Merlin Properties Socimi, S.a. · BME:MRL
Merlin Properties Socimi — FY2018 Earnings Presentation
51 slides from Merlin Properties Socimi's earnings presentation, Feb 28, 2019
Slide 1: FY 2018 Results Presentation
FY 2018 RESULTS PRESENTATION 28 February 2019
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
Contents Highlights Update on strategy ISMAEL CLEMENTE FY18 Financial results CEO Portfolio performance Offices Shopping centers MIGUEL OLLERO GM / COO Logistics Valuation and debt position Value creation DAVID BRUSH CIO Closing remarks
Slide 4: Key highlights
Key highlights | FINANCIAL PERFORMANCE • +6.5% Rents YoY • FFO per share of € 0.61, meeting guidance • EPRA NAV per share up 11.7% YoY to € 14.81 • Leverage significantly reduced to 40.7%, down 287 bps YoY OPERATING PERFORMANCE • Rental growth in all asset categories with robust release spreads • Si
Slide 5: Total Shareholder Return
Total Shareholder Return | Compelling return to shareholders achieved in FY 2018 (€ per share) TSR + 15.2% 0.46 15.27 1.56 14.81 13.25 EPRA NAV NAV growth EPRA NAV DPS NAV + Dec-17 2018 Dec-18 2018 Div-2018 Source: Company ı5ı
Slide 6: Shareholders remuneration
Shareholders remuneration | FY 2018 dividend to reach € 235m, meeting guidance Interim(1) Complementary(1) Total (paid) (subject to AGM) MERLIN FY 18 0.50 DIVIDEND € 235M 0.30 0.20 October 2018(1) May 2019(2) Total Source: Company (1) Dividend holders are 467.6m shares ı6ı
Slide 7: Update on strategy
FY 18 Update on strategy
Slide 8: Asset categories evolution (by GRI)
Update on strategy | Asset categories evolution (by GRI) Logistics, the fastest growing asset category since 2014 2014 2018 2018 PF(2) (1) (1) 5 % 3 % 2 % 12 % Hoteles 10 % Hoteles 16% Residencial en alquiler Residencial en alquiler 14% 69% Otros 18% 46% Otros 16% 44% Logístico Logístico Oficinas Hi
Slide 9: Update on strategy: Offices and Shopping centers
Update on strategy | Offices alue extraction V Increase exposure in Creation of MERLIN oll out R through Landmark I Portugal to become Hub north of of Loom #1 player Castellana • Excellent achievements • Acquisition of Zen, • Fully developed cluster • Flex space brand in Torre Glories Art and TFM of
Slide 10: Update on strategy: Logistics
Update on strategy | Logistics onsolidate Iberian C tate-of-the-art facilities S xpand last mile E leadership and further suitable for 3 PL´s and solutions expand our national e-commerce footprint • Successful progress of Best II • Unique footprint to serve 100% • MERLIN has the largest footprint •
Slide 11: Financial Results
FY 18 Financial Results
Slide 12: +11.7% increase in EPRA NAV per share
FY18 Financial Results | +11.7% increase in EPRA NAV per share (€ million) FY 2018 FY 2017 YoY Gross rents 499.7 469.4 +6.5% Gross rents after incentives 475.6 452.5 +5.1% Net rents 433.5 415.2 +4.4% EBITDA(1) 403.6 392.6 +2.8% FFO 286.9 289.2 (0.8%) AFFO 270.5 270.9 (0.2%) IFRS net profit 854.9 1,1
Slide 13: Bridge gross rents
FY18 Financial Results | Bridge gross rents Robust LfL growth in all asset categories except offices, still penalised by the exits of Renault and Huawei. If excluded, +5.3% LfL in offices and +5.1% overall +1.2% Offices Shopping centers +4.1% Logistics +6.3% LfL(1) H. Street retail +4.0% +3.1% Other
Slide 14: Occupancy and WAULT
FY18 Financial Results | Occupancy and WAULT Significant occupancy growth in offices (+179 bps YoY) and shopping centers (+164 bps YoY) OCCUPANCY AND WAULT PER ASSET TYPE(1) +80bps 99.2% 98.2% 93.4% VS 92.6% 90.0% 91.0% 17.7 Average FY 2017 MERLIN 74.0% 4.0 5.8 years 3.7 Average MERLIN 3.1 2.5 Offic
Slide 15: Offices
FY 18 Offices
Slide 16: Offices | Rent bridge and breakdown
Offices | Rent bridge and breakdown Positive LfL in offices (+1.2%) after a strong second half to overcome Huawei/Renault (+5.3% if excluded) (€m) LfL(1) (+5.3% if Huawei and +1.2% Renault are excluded) 217.5 +2.5 +4.4 224.4 FY 2017 Like-for-Like growth Balance acquisitions, FY 2018 disposals, other
Slide 17: Offices | Leasing activity
Offices | Leasing activity Rental growth accelerating (+6.5% release spread vs +3.4% FY17) Contracted sqm Release spread #contracts Tenants PE Via Norte PE Beatriz Bobadilla Torre Chamartin Partenon 12-14 Madrid 191,085 + 4.3% 135 +6% +6% 6,046 1,780 Release spread Release spread sqm sqm Torre Glóri
Slide 18: Offices | Flex space
Offices | Flex space Roll out of LOOM TAPICES HUERTAS PRINCESA 1,100 sqm ı 179 desks 1,300 sqm ı 165 desks 1,100 sqm ı 123 desks Open Open Open Broadening our offer Flex space EUCALIPTO TORRE GLÒRIES SALAMANCA 1,200 sqm ı 160 desks 1,560 sqm ı 160 desks 1,930 sqm ı 270 desks June-19 September-19 Sep
Slide 19: Shopping Centers
FY 18 Shopping Centers
Slide 20: Shopping Centers | Rent bridge and breakdown
Shopping Centers | Rent bridge and breakdown Accelerated LfL rental growth. Tenant sales up by 1.2% (€m) LfL(1) +4.1% +3.7 +7.1 103.6 92.8 FY 2017 Like-for-Like growth Balance acquisitions, FY 2018 disposals, other Tenant sales (million) Visitors (million) 2017 LTM 1,109.9 2017 LTM 109.0 Post Capex
Slide 21: Shopping Centers | Leasing activity and occupancy
Shopping Centers | Leasing activity and occupancy Upward trend in performance with a release spread of 3.5% and meaningful growth in occupancy to end at 91.0% (+164 bps YoY) Release spread #contracts Tenants All portfolio +3.5% 173 Occupancy Change vs Contracted sqm Net Absorption 31/12/18 31/12/17
Slide 22: Shopping Centers | Active retenanting
Shopping Centers | Active retenanting Transforming our centers… … and opening flagships 8 new stores 9 new stores 8,282 sqm 4,425 sqm 16 new stores 13 new stores 6 new stores 12 new stores (1) 2,300 sqm 844 sqm 7 new stores 12 new stores ı 22 ı (1) Since acquisition
Slide 23: Logistics
FY 18 Logistics
Slide 24: Logistics | Rents bridge and breakdown
Logistics | Rents bridge and breakdown Significant LfL growth driven by meaningful increase in rents (€m) LfL(1) +6.3% +2.2 +6.8 50.3 41.3 FY 2017 Like-for-Like growth Balance acquisitions, FY 2018 disposals, other Lfl growth by area Occupancy by area FY17 FY18 3PL multi-client +9.1% Madrid 100.0% 9
Slide 25: Logistics | Leasing activity
Logistics | Leasing activity Outstanding release spread (9.2% all portfolio) Contracted sqm Release spread #contracts Tenants Madrid 229,135 +8.0% 13 Barcelona 85,784 +12.2% 10 Other 87,277 +8.3% 12 Total 402,196 +9.2% 35 76,024 +11.9% 29 ı 25 ı
Slide 26: Valuation and debt position
FY 18 Valuation and debt position ı 26 ı
Slide 27: GAV summary
Valuation and debt position | GAV summary Gross asset value exceeding € 12bn Passing 4.1% 5.2% 4.3% 6.2% - 4.6% Gross yield 12,041 11,840 5,513 GAV TOTAL with minority stakes (€ million) Shopping centers High Street Retail 2,265 2,220 Minority stakes Logistics 1,011 Offices TOTAL Other(1) 830 201 €/
Slide 28: GAV bridge
Valuation and debt position | GAV bridge Sound revaluation in the year of +7.0% (+6.1% LfL) (€m) +7.0% 587.4 12,041.1 569.5 132.6 11,254.0 (502.3) GAV Acquisitions Disposals Capex & WIP(1) Revaluation(2) GAV Dec-17 2018 2018 2018 2018 Dec-18 Including acquisition of logistics assets to be developed
Slide 29: GAV drivers
Valuation and debt position | GAV drivers Appraisals reflecting income growth with virtually no yield compression (except logistics) +12.4% GAV LIKE-FOR-LIKE EVOLUTION (1) +12.4% +6.7% +5.7% +6.1% +6.7% +2.3% +5.7% +6.1% MERLIN average (2) MERLIN +2.3% average(2) Offices Shopping centers High street
Slide 30: Debt position: extending maturities
Valuation and debt position | Debt position Financial discipline while extending maturities 1,004 Tree refinancing (Nov-18) 930 867 821 17 776 21 716 16 176 840 700 850 600 800 630 83 14 38 300 12 81 150 17 26 2 17 2019 2020 2021 2022 2023 2024 2025 2026 2027-2034 Unsecured loans Unsecured bonds Sec
Slide 31: Debt position: stronger debt metrics
Valuation and debt position | Debt position Stronger debt metrics led by ca. 40% LTV € 161m debt repaid (€ million) 31/12/2018 31/12/2017 Gross financial debt 5,252 5,413 Cash (350)(1) (509) Net financial debt 4,902 4,904 (Metrics) LTV 40.7% 43.6% Average cost hedged (spot) 2.13% (1.84%) 2.23% Fixed
Slide 32: Value creation
FY 18 Value creation
Slide 33: Capital recycling
Value creation | Capital recycling Above guidance Increased exposure to Portugal Investments Increased exposure to € 569.5m urban + dominant retail Increased exposure to logistics A bove guidance +3.1% premium Disposals Remarkable value creation story in Testa Residencial (€ 155m value € 594.4m crea
Slide 34: Capital recycling - Acquisitions: Zen, Art, TFM
Value creation | Capital recycling - Acquisitions Zen Tower Art TFM • Located in Dom Joao II, main avenue • Located in Dom Joao II, main avenue in • Located in Dom Joao II, main avenue in Parque das Nações in Lisbon Parque das Naçoes in Lisbon in Parque das Naçoes in Lisbon • Glass curtain wall desi
Slide 35: Capital recycling - Acquisitions: Almada, Cabanillas, Vitoria
Value creation | Capital recycling - Acquisitions Vitoria Jundiz II Almada Cabanillas III + Cabanillas II • Undisputed dominant shopping and leisure • Located in the third logistics ring of Madrid • Portfolio of 2 logistics assets: destination in the south bank of river Tagus (50 kms. from city cent
Slide 36: Exposure to Portugal
Value creation | Exposure to Portugal Portugal has gained relative weight in 2018 Offices Shopping centers Logistics Monumental Marqués Pombal 3 Lisboa Expo Torre Lisboa Almada Lisbon Park 16,892 sqm 12,460 sqm 6,740 sqm 13,715 sqm 60,098 sqm 224,874 sqm Central Office Torre Zen Art TFM Monumental 1
Slide 37: Landmark I - Successful delivery on Torre Glòries
Value creation | Landmark I - Successful delivery on Torre Glòries Redesigned to welcome Returns Barcelona’s business future • Acquisition € 142.0m Reconversion into • Capex € 27.2m multi-tenancy • Total investment € 169.1m Lobby & communal areas • ERV € 11.8m Amenities & Flex space • Yield on cost
Slide 38: Landmark I - Update
Value creation | Landmark I - Update Torre Torre Marqués de Castellana Diagonal Adequa Adequa Plaza Ruiz Alfonso Monumental Charmartín Glòries Pombal 3 85 605 7 4 Picasso XI GLA (sqm) 18,295 37,614 12,460 22,387 15,254 14,795 32,109 15,793 31,576 9,945 Acquisition (€m) 31.2 142.0 - - - - 64.5 28.2 -
Slide 39: Flagship - Successful delivery of Arturo Soria
Value creation | Flagship - Successful delivery of Arturo Soria Deep re-do Capex 100% Occupancy Yield on Capex of common € 5.4m + 3.4% Tenant sales 11.1% areas and acceses Make over of Terrace & Parking ı 39 ı
Slide 40: Flagship - X-Madrid
Value creation | Flagship - X-Madrid achieving high pre-leasing rate X-Madrid: a new concept to be launched in 4Q 2019 Experience Ground breaking Diving citywave® mall focused on Surfing Madrid experiences and Climbing cutting edge Escape room Gourmet dining retailers Gourmet dining VIP cinemas Cutt
Slide 41: Flagship - Larios
Value creation | Flagship - Compelling returns prospects for Larios A full Buying 95% pre-let € 19.9m Additional space refurbishment additional space additional space € 28.1m Capex nearing to expand + 8.9% release € 48.0m Total investment completion anchors and spread in recent 6.4% Yield on cost re
Slide 42: Flagship - update
Value creation | Flagship - update Arturo Soria Larios X-Madrid Tres Aguas(1) El Saler Porto Pi Callao 5 Plaza GLA (sqm) 41,460 6,985 47,424 67,690 47,013 58,779 11,629 GLA MERLIN (sqm) 37,822 6,000 47,424 33,845 26,262 32,568 11,629 Works: 28.1 Works: 35.2 Works: 25.1 Works: 21.1 Capex (€m) 5.4 10.
Slide 43: Best II - Successful delivery of Pinto II
Value creation | Best II - Successful delivery of Pinto II Pinto II Acquisition of an 70,116 sqm GLA XL size warehouse A-4 corridor to convert into a 2nd isochrone state-of-the-art e-commerce logistics facility € 28.6m Total investment 100% let 9.5% Yield on cost ı 43 ı
Slide 44: Best II - Update
Value creation | Best II - Update Madrid Guadalajara Guadalajara Toledo Madrid Guadalajara Guadalajara Guadalajara Pinto II B(1) Cabanillas F Cabanillas III Seseña San Fernando II Azuqueca II Azuqueca III Cabanillas Park II GLA (sqm) 29,473 19,750 21,544 28,541 34,224 98,000 51,000 210,678 Capex (€m
Slide 45: Best III
Value creation | Best III Launch of Best III to expand footprint to other areas of the Iberian Peninsula +510K sqm € 24m GLA Basque Country ERV Zaragoza Madrid Valencia Lisbon € 309m € 7.8% Investment Seville Yield on cost ı 45 ı
Slide 46: Potential rental growth
Value creation | Potential rental growth (€m) +31% 17.3(1) 652.6 21.1 18.2 40.0 56.2 499.7 469.4 Not considering rental growth nor inflation GRI GRI Reversionary Landmark Flagship Best II Best III Potential GRI FY17 FY18 potential FY22 ERV considered for Best III in the period (1) ı 46 ı
Slide 47: Outlook 2019
z= | Outlook 2019
Slide 48: Dividend guidance
Outlook | Dividend guidance 2019 DPS guidance of € 0.52 Represents +4% growth YOY • Calculated on the basis of 80% of AFFO 0.48 from AFFO (AFFO guidance of € 0.60) +4% 0.52 0.04 from disposals 0.50 p.s. +9% p.s. • Payment in two instalments € 0.20 in Oct-19 € 0.32 in May-20 0.46 +15% p.s. € 235m € 2
Slide 49: Closing remarks
FY 18 Closing remarks
Slide 50: Closing remarks
Closing remarks | Financial • +11.7% EPRA NAV per share YoY • FFO per share of € 0.61 and DPS of € 0.50, meeting guidance performance • Double-digit TSR of 15.2% • Significant leverage reduction reaching 40.7% • Rental increase across all asset categories Operating • Excellent growth prospects on th
Slide 51: Contact
Paseo de la Castellana, 257 28046 Madrid +34 91 769 19 00 info@merlinprop.com www.merlinproperties.com
MERLIN Properties SOCIMI — FY2018 Earnings Presentation on 6ix