million) 2,208 1,694
590 422 294 346 132 Offices Other Land for development (incl WIP) TOTAL Shopping centers High Street Retail Non-core land Equity method TOTAL Logistics
€/sqm AG 3,803 3,721 641 4,798 2,487 625 348 2,371
Source: Company ı 21 ı (1) Including Non income producing assets such us Logistic WIP and office WIP (Torre Charmatin and Torre Glories) Valuation and debt position | GAV prospects
AMPLE ROOM FOR FUTURE GROWTH
LfL growth 6M 17 Yield compression 6M 17
Office 4.7% (11 bps) Shopping centers 5.1% (27 bps) Logistics 6.0% (18 bps) High Street retail 0.2% (0 bps) MERLIN 3.7% (11 bps)
Lowest yield compression among Spanish peers
Yields on GAV MERLIN Peer 1 Peer 2 Peer 3
Office 4.6% 3.9% 3.4% 2.8% Shopping centers 5.4% 6.3% Logistics 7.0% 5.9% 6.3% FFO Yield on NAV(1) 5.3% 2.5% 2.4% 5.1%
Highest FFO yield among Spanish peers
(1) Calculated as 6M 17 FFO share multiplied by 2, and divided by EPRA NAV per share as of 30/06/17 ı 22 ı Valuation and debt position | Debt position
LONG-TERM, BALANCED MATURITY PROFILE
Unsecured loans 81 41 Unsecured bonds 10 Secured bank loans 19 Leasing 158
840 850 839 800 700 600 124 5 15 10 84 2 5 5 27 2 2017 2018 2019 2020 2021 2022 2023 2024 2025 +2026
30/06/17 31/12/16 Gross financial debt € 5,216m € 5,193m Cash(1) € 451m € 722m Net financial debt € 4,765m € 4,471m GAV € 10,459m € 9,824m LTV 45.6% 45.5% Average cost 2.24% 2.26% Floating interest rate 1.6% 11.3% Average maturity (years) 6.2 6.2 Liquidity (2) € 871m € 949m Non-mortgage debt 75.8% 75.6%
(1) Including cash and net proceeds from the sale of hotels ı 23 ı (2) Including available treasury plus hotels sale receivable and unused credit facilities (€ 420m) VALUE CREATION Value creation | Delivered
BALMES 236
THE PLAN Occupancy 6,187 sqm • Transformation of a 59% GLA multi-tenant C asset in an excellent location into a B+ mono-tenant HQ 100%
100% Occupancy (€/sqm/m) ACTIONS • Commercialization by 12.4 € 8m Capex internal leasing team +29% mostly borne • Technical supervision by tenant by internal technical team 16.0 (€1.8 by MRL) • Pre-let to Eugin, Spanish leader in fertility investigation 39% ROI ı 25 ı Value creation | Delivered
MARINEDA SPORTS AREA
THE PLAN 3,402 sqm 91% GLA • Transformation of an Occupancy unborn luxury brands area, with high vacancy, into a sports related area Succesful retenanting € 2.5m Total Cost
ACTIONS 1st store in a shopping center in Spain • Redesign to improve € 0.45m visibility, vertical connections and interior Rents Largest gym operation design in NW Spain • Change of flooring, lighting, furniture and digitalization
nd • Re-tenanting plan 2 store in a shopping center in Spain 18% • In-house project ROI management 1st store in Galicia ı 26 ı Value creation | Delivered
MERLIN-CABANILLAS PARK I
THE PLAN 202,607 sqm • Development of a large GLA logistics park in the main hub in Spain, with the highest specifications 100% Largest to meet the needs of Occupancy Park built 3PLs and e-commerce companies since 2007 € 7.8m ACTIONS Annual rents • Forward purchase 100% agreement with two Occupancy developers Top tier tenants • Price set in an inflationary market 8.2% • No construction risk Yield on cost • Leasing risk reduced through rental guarantees • Project monitored “in-house” 30% valuation • MRL leasing team led uplift commercialization
ı 27 ı Value creation |
EXCELLENT VALUE CREATION (+31% UPLIFT)
December 2015 December 2016 April 2017 September 2017
Testa portfolio Testa + Metrovacesa Testa + Metrovacesa Testa + Metrovacesa + portfolio + banks portfolio banks + Acciona portfolio
NAV 177 618 1,377 1,816 MRL stake 100% 34.2% 16.2% 12.7% MRL attributed NAV 177 212 223 231
SIMULTANEOUSLY IMPROVING TESTA RESIDENCIAL PROFILE: THE LEADER IN THE MARKET
#units 1,519 4,706 7,992 9,041 GRI 12 35 56 70 GAV 288 340 1,738 2,179
ı 28 ı Value creation | Future growth drivers
Delivery Pending Expected Year Capex Rent Torre Glòries 2018
Development Torre Chamartin 2018 € 97m € 24m
Adequa 2021
Offices 2017-2020 Refurbishment € 174m € 12m Shopping centers 2017-2020
Meco II 2017
Pinto I 2017
Pinto II 2017
Gavilanes 2018
Logistics WIP Sevilla ZAL 2018 € 230m € 24m
Azuqueca II 2018
Azuqueca III 2018
San Fernando 2018
Cabanillas Park II 2021 ı 29 ı Cash flow | Potential rental growth
(€m) +22% 12.0 568.7 48.3
41.1 467.3
30/06/17 Reversionary(1) WIP Refurbishment Potential Annual potential & Development(2) Annual Gross rents Gross rents
(1) Not considering any rental market growth nor inflation (2) Includes Torre Glòries, Torre Chamartín, Adequa and Logistic WIP ı 30 ı CLOSING REMARKS Outlook 2017 |
• MERLIN very well positioned to capture strong upwards market dynamics • Strong reversion through rents, occupancy, developments and refurbishments program (€ 467m of annual rents to reach € 569m) • AFFO per share and DPS guidance upgraded: € 0.58 (vs € 0.55) and € 0.46 (vs € 0.44), respectively (+15% growth YoY 2017 vs 2016)
Dividend Evolution 0.46 New guidance p.s. (€ per share) +15% +4.6% 0.44 p.s. Previous guidance
0.40 € 216.1m p.s. € 9.4m (Guidance Update)
€160.2 m
0.19 p.s. €206.7m
€60.0m on ) mill i r u E ( 0,0
2014 2015 2016 2017E ı 32 ı
Paseo de la Castellana, 257 28046 Madrid +34 91 769 19 00 [email protected] www.merlinproperties.com