Merlin Properties Socimi, S.a. · BME:MRL
Merlin Properties Socimi — FY2020 Earnings Presentation
63 slides from Merlin Properties Socimi's earnings presentation, Feb 26, 2021
Slide 1: FY2020 Results Presentation
FY2020 R E S U LT S P R E S E N TAT I O N 26 FEBRUARY 2021
Slide 2: Disclaimer
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 SEL
Slide 3: Contents
ISMAEL CLEMENTE CEO Contents Highlights FY20 Financial results Offices Logistics MIGUEL OLLERO Shopping centers GM / COO Valuation and debt position Sustainability & Technology Value creation Closing remarks DAVID BRUSH CIO
Slide 4: Highlights | 2020: a challenging year
Highlights | 2020: a challenging year MERLIN Market Occupancy FY20 New contracts (sqm) Rents Occupancy New contracts (sqm) Prime rents (€/sqm) (YoY) (YoY) (LfL Growth) MAD 91.0% (-60 bps) 350k (-43% YoY) 35.5 (-2% YoY) Offices 91.1% 44,388 € 233m BCN 92.8% (-50 bps) 179k (-55% YoY) 28.0 (-2% YoY) (-
Slide 5: Logistics has overtaken retail as revenue contributor
Highlights | 2020: a challenging year Drop in net rents of SCs means logistics has overtaken retail as revenue contributor and will continue to be the fastest growing category 2020(1) Target (2) 15% 2 % 15% Hoteles Hoteles Residencial en alquiler Residencial en alquiler 69% Otros 47% Otros 50% Logís
Slide 6: MERLIN is implementing sustainable initiatives across its portfolio
Highlights | Sustainability MERLIN is implementing sustainable initiatives across its portfolio Assets Construction Mobility • Path to • Embodied • Mobility net zero carbon reduction as a service Plans • Photovoltaic • Urban regeneration •L ast mile logistics Initiatives •E lectric vehicles chargers
Slide 7: MERLIN continues to expand its technology and digitalization efforts
Highlights | Technology MERLIN continues to expand its technology and digitalization efforts Sensorization Digitalization Data and processes User experience ı7ı
Slide 8: FY20 Financial Results
FY2O0 FINANCIAL RESULTS
Slide 9: Resilient business performance. FFO per share of €0.56
FY20 Financial results | Resilient business performance. FFO per share of € 0.56 beating the post Covid-19 guidance (€ million) FY20 FY19 YoY Gross rents 503.4 525.9 (4.3%) Gross rents after incentives 441.1 511.5 (13.8%) Net rents 393.9 463.3 (15.0%) EBITDA(1) 365.4 425.5 (14.1%) FFO(2) 262.4 313.3
Slide 10: Bridge gross rents
FY20 Financial results | Bridge gross rents Good LfL growth in offices and logistics, while shopping centers down +2.2% Offices Logistics +1.8% Net leases +1.2% LfL(1) LfL(1) +0.4% Shopping centers (1.2%) +0.4% Other (25.0%) (€m) 525.9 +1.9 503.4 525.9 +1.9 503.4 (24.4) (24.4) FY 2019 Like-for-Like
Slide 11: Occupancy and WAULT
FY20 Financial results | Occupancy and WAULT Occupancy maintained in a challenging environment OCCUPANCY AND WAULT TO FIRST BREAK PER ASSET TYPE(1) (57 bps) 97.5% 99.7% 94.2% VS 94.8% MERLIN 2019 93.7% Average 91.1% 17.4 72.1% 5.4 years 3.0 3.4 3.5 MERLIN 2.4 Average Offices Logistics Net leases Sho
Slide 12: Offices
SISA yy OFFICES
Slide 13: Offices | Rent bridge and breakdown
Offices | Rent bridge and breakdown Positive LfL rental growth in the period (+2.2%) (€m) LfL(1) +2.2% 243.4 +4.9 233.2 (15.1) FY 2019 Like-for-Like growth Balance acquisitions, FY 2020 disposals, other LfL growth by area Occupancy by area FY19 FY20 Madrid +1.3% Madrid 91.0% 89.5% (150) bps Barcelon
Slide 14: Offices | Leasing activity
Offices | Leasing activity Rental growth was positive in the period (+3.0% release spread) Contracted sqm Release spread #Renewed contracts Tenants contracted Madrid 204,268 (1.4%) 115 +9.1% Ex-Endesa full year Madrid only Barcelona 39,187 +29.5% 24 Lisbon 5,538 +31.1% 11 TOTAL 248,992 +3.0% 173 ı 1
Slide 15: Offices | What happened after Covid-19?
Offices | Leasing activity What happened after Covid-19? Q2-Q4 2020 News contracts signed(1) 83,518 Monumental Castellana 85 Premium to FY19 ERV 7.3% Contracts renewed 142,959 Renewal rate 83% TFM Ribera del Loira Release spread +0.9% +12.9% Ex-Endesa Post-Covid full portfolio PE Las Tablas Castella
Slide 16: Offices | Resilient rental profile
Offices | Resilient rental profile Strong Defensive lease tenant roster maturities • Only 15% to expire in 2021 • 12% reversionary potential 9 5% < 8% large corporates vulnerable industries 7 0% (1) headquarters as a buffer against market declines • Diversified tenants (Top-10 represents 31% of rent
Slide 17: Offices | Flex space: the office of the future
Offices | Flex space A full service shop in Iberia, offering the whole suite of products The office of the future Fixed Flexible Conventional office staff staff Flexible office Outside the scope of WFH Law “Work close to home” “Work close to the client” Fully serviced clients in our portfolio ı 17 ı
Slide 18: Offices | Flex space Madrid and Barcelona
Offices | Flex space MERLIN ready to escalate flex offer (currently 1.5% of stock) Madrid Barcelona Operating Operating 6 spaces ı 1,129 desks ı 50% Occ. 2 spaces ı 348 desks ı 59% Occ. New openings New openings Atica Torre Chamartín exp. Pza. Ruiz Picasso Torre Glòries exp. Ferreteria 22@ Plaza Cat
Slide 19: Logistics
LOGISTICS
Slide 20: Logistics | Rent bridge and breakdown
Logistics | Rent bridge and breakdown Logistics continues delivering a strong performance (€m) LfL(1) +1.8% 53.8 +1.0 +4.1 58.9 FY 2019 Like-for-Like growth Balance acquisitions, FY 2020 disposals, other Lfl growth by area Occupancy by area FY19 FY20 Madrid +6.2% Madrid 97.2% 97.2% +3 bps Barcelona
Slide 21: Logistics | Leasing activity
Logistics | Leasing activity Excellent release spread (+6.0% all portfolio) Contracted sqm Release spread #Renewed contracts Tenants contracted Madrid 76,184 (9.9%) 1 Barcelona 29,191 +12.1% 3 Other 50,197 +12.2% 1 TOTAL 155,572 +6.0% 5 ı 21 ı
Slide 22: Logistics | ZAL Port
Logistics | ZAL Port Stock 632,176 WIP 103,784 GRI secured € 8.1m Stock incl. WIP 735,960 Third parties stock 183,252 Stock under management 919,212 Contracted sqm Release spread #contracts Tenants 345,624 (0.3%) 41 Occupancy by area FY19 96.8% +79 FY20 97.6% €m FY20 FY19 YoY Gross rents 56.2 45.9 +
Slide 23: Logistics | The name for logistics in Iberia
Logistics | The name for logistics in Iberia KPI’s Existing WIP Total GLA (sqm) 1,853,892 1,040,340 2,894,231 Gross rents (€m)(1) 86 55 141 Net rents (€m)(1) 82 54 136 An unparalelled Bilbao/Vitoria footprint managed(2) Zaragoza Madrid Barcelona A-2 1,154k sqm Port 868k sqm A-4 166k sqm Other 17k sq
Slide 24: MERLIN is a clear leader in the Iberian logistics market
Logistics | The name for logistics in Iberia MERLIN is a clear leader in the Iberian logistics market… (‘000 sqm managed) 90% suitable 3000 for e-commerce 2500 2,894(1) 2000 1500 1000 1,900 500 1,300 1,000 0 Merlin uk usa usa2 ue 615 Peer 1 Peer 2 Peer 3 Peer 4 … backed by our top tenant roster E-co
Slide 25: Logistics | Omnichannel initiatives
Logistics | Omnichannel initiatives The ability to integrate physical and digital channels is key in the current competitive landscape MERLIN is the “top of mind” solution provider for omnichannel customers Main omnichannel actions Main omniclients in our portfolio LAST MILE CLICK & COLLECT FLEXIBLE
Slide 26: Shopping Centers
SHOPPING CENTERS
Slide 27: Footfall and tenant sales affected by the pandemic
Shopping centers | Rent bridge and breakdown Footfall and tenant sales affected by the pandemic (€m) LfL(1) (1.2%) 127.3 114.4 (1.4) (11.5) FY 2019 Like-for-Like growth Balance acquisitions, FY 2020 disposals, other Footfall (million) Tenant sales (million) 2019 102.7 2019 1,104.6 (37.4%) (36.4%) 20
Slide 28: Shopping Centers | Leasing activity and occupancy
Shopping Centers | Leasing activity and occupancy Positive release spread mainly explained by contractual step-ups. Occupancy supported by the Commercial Policy and Flagship deliveries Release spread #contracts Tenants All portfolio +4.1% 95 Contracted Net Occupancy Change vs sqm Absorption 31/12/20
Slide 29: Shopping Centers | A resilient portfolio
Shopping Centers | A resilient portfolio Our commercial policy is paying off Rent relief 2020 6M2021 Trade-Off Description • Includes full closures due to 3rd wave €m 46.7 € 19.6m • Common services fully paid • Extension of maturities beyond Dec-21 Protects occupancy and reduces litigation Avoids zo
Slide 30: Valuation and Debt Position
VA LUAT I O N AND DEBT POSITION
Slide 31: Valuation and debt position | GAV summary
Valuation and debt position | GAV summary Valuation slightly down, with logistics up, offices and net leases flat and retail down Reversionary 5.0% 6.3% 4.7% 5.7% yield Passing 4.1% 5.6% 4.7% 5.0% 4.5% yield 12,811 12,216 6,322 GAV TOTAL with minority stakes (€ million) Shopping centers Minority sta
Slide 32: GAV almost flat (+0.5%) during the year
Valuation and debt position | GAV bridge GAV almost flat (+0.5%) during the year (€m) +0.5% 12,751 236 12,811 127 (198) (105) GAV Disposals Acquisitions Capex & WIP(1) Revaluation(2) GAV FY19 FY20 FY20 FY20 FY20 FY20 Including acquisition of logistics assets to be developed (1) ı 32 ı -€ 105m revalu
Slide 33: GAV drivers: yield expansion
Valuation and debt position | GAV drivers The GAV movement is explained by the yield expansion GAV LIKE-FOR-LIKE EVOLUTION(1) +8.0% +8.0% +1.0% +1.0% (0.6%) (0.6%) MERLIN (0.2%) MERLIN(2) (0.2%) average average(2) (8.7%) (8.7%) Offices Logistics Net Leases Shopping centers Offices Logistics Net Leas
Slide 34: Credit rating maintained by S&P and Moody's after Covid-19
Valuation and debt position | Debt position Credit rating maintained by S&P and Moody’s after Covid-19 31/12/2020 31/12/2019 Net debt € 5,268m € 5,182m LTV 39.9% 39.5% Average cost (spot) 2.12% (1.80%) 2.09% (1.79%) Average Maturity (years) 6.0 6.4 Liquidity(1) (€ million) 1,253 1,085 Fixed rate deb
Slide 35: Liquidity position
Valuation and debt position | Liquidity position Minimun¡m collection defaults imply extremely low bad debt write-off risk ERLIN enjoys a M ERLIN’s collection rate M hese figures, well above T comfortable liquidity has remained at very high European peers, prove the position (€ 1.25 bn) levels durin
Slide 36: Sustainability & Technology
S U STA I N A B I L I T Y & TECHNOLOGY
Slide 37: ESG at the core of our business
Sustainability & Technology | Strategy update ESG at the core of our business Sustainable Sustainable assets mobility • Energy efficiency measures: Sustainable • MERLIN HUB: a fully developed systems installed across our construction cluster of mobility to tenants portfolio to promote energy located
Slide 38: Sustainable assets: Net zero emissions
Sustainability & Technology | Sustainable assets: Net zero emissions MERLIN engaged and supporting the race to net zero emissions Designing an ambitious policy with clear set targets for improvement by 2030… Reduce our embodied and operational carbon emissions Increase our renewable energy consumpti
Slide 39: Sustainable assets: photovoltaic project
Sustainability & Technology | Sustainable assets: photovoltaic project MERLIN is a pioneer in photovoltaic self-consumption installations on its real estate portfolio, launching a national roll-out program (Phase I) that will become the largest initiative of its kind in Spain 24 assets across all as
Slide 40: Sustainable construction: DCN & Renazca
Sustainability & Technology | Sustainable construction: DCN & Renazca • Urban biodiversity around a green axis • Sustainable urban drainage • Accesible urbanism • Smart city concept DCN •U rban regeneration anchored by biodiversity •O ld water courses recovered Renazca ı 40 ı
Slide 41: Sustainable mobility
Sustainability & Technology | Sustainable mobility MERLIN hub offers personalized mobility solutions, contributing to reduce carbon emissions 32 buildings ca. 350,000 sqm > 40,000 daily users Mobility as a service… …. Shaped in 6 basic mobility pillars Carpooling Carsharing platform agreements Regul
Slide 42: Sustainable mobility: last mile logistics
Sustainability & Technology | Sustainable mobility: last mile logistics 30% of the logistics operators cost is generated in the last mile. Reinventing the use of the space, achieving additional income, with double-digit yield on costs DAYTIME HOURS NIGHT-TIME HOURS DAYTIME HOURS - • Load break point
Slide 43: Scoring: energy certifications
Sustainability & Technology | Scoring: energy certifications Outstanding achievement in terms of energy certifications, with more than 2.5 million sqm certified Offices Breeam Leed 82% Pass Silver Platinum 2% 20% 6% > 1,060k sqm Very good 4% 55% certified (2016 - 2020) Good 16% 84% Gold 2015 FY20 43
Slide 44: Scoring: quality seals
Sustainability & Technology | Scoring: quality seals First-rate quality seals in a variety of certificates 78% 69% 70% 71% MERLIN score Average performance C C C Gold since 2017 EPRA Sustainability B in the EPRA Best Practices Financial Europe Global reporting recommendations MERLIN European Global
Slide 45: Technology: 3 pillars
Sustainability & Technology | Technology MERLIN is focusing its technology efforts through 3 pillars Deployment in our portfolio Mentoring Sponsoring Sensorization Proptech challenge MERLIN has invested in Fifth Wall, MERLIN teamed up a venture capital proptech fund with ISDI and Impact accelerator
Slide 46: Value Creation
VA LU E C R E AT I O N
Slide 47: Capital recycling - Divestments
Value creation | Capital recycling - Divestments € 244m of divestments executed Shopping centers Logistics Net Leases • Sale of 3 secondary retail assets • Disposal of 3 logistics • Disposal of 19 BBVA branches (Thader, La Fira and Nassica) in warehouses, 2 in Madrid and in 2020 for € 25.3m exchange
Slide 48: Landmark I: Castellana 85 and Monumental
Value creation | Landmark I Castellana 85 Monumental • Full refurbishment of the asset, located in the heart • Full refurbishment of the building, located in Duque de of Azca, the best business area in Madrid Prime CBD Saldanha, one of the most emblematic squares in the city • C85 will become the HQ
Slide 49: Landmark creation | Madrid Nuevo Norte
Value creation | Landmark creation | Madrid Nuevo I Norte update 0% 0% % 28 10 10 T T T LE LE LE E- E- E- PR PR PR Torre Torre Marqués de Diagonal 605 Plaza Ruiz Castellana 85 Monumental Charmartín Glòries Pombal 3 Picasso GLA (sqm) 18,295 37,614 12,460 13,244 16,474 25,385 31,576(1) Acquisition (€m
Slide 50: Madrid Nuevo Norte update: 2021 milestones
Value creation | Madrid Nuevo Norte update 2020 2021 milestones “Convenio de Infraestructuras” Land adquisition On July 22th 2020, he “Convenio de Infraestructuras” T nce the “Convenio de Infraestructuras” O the Madrid City Council is in process of being approved. This is approved (estimated in 2Q21
Slide 51: Flagship: Saler and Porto Pi
Value creation | Flagship Saler Porto Pi • The refurbishment will consolidate Saler, facing the City of • Full refurbishment of the shopping center Arts and Sciences, as the leading urban mall in Valencia • The asset will contain outstanding exterior terraces nchor tenants upsizing and upscaling uni
Slide 52: Value creation | Flagship
Value creation | Flagship Arturo Soria Larios X-Madrid Tres Aguas(1) Saler Porto Pi Plaza GLA (sqm) 41,460 7,054 47,170 67,690 47,471 58,779 GLA MERLIN 37,957 6,069 47,170 33,845 28,861 32,963 (sqm) Works: 27.5 Works: 46.4 Works: 25.8 Works: 28.6 Capex (€m) 5.4 12.1(1) Ad. GLA: 19.9 Investment: 10.5
Slide 53: Value creation | Best II & III
Value creation | Best II & III A2 - San Fernando II Zaragoza Plaza II Sevilla ZAL WIP A2 - Azuqueca II • Project delivered in 3Q20 • Turn key project in the most • Phased project located in • XXL Turn-key project • 85% let to Grupo Damm dynamic hub of Zaragoza Seville’s Port area in the A2 Corridor
Slide 54: Value creation | Best II
Value creation | Best II 85 % 0% 10 LET ET E- L E- PR PR A4 A2 A4 A2 A2 A2 Cabanillas A2 A2 Pinto II B(1) Cabanillas III Seseña Cabanillas F San Fernando II Park I G & H Azuqueca II Cabanillas Park II GLA (sqm) 29,473 21,879 28,731 20,723 33,592 92,994 98,757 47,403 Capex (€m) 13.7 11.8 15.5 10.8 22
Slide 55: Value creation | Best III
Value creation | Best III % 00 T1 -LE PRE Valencia Zaragoza Sevilla(1) Lisboa Ribarroja Plaza II ZAL WIP Park GLA (sqm) 34,992 11,421 42,650 44,973 Capex (€m) 26.3 7.1 29.9 29.5 ERV (€m) 1.9 0.5 3.0 2.1 ERV YoC 7.2% 7.2% 10.2% 7.1% Delivery 2019 2020 2019/2020/2021 2021 GLA Total investment Total ad
Slide 56: Growth plans: future rents secured
Value creation | Growth plans: rents secured Growth plans: Total Rents 2021 2022 future rents secured (€m) contracted CF effect CF stabilized Offices 12.5 8.1 12.5 Logistics(1) 9.7 6.3 9.7 Total 22.2 14.4 22.2 (1) Including ZAL Port on proportionate basis ı 56 ı
Slide 57: Outlook 2021
OUTLOOK 2021
Slide 58: Outlook 2021 | Guidance
Outlook 2021 | Guidance OFFICES light decline in occupancy expected due to space S reduction and insolvencies Low maturity profile (15%) combined with quality Asset of tenant roster will help to navigate the crisis Flex space will gain relative share from its current Categories small base LOGISTICS
Slide 59: Closing Remarks
CLOSING REMARKS
Slide 60: Diversified business model
Closing remarks | A resilient company 47% 18% 18% Diversified OFFICES(1) LOGISTICS(1) NET LEASES(1) business model 15% 1,900 RETAIL(1) TENANTS(2) 92% OFFICES IN PRIME CBD AND NEW BUSINESS AREAS High quality 90% portfolio SUITABLE FOR E-COMMERCE LOGISTICS 95% URBAN AND DOMINANT MALLS y net rents B (1
Slide 61: Stable and predictable cash flow
Closing remarks | A resilient company 2.9 bn(1) in contracted rents to first break € and € 5bn to maturity Stable and Only 9.9% of rents maturing before end of 2021 predictable cash flow Covid-19 incentives fully booked in 2020 (€ 47m) stream Secured annual rents from growth plans of € 22m Fully fun
Slide 62: Committed to offer the best customer experience
Closing remarks | Strategy update #1 Offices Disposals of: Building a #1 Net leases • Hotels 2014 unique portfolio 2017 • Residential #1 Logistics • Non-core and retail in record time Top 5 retail € 4.2bn sold since 2016 Optimizing the 2018 quality of the 2023 Landmark | Flagship | Best II & III por
Slide 63: Contact
Paseo de la Castellana, 257 28046 Madrid +34 91 769 19 00 info@merlinprop.com www.merlinproperties.com
MERLIN Properties SOCIMI — FY2020 Earnings Presentation on 6ix