Colonial Sfl Socimi Sa · BME:COL
Colonial Sfl Socimi Sa — Inmobiliaria Colonial, SOCIMI — FY2017 Earnings Presentation
61 slides from Colonial Sfl Socimi Sa's earnings presentation, February 2018
Slide 1: Annual Results 2017
Annual Results 2017 February 2018 4/17
Slide 2: Disclaimer
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Slide 3: Agenda
Agenda 01 Highlights 02_ Market 03 Operational performance 04 Financial performance 05 Growth drivers 06 Conclusion 3
Slide 4: Presenting management team
Presenting management team PRESENTING MANAGEMENT TEAM Pere Viñolas Carmina Ganyet Carlos Krohmer Chief Executive Officer Corporate Managing Director Chief Corporate Development Officer 4
Slide 5: Highlights: Solid delivery on Business Plan
01 Highlights Solid delivery on Business Plan
Slide 6: A year of excellent achievements
01 Highlights 2017 A year of excellent achievements Financial Results Operational Disposals Acquisitions M&A Performance 1 +21% TSR 134,800 sqm let € 445 m € 389 m Take over bid Strong Rental Growth + 27% premium2 Alpha II Equity Raising Bond Issuances Rating Upgrade REIT conversion & Integration of
Slide 7: Solid delivery on Business Plan
01 Highlights 2017 Solid delivery on Business Plan OUTSTANDING FINANCIAL RESULTS > Total Shareholder Return: +21% > EPRA NAV of 8.60€/share: +19% > Net Rental Income, +4% like for like > Recurring earnings, +22% > Recurring EPS +14% > Net Profit of €683m, +149% STRONG OPERATIONAL PERFORMANCE > More
Slide 8: Excellent financial results with healthy growth
01 Highlights 2017 Excellent financial results with healthy growth > Total Annual Shareholder Return + 21% > Solid GRI growth: +4% EPRA like for like > Strong momentum in net profit, +149% Return - € per share 2017 YoY Var BUSINESS MIX – GAV GROUP TOTAL SHAREHOLDER RETURN +21% EPRA NAV per share 8.6
Slide 9: Outstanding operating performance
01 Highlights 2017 Outstanding operating performance > Significant rental growth in all segments > Strong fundamentals with low vacancy > Disposal at substantial premium OPERATIONAL PERFORMANCE 2017 BUSINESS MIX – GAV GROUP # Transactions signed 99 Volume of sq m signed 134,831 EPRA Vacancy 4% Doubl
Slide 10: Scarcity in Grade A
| Scarcity in Grade A RK ee, SHmnEEES: ae YW OA, Saleen opens
Slide 11: Macro Outlook remains strong
02 Market Macro Outlook remains strong > Eurozone with positive momentum > Spain growing above EU average > France improving significantly MARKET TRENDS GDP GROWTH WORLD & EU World GDP improving +3.6% in 2017 & +3.8% in 2018 2017E 2018E 2019E Euro area: positive momentum with increased confidenc
Slide 12: Office Markets remain strong
02 Market Office Markets remain strong > Barcelona with solid fundamentals > Madrid with accelerating take-up > Paris strong with attractive outlook MARKET TRENDS BARCELONA > Fundamentals remain strong: low vacancy rate combined with healthy take-up > Fourth European city with highest volume investe
Slide 13: Fundamentals remain solid in every market
02 Market Fundamentals remain solid in every market VACANCY % TAKE UP HIGHLIGHTS (‘000 sq m) > Full Year 2017 take-up of 332,000 sqm, + 9% BARCELONA > Take-up Q4 of 72,000 sqm, +42% Q-o-Q +9% > Increased number of large transactions > 5,000 sqm > CBD vacancy historically low levels +48% > Full Year
Slide 14: Colonial as leading market indicator for rental growth
02 Market Colonial as leading market indicator for rental growth > Colonial outperforming the market in the last two years > Colonial portfolio setting the benchmark for prime rental levels ERV GROWTH – COLONIAL VS MARKET PRIME ERVs 12 months 2016 12 months 2017 €/sqm/month Colonial Max Rent 23.5 si
Slide 15: Investment Markets remain strong
02 Market Investment Markets remain strong > Interest for prime remains very strong > Spread vs reference rates at healthy levels > Rental growth main driver for future capital value growth PRIME YIELDS (1) SPREAD VS 10Y BOND HIGHLIGHTS > Investment volume of €0.7bn in line with 2016 BARCELONA > Lac
Slide 16: Investor interest for prime product remains strong
02 Market Investor interest for prime product remains strong > Significant capital value increases in recent quarters > Colonial capital values significantly below recent transactions evidence > Premiums on recent disposals highlight room for mark to market catch-up Madrid City Center (inside M30) B
Slide 17: Operational performance: Offering the better site
03 Operational performance Offering the better site
Slide 18: Prime positioning ensures strong letting performance
03 Operational performance Prime positioning ensures strong letting performance > More than 134,000 sq m signed in 99 transactions 96% > Incentives far below market average TOTAL 93% > Healthy vacancy levels across all segments 3Q 2015 3Q 2016 # CONTRACTS SQM SIGNED GRI SECURED1 INCENTIVES2 EPRA VAC
Slide 19: Prime positioning captures top tier clients paying maximum rents
03 Operational performance Prime positioning captures top tier clients paying maximum rents > High quality premises attract top tier tenants > Colonial captures rental prices at the top of the market MAX. RENT SIGNED PRIME RENTS # CONTRACTS CAPTURING & RETAINING TOP TIER CLIENTS COLONIAL MARKET BARC
Slide 20: Strong delivery on rental price increases
03 Operational performance Strong delivery on rental price increases > High rental growth in every city > Double digit release spreads in Spain SOLID INCREASE IN RENTAL PRICES ANNUAL GROWTH ON SIGNED RENTS1 RELEASE SPREAD2 4Q 17 FY 2017 4Q 17 FY 2017 BARCELONA +16% +10% +15% +19% MADRID +12% +8% +31
Slide 21: A highly resilient tenant portfolio
03 Operational performance A highly resilient tenant portfolio > Long term relationships with high quality clients > Strong diversification across sectors High quality tenants F A Law firms & Consultancy B Finance & Insurance C Digital & Information Technology E 8% A 8% 26% Diversification D 22% 23%
Slide 22: Barcelona Letting Performance
03 Operational performance Barcelona Letting Performance BARCELONA – LETTING PERFORMANCE Solid Performance Strong Rental Growth IT Multinational 51,614 sq m let IT Multinational > 9,338 sq m signed in 2016 IT Multinational IT Multinational > Max. rent signed 23.5 €/sqm/month More than 10,000 sqm of
Slide 23: Madrid Letting Performance
03 Operational performance Madrid Letting Performance MADRID – LETTING PERFORMANCE Solid Performance Strong Rental Growth - Highlights 62,175 sq m let Santa Engracia Recoletos 37-41 Alcalá 30-32 32 > Max. rent signed €/sqm/month +8% (1) > ERV growth +20% +4% +21% release release release spread sprea
Slide 24: Paris Letting Performance
03 Operational performance Paris Letting Performance PARIS – LETTING PERFORMANCE Solid Performance Strong Rental Growth - Highlights 21,042 sq m let 92 Champs Elysées 131 Wagram Washington Plaza > Max. rent signed 850 €/sqm/year > ERV growth +8% (1) +23% +14% +14% vs ERV1 vs ERV1 vs ERV1 > EPRA Vaca
Slide 25: Vacancy remains at healthy levels
03 Operational performance Vacancy remains at healthy levels > Barcelona fully occupied > Madrid at 2% excluding Discovery > Paris remains at 3% EPRA VACANCY BARCELONA > Solid ongoing letting performance > Solid take-up on CBD assets > 22@ with strong traction COLONIAL GROUP Discovery MADRID > Disco
Slide 26: Colonial portfolio outperforming the market on occupancy
03 Operational performance Colonial portfolio outperforming the market on occupancy > Colonial with solid vacancy levels in every city > Colonial clearly beats market average > Levels of vacancy provide a solid base to capture rental growth EPRA VACANCY VACANCY COLONIAL VS. MARKET BARCELONA Total Ma
Slide 27: Corporate Social Responsibility at the core of strategy
03 Operating Performance Corporate Social Responsibility at the core of strategy > Colonial with strong commitment on CSR > CSR as base to offer long term sustainable returns EPRA BPR Gold ENERGY EFFICIENCY STANDARDS 3rd year in a row Energy certifications 93% 93% of operating portfolio with max. EP
Slide 28: Financial performance: Superior risk adjusted returns
04 Financial performance Superior risk adjusted returns
Slide 29: Strong underlying rental growth
04 Financial performance Strong underlying rental growth > More than half of like for like driven by rental price increases > Barcelona + 10% like for like with outstanding rental price impact GROSS RENTAL INCOME - €M EPRA Price Volume Like for like1 BARCELONA +9.6% +5.3% +4.3% MADRID +2.1% +1.9% +0
Slide 30: Strong underlying rental growth
04 Financial performance Strong underlying rental growth > Strong like for like in net rental income > High efficiency and incentives clearly below market average LIKE FOR LIKE VARIANCE1 – GRI & NRI SOLID EPRA LIKE-FOR-LIKE GROWTH GRI and NRI like for like of +4%, and even 2017 2017 Adjusted Adjusti
Slide 31: Disposals with premium
04 Financial performance Disposals with premium > Capturing optimal point in specific asset life cycle > Asset rotation as source of value creation > Redeploying capital on value add projects REAL ESTATE VALUE CREATION SMART CAPITAL ROTATION In & Out Capturing optimal point in asset life cycle Value
Slide 32: Strong underlying growth in Asset Values
04 Financial performance Strong underlying growth in Asset Values Gross Asset Value of €9,282m (€9,741m including transfer costs) > +12% like for like growth in year > Solid growth rates in every segment > Rental price increases become relevant value driver GAV 2017 YoY GROWTH LIKE FOR LIKE VARIANCE
Slide 33: Strong underlying growth in Asset Values: Spain
04 Financial performance Strong underlying growth in Asset Values VALUE CREATION THROUGH PRIME PRODUCT IN SPAIN GAV increase of +€110m YoY in 8 assets Santa Engracia Recoletos 37 Castellana 43 Castellana 52 +18%1 +9%1 +24%1 +16%1 Santa Hortensia Diagonal 409 Diagonal Glories Diagonal 530 +14%1 +10%1
Slide 34: Strong underlying growth in Asset Values: Paris
04 Financial performance Strong underlying growth in Asset Values VALUE CREATION THROUGH PRIME PRODUCT IN PARIS GAV increase of +€500m YoY in 8 assets Cézanne St. Honoré Washington Plaza Edouard VII 92 Champs Elys +11%1 +10%1 +11%1 +17%1 Galeries Champs Elys 90 Champs Elys #Cloud Condorcet +39%1 +17
Slide 35: Positive momentum in earnings
04 Financial performance Positive momentum in earnings Significant increase in Group Net Profit through > Delivery of strong increase in Gross Rental Income > Solid asset value growth through active real estate management > Savings in financing costs & positive SOCIMI impact in taxes STRONG TOP & BO
Slide 36: Active Balance Sheet Management
04 Financial performance Active Balance Sheet Management > Proactive management of capital structure > Providing a solid balance sheet with sufficient flexibility ABB – €253m Bond issuance - €800m ABB - €416m > Capital increase of €253m > Two tranches bond > Capital increase of €338m > Price of 7.1
Slide 37: A solid capital structure
04 Financial performance A solid capital structure > An unparalleled high quality collateral diversified in three cities > A financial structure with solid LTV levels > A strong credit profile with competitive costs A FIRST CLASS COLATERAL WITH… … SOLID CAPITAL STRUCTURE €9bn well diversified high q
Slide 38: Superior Risk Adjusted Returns
04 Financial performance Superior Risk Adjusted Returns +21% Total Shareholder Return > EPRA NAV of 8,60 €/share, + 19% > Highest total return in Spain since recap. of the sector STRONG MOMENTUM IN NAV GROWTH TOTAL SHAREHOLDER RETURN €/share FY 2017 6/14 – 12/17 +19% NAV Growth per share +19% +92% D
Slide 39: "Alpha" as significant driver in value creation
04 Financial performance “Alpha” as significant driver in value creation Total Shareholder Return 2017 relies on “Alpha” > More than half of the NAV growth per share through “Alpha” strategies > High double digit shareholder return with one of the lowest LTVs among peers TOTAL SHAREHOLDER RETURN TOT
Slide 40: Share price follows fundamental value
04 Financial performance Share price follows fundamental value > Share price driven by solid delivery of fundamentals > Capital markets recognize successful execution of Business Plan & NAV growth SOLID DELIVERY RECOGNISED BY CAPITAL MARKETS 1 Alpha II 10 12 9 2 2016 Results, SFL 11 29/12/17 8 €8.3
Slide 41: Growth drivers: A solid base for future growth
05 Growth drivers A solid base for future growth
Slide 42: A solid base for growth
05 Growth drivers A solid base for growth GROWTH DRIVER KPIs ADDITIONAL GRI1 ATTRACTIVE TIMING 1 Spain: 74% of contracts due in 3 years Capturing €33m France 52% of contracts due in 3 years Reversion ADDITIONAL UPSIDE 2 Project 11 Projects FROM MARKET €71m GLA of more than 240,000 sqm(4) pipeline RE
Slide 43: Colonial well positioned to capture reversion
05 Growth drivers 1 Colonial well positioned to capture reversion > Attractive rent roll profile with prime exposure to growth markets > Double digit release spreads capturing reversion from under-rented contract portfolio > Strong static price reversion as of 12/17 to be enhanced with market rental
Slide 44: Project pipeline
05 Growth drivers 2 Project pipeline Discovery Príncipe de Vergara Plaza Europa 34 M Álvaro Office Scheme M Álvaro Campus Castellana 163 2018 2019 2020 2021 >2022 Parc Glories Gala Placidia Iena Emile Zola Louvre St.Honoré 44
Slide 45: Project pipeline: Barcelona Projects
05 Growth drivers 2 Project pipeline Barcelona Projects GLA of 43,169 sq m Ungeared IRR 8-9%2 Parc Glories Gala Placidia Plaza Europa IT Multinational 80% PRE LET IT Multinational FINAL PRODUCTS - KPIs BARCELONA PRIME MARKET IT Multinational IT Multinational Total Cost1 €126m 2,900 6,975 Capital Val
Slide 46: Project pipeline: Madrid Projects
05 Growth drivers 2 Project pipeline Madrid Projects GLA of 141,168 sq m Ungeared IRR 8-9%2 Discovery Delivered Príncipe de Vergara Castellana 163 Méndez Álvaro Campus Méndez Álvaro Office Scheme FINAL PRODUCTs - KPIs PRIME MARKET Total Cost1 €495m 3,500 Capital 10,000 Capital Value Value €/sqm €/
Slide 47: Project pipeline: Paris Projects
05 Growth drivers 2 Project pipeline Paris Projects GLA of 49,300 sq m Ungeared IRR >> 7%2 Emile Zola Iéna Louvre St. Honoré FINAL PRODUCTs - KPIs PARIS PRIME MARKET Iéna €536m Total Cost1 Louvre St. H. Emile Zola 11,000 25,800 Capital Value €/sqm Capital Value €/sqm >6% 3% Yield on Cost Prime Yield
Slide 48: Axiare acquisition
05 Growth drivers 3 Axiare acquisition Acceleration of Colonial’s Business Plan Successful takeover bid Creation of a leader in offices Full capital markets support for Colonial 1 Announcement takeover bid > More than €10bn of GAV 7 2 Prospectus approval CNMV 6 23/02/18 3 Start of acceptance period
Slide 49: A strong growth profile
05 Growth drivers A strong growth profile > Potential GRI of more than 500 €m > Reversion relies on solid delivery on Alpha with current rental prices > Additional potential through market momentum and ongoing growth initiatives Passing GRI 1 – Uplift Potential (€m) Potential for Yield compression &
Slide 50: Acquisitions – solid track record with €2bn in 4 years
05 Growth drivers Acquisitions – solid track record with €2bn in 4 years > Mainly off market transactions > High value added components > City center locations with strong fundamentals INVESTMENTS SINCE 2015 - €m 579 499 Close to €2.0bn 477 389 of organic acquisitions I. Attractive entry prices thro
Slide 51: Conclusion
06 Conclusion
Slide 52: Conclusion
06 Conclusion SOLID OPERATIONAL PERFOMANCE > More than 134,000 sq m let with top tier clients > Very healthy vacancy levels at 4% > Strong growth in rental prices - double digit release spreads Setting the benchmark in Prime Driving GRI growth Driving Capital Value growth STRONG FINANCIALS > S
Slide 53: Confident outlook and dividend guidance
06 Conclusion CONFIDENT OUTLOOK Solid delivery on Business Plan as base for future growth > CBD markets and Colonial portfolio with solid growth perspectives > Colonial best positioned to capture rental cycle > Significant value creation through attractive project pipeline > Axiare accelerating Colo
Slide 54: Q&A
Q&A
Slide 55: Positive momentum in earnings
APPENDICES Positive momentum in earnings High double digit profit increase based on high quality growth drivers 1. Solid GRI increase 2. Optimized financing through active liability management PROFIT & LOSS ACCOUNT STRONG TOP & BOTTOM LINE PERFORMANCE GROSS RENTAL INCOME €m +4% LFL NET PROFIT €m +14
Slide 56: December 2017 Gross Asset Value
APPENDICES December 2017 Gross Asset Value Gross Asset Value of €9,282m (€9,741m including transfer costs) > +12% like for like growth in year (+6% like for like in 12 months) > Solid growth rates in every segment > Significant value growth through real estate transformation GAV 2017 YoY GROWTH GAV
Slide 57: Attractive valuation levels of current portfolio
APPENDICES Attractive valuation levels of current portfolio Important value potential through Re-Rating to current market > Colonial valuation yields still above market levels > Colonial capital values significantly below recent transactions evidence > Full impact of rental growth still to come thro
Slide 58: A solid capital structure
APPENDICES A solid capital structure A high quality collateral underpinned with a solid financial structure > An unparalleled high quality collateral diversified in three cities > A solid finance structure with competitive financing costs > A strong credit profile A FIRST CLASS COLATERAL A SOLID FIN
Slide 59: Total Shareholder Return since June 2014
APPENDICES Total Shareholder Return since June 2014 59
Slide 60: Project pipeline and value-add programme
APPENDICES Project pipeline and value-add programme A very attractive Project pipeline > Significant amount of additional rental income for the coming years > Additional value creation through created yield compression > Top product at optional market timing PROJECTS AND REFURBISHMENTS 2017 YTD 2017
Slide 61: www.inmocolonial.com
www.inmocolonial.com © Colonial
Inmobiliaria Colonial, SOCIMI — FY2017 Earnings Presentation on 6ix