Slide 1: 2018 Half-Year Results
2018 HALF-YEAR RESULTS July 26, 2018
Slide 2: Preliminary remarks
Preliminary remarks The 2018 first-half consolidated financial statements were approved by the Board of Directors on July 25, 2018. A limited scope review of these financial statements has been performed by the statutory auditors. 2
Slide 3: Contents
Contents 01. 02. 03. Successfully Continuously Financial structure tackling market evolving portfolio & results evolutions 4 19 40 3
Slide 4: Successfully Tackling Market Evolutions
SUCCESSFULLY TACKLING MARKET EVOLUTIONS Eric Le Gentil Chairman & CEO
Slide 5: Another half-year of operational excellence
Another half-year of operational excellence Footfall and retailer sales significantly outperforming the national benchmark Cumulative change in Cumulative change in Footfall at end-June 2018 Retailer sales at end-May 2018 +4.5% 3.9% 3.9% 3.3% 2.9% 4.3% 3.0% 2.4% +2.7% 2.1% 1.6% +2.1% +2.1% +1.9% 0.9
Slide 6: Robust key figures
Robust key figures Organic growth (%) FFO (€mn) 3.8% 3.3% 3.3% 59.6 59.8 3.0% 2.9% 2.8% 2.8% 2.9% 2.6% 2.5% 58.7 57.0 56.8 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Organic growth in invoiced rents excluding indexation 39.9% proforma Organic growth in invoiced r
Slide 7: 2018 objectives confirmed
2018 objectives confirmed Dividend policy: Change in FFO: Organic growth in invoiced At least +2% rents: At least +2% within a range of 85% to 95% of 2018 FFO excluding the full impact of the >2% above indexation(1) €0.50 per share interim dividend 2019 bond maturity refinancing to be paid out on Oc
Slide 8: Strength of French commercial REITs underestimated
Strength of French commercial REITs underestimated Generational asymmetry and diversity of shopping journeys within which brick and mortar is still a successful channel Retailers’ ability to adapt to cyclical changes over the medium term and REITs’ know-how to select the best- performing brands Merc
Slide 9: Fragmentation of shopping journeys: shopping center still a relevant format
Fragmentation of shopping journeys: shopping center still a relevant format “Baby boomers continue to exert Average delivery costs of €7(2) per order disproportionate economic influence for online retail in Paris, even though the even though their generational influence most densely populated city i
Slide 10: Retailers adapting to address key customer needs
Retailers adapting to address key customer needs Generation Y Generation X Baby Boomers Convenience and store experience represent 1 Convenience Convenience Value for money strong determining factors for shopping across Key purchase criteria the generations for different 2 Value for money Store expe
Slide 11: Proof on electronics: Mercialys redeploys reinvented specialists
Proof on electronics: Mercialys redeploys reinvented specialists SECTOR MERCIALYS RESPONSE Positive trends across all the segments, with excellent long-term trends for household appliances Ongoing reduction of hypermarket space: 2017 consumer opportunity to install the successful specialist brands s
Slide 12: Proof on textiles: Mercialys effectively selects winning concepts
Proof on textiles: Mercialys effectively selects winning concepts SECTOR MERCIALYS RESPONSE Large branded chains continue to perform very well, despite a slowing market 2017 consumer New trends and needs: spending: €39.3Bn 2008-17 CAGR 2016-17 CAGR new brands selected Top 100 Brands brands Mercialys
Slide 13: Proof on health and beauty: Mercialys supports a more diverse offering
Proof on health and beauty: Mercialys supports a more diverse offering SECTOR MERCIALYS RESPONSE Performance supported by non-store retailing and specialized retailers New retail formats: through Casual Leasing 2017 consumer spending: €12.9Bn 2005-17 CAGR 2013-17 CAGR New trends and generations: (1)
Slide 14: Proof on foodservice: Mercialys strengthens major footfall drivers
Proof on foodservice: Mercialys strengthens major footfall drivers SECTOR MERCIALYS RESPONSE 5% niche growing steadily within the overall foodservice market Targeted offer: 2017 consumer fast food and concepts dedicated to spending: €2.9Bn 2005-17 CAGR 2016-17 CAGR specific customers Foodservice thr
Slide 15: Consumer categories driving Mercialys' growth
Consumer categories driving Mercialys' growth Dedicated offer aligned with the characteristics of French medium-sized city populations Women 74% of visitors Visiting primarily for the mall Baby Boomers and Generation X and Y 82% of visitors come primarily for the mall Average age of 39 18% for the h
Slide 16: Major expectations for these customers
Major expectations for these customers 1 2 Need for simplicity Need for recognition and rewards 1 out of 2 French people choose their shopping 56% of consumers want to benefit from personalized center based on its ease of access(1) and 78% spend offers(2) less than 2h per shopping trip(2) 5 3 Need f
Slide 17: Customers at the heart of Mercialys' marketing strategy (1/2)
Customers at the heart of Mercialys' marketing strategy (1/2) Ensuring local visibility for our centers Over 6,000 Adwords ads to promote the 2,380 stores in our centers, optimized with a KPI for conversions to visits Waze campaigns to reach 4 out of 10 drivers locally Centers in the top 3 G
Slide 18: Customers at the heart of Mercialys' marketing strategy (2/2)
Customers at the heart of Mercialys' marketing strategy (2/2) Enabling customers to benefit from our strong local roots Expectation #3: Over 200 events with sports and fun-educational associations or charities Need for meaning Engaging customers in their center's CSR approach Customer traini
Slide 19: Continuously Evolving Portfolio
CONTINUOUSLY EVOLVING PORTFOLIO Vincent Ravat Chief Operating Officer
Slide 20: Continuously optimized portfolio
Continuously optimized portfolio Redevelopment of existing areas within shopping centers: hypermarkets, cafeterias, replacing older formats (furniture, DIY stores, etc.) Key drivers for Mercialys’ ability to densify its Land banks enabling Mercialys to sites through mixed-use extend shopping centers
Slide 21: Sales helping drive the portfolio's rationalization
Sales helping drive the portfolio’s rationalization 15 assets sold since 2016 for €373m(1) Capital recycling leading to a portfolio structured around (including transfer taxes, proforma for the two sales agreements signed for the Gap sites with critical mass and optimized asset management and Lannio
Slide 22: 2018 projects
2018 projects 3 hypermarket transformations Major extension and outdoor food court Annecy Besançon Brest (ph. 2) Le Port (Reunion Island) 15,000 sq.m of gross leasable area 8 new medium-sized stores, 48 new shops €4.9m of annualized rent 6.2% overall yield on cost 22
Slide 23: Targeted investments for leading and strong potential centers in dynamic urban hubs
Targeted investments for leading and strong potential centers in dynamic urban hubs ANNECY BESANCON ECOLE VALENTIN Ageing retail hub, positioning itself as a Retail hub with a GRAND EPAGNY Urban hypermarket, the city's smallest challenger predominantly food focus hub CHALEZEULE Suburban retail hub,
Slide 24: Targeted investments for leading and strong potential centers in dynamic urban hubs
Targeted investments for leading and strong potential centers in dynamic urban hubs BREST LE PORT KERGARADEC Le Port city center, with around 150 City's leading hub, with a strong shops and 10 specialist large stores hypermarket and the majority of the region's medium-sized stores CITY CENTER GUIPAV
Slide 25: Annecy Seynod – Center at the heart of a high-growth region
Annecy Seynod – Center at the heart of a high-growth region La Galerie Annecy Seynod 63 shops with 9,000 sq.m GLA Catchment area c. 273,000 inhabitants, +20% population growth over the last 10 years Average income level higher than the national average (+30% at the heart of the area) Sey
Slide 26: Annecy Seynod – Vibrant example of a prime convenience center
Annecy Seynod – Vibrant example of a prime convenience center building loyalty in its primary sector 2016 and 2017: cafeteria transferred to the car park and 1 adapted to the “A la Bonne Heure” concept. Requalification of the space freed up in the center to welcome Brut Butcher and Casa Pizza 4 2017
Slide 27: Besançon – Area's historic hub and leader
Besançon – Area’s historic hub and leader La Galerie Besançon Chateaufarine 90 stores with 33,000 sq.m GLA Catchment area c. 400,000 inhabitants, +3.7% expected by 2025 Overrepresentation of families and people under the age of 39 Dynamic employment area, with 167,000 jobs , including 28
Slide 28: Besançon – Undisputed leadership, further strengthened
Besançon – Undisputed leadership, further strengthened with the new selection of retailers 2014: 2,200 sq.m extension, making it possible to create 1 18 units and notably welcome Hema and Du Bruit dans la Cuisine 4 2015: cafeteria transferred to the car park and adapted 2 to the “A la Bonne Heure” c
Slide 29: Brest – Leading center with outstanding transport links
Brest – Leading center with outstanding transport links and a dense urban area La Galerie Brest Le Phare de l’Europe 70 shops with 22,000 sq.m GLA Catchment area c. 420,000 inhabitants, located primarily in the north of the area Young population, with a mid to high education level Signif
Slide 30: Brest – Leadership consolidated by outstanding medium-sized stores
Brest – Leadership consolidated by welcoming outstanding medium-sized stores and improving the customer experience 2014 and 2015: Cafeteria transferred to the car park, 1 with the “A la Bonne Heure” concept. Mango and Boulangerie Ange set up in the space vacated in the center 5 T 4 1 2 2015: Open-ai
Slide 31: Reunion Island – Site fully redesigned to become the leader in the Indian Ocean
Reunion Island – Site fully redesigned to become the leader in the Indian Ocean Objective: development of a complete commercial offer within 2 years, turning the center into the absolute shopping and leisure spot on Reunion island In 2018: Development of an 8,300 sq.m gross leasable area exten
Slide 32: Reunion Island – Project phases
Reunion Island – Project phases Extension 2 1 44 new shops including 5 medium-sized stores on 1 8,300 sq.m gross leasable area CAR PARK 2018 Multistory car park 2 550 spaces HYPERMARKET 3 5 3 5 Space requalification 1,000 sq.m gross leasable area 4 Outdoor food court 4 6 units on 575 sq.m gross leas
Slide 33: Pipeline
Pipeline Total investment Investment still to be Net rental income (in millions of euros) Net yield on cost forecast Completion date (€M) committed (€M) forecast (€M) COMMITTED PROJECTS 79.5 25.0 4.9 6.2% 2018 Le Port extension 73.8 21.3 4.6 6.2% 2018 COMMITTED Other projects 5.7 3.6 0.4 6.1% 2018 P
Slide 34: High-street retail focus: Paris' wealthy inner rims
High-street retail focus: Paris’ wealthy inner rims LA DÉFENSE Puteaux 1 km Vibrant hub at the gateway to Paris City with c. 45,000 inhabitants 3 km northwest of Paris, 5 minutes from the La Défense 3 km business center, part of which spreads into Puteaux Les Hauts-de-Seine is France's wealthi
Slide 35: High-street retail focus: Paris' wealthy inner rims
High-street retail focus: Paris’ wealthy inner rims BEFORE AFTER Current asset Metrics 3-floor Monoprix store with 2,200 sq.m sales area Completion date: 2022 Opened in 1999, joint ownership Target investment: €19.5m Target IRR: >8% Project Progress Mixed-use project, including the redev
Slide 36: High-street retail focus: Paris' most densely-populated inner rims
High-street retail focus: Paris’ most densely-populated inner rims Saint-Denis PARIS Booming neighborhood at the gateway to Paris City adjacent to Paris, north of the city. Famous Industrial sector transformation, as the home of the Stade de France national switching to service stadium and for h
Slide 37: High-street retail focus: Paris' most densely-populated inner rims
High-street retail focus: Paris’ most densely-populated inner rims BEFORE AFTER Current asset Metrics 3-floor Leader Price store, with 1,925 sq.m sales area Completion date: 2022 Opened in 1967, freehold Target investment: €6.3m Target IRR: >8% Project Progress Mixed-use project with the
Slide 38: High-street retail focus: immediate outskirts of Lille
High-street retail focus: immediate outskirts of Lille Marcq-en-Baroeul Premium city within France's 6th largest urban area City with c. 40,000 inhabitants, 10 mins from Lille and 15 mins from the Belgian border Sought-after neighborhood with high disposable income levels Monoprix easily acc
Slide 39: High-street retail focus: immediate outskirts of Lille
High-street retail focus: immediate outskirts of Lille Homeownership housing Social housing Monoprix rooftop car park Ground-floor retail units External raised garden Public stores Monoprix entrance and store car park Seniors residence entrance Housing underground car park entrance Restaurants Landm
Slide 40: Financial Structure & Results
FINANCIAL STRUCTURE & RESULTS Elizabeth Blaise Chief Financial Officer
Slide 41: Solid organic growth
Solid organic growth Renewals & relettings: +12.1% 3.8% 3.3% 3.3% 3.0% 2.9% 2.9% 2.8% 2.8% 2.6% 2.5% H1 2014 H1 2015 H1 2016 H1 2017 H1 2018 Organic growth in invoiced rents excluding indexation Organic growth in invoiced rents including indexation 41 (1) Assets enter the like-for-like scope used to
Slide 42: Sustainable rents keeping vacancy rates at frictional levels
Sustainable rents keeping vacancy rates at frictional levels Change in recurring financial vacancy rate Change in occupancy cost ratio 10.5% 2.5% 2.5% 10.2% 10.3% 2.2% H1 2017 2017 H1 2018 H1 2017 2017 H1 2018 (Rents + charges incl. tax) / tenants’ sales incl. tax, excluding large food stores 42
Slide 43: Strong financial profile
Strong financial profile Change in LTV (excluding transfer taxes) and ICR 3% Change in the cost of drawn debt 3% 1.9% 1.9% 2% 1.8% 60,0% 5.2x 5.1x 4.9x 50,0% 2% 40,0% 1% 30,0% 1% 20,0% 39.6% 39.9% 40.2% 39.9% 0% H1 2017 2017 H1 2018 10,0% 7,0 0,0% H1 2017 2017 H1 2018 H1 2018 proforma (1) 6,0 5,0 Ch
Slide 44: Cost of debt and hedging strategy
Cost of debt and hedging strategy Early refinancing of the 2019 bond Debt: fixed vs. floating rate exposure in a favorable context (including commercial paper program) €479.7m bond issue, with a coupon of 4.125%, maturing in March 2019 and to be held to maturity Early refinancing of this line th
Slide 45: Rental revenues
Rental revenues Organic growth in line with 2018 target: +3.8% €93.1m €92.2m -1.0% Lease rights Lease rights €1.0m €0.8m - €3.0m + €1.2m + €2.3m - €1.2m Disposals Strategic Like-for-like vacancy(1) and Indexation growth in non-recurring invoiced rents items €92.1m Organic growth €91.4m -0.8% +3.8%(2
Slide 46: FFO
FFO +0.3% increase including the carrying cost, +3.5% without + €1.9m €61.7m Scope effect and lower Stabilized Decrease in lease rights cost other costs + €0.8m €59.8m €59.6m €59.6m + €0.3m structure + €1.2m + €0.1m - €0.0m - €1.0m Stability of Strong the gross-to- - €1.1m performance net ratio at f
Slide 47: Disposals
Disposals 1 disposal finalized and 2 preliminary sales agreements signed in July 2018 for a total of €33.7m including transfer taxes Saint-Paul shopping center Gap shopping center Lannion shopping center Above appraisal values 47
Slide 48: Change in NNNAV per share
Change in NNNAV per share(1) +2.2% over 12 months, +1.3% over 6 months + €0.34 €20.81 €20.37 €20.54 Portfolio value of €3,797m including rights + €0.65 - €0.05 +1.6% over 6 months, +2.6% over 12 months - €0.68 +1.4% like-for-like over 6 months(3), including a €17.0m (i.e. 0.5%) contribution fr
Slide 49: Appendices
APPENDICES DKIDS - act for kids. PIERCIALYS
Slide 50: Financial calendar
Financial calendar 2018 October 17 Activity at September 30, 2018 (after market close) 50
Slide 51: Asset locations
Asset locations Leading listed French real estate company that is a pure Mercialys portfolio player for shopping centers Mercialys' portfolio is focused on large and neighborhood shopping centers, as well as high-street retail assets that are leaders in their areas Assets are concentrated in the
Slide 52: Mercialys portfolio
Mercialys portfolio Change in the share of Casino brands in Breakdown of rental income Mercialys’ annualized rental income by business sector (Rent paid by Casino brands as % of annualized rental income (% of annualized rental income at June 30, 2018 – including at June 30, 2018) exposure to the Cas
Slide 53: Mercialys portfolio
Mercialys portfolio Types of retailers present Lease expiry schedule in Mercialys assets (percentage of leases expiring / guaranteed minimum rent) (% of annualized rental income at June 30, 2018 – including exposure to the Casino Group) 35.5% 11% 14.7% National and international retailers 7.8% 7.5%
Slide 54: Financing structure & debt schedule
Financing structure & debt schedule Debt schedule at end of H1 2018(1) Debt schedule at end-2017(1) in €m in €m 750 750 480 480 300 240 240 50 150 50 150 60 60 60 30 30 Dec. 2019 Dec. 2020 Nov. 2027 Jul. 2020 Jul. 2021 2018 Mar. 2019 2022 Mar. 2023 2024 2025 2026 Dec. 2019 Dec. 2020 Nov. 2027 Jul. 2
Slide 55: Mercialys shareholding structure and number of shares
Mercialys shareholding structure and number of shares Mercialys shareholders at June 30, 2018 8.01% 0.47% December December June Casino Group 31, 2016 31, 2017 30, 2018 40.16% Number of shares outstanding (1) 92,049,169 92,049,169 92,049,169 Foncière Euris at the end of the period Average number of
Slide 56: FFO, EPRA earnings & net income group share
FFO, EPRA earnings & net income group share In thousands of euros June 30, 2017 June 30, 2018 Invoiced rents 92,098 91,381 Lease rights 1,020 771 Rental revenues 93,118 92,152 Non-recovered service charges and property taxes -3,508 -3,411 Property operating expenses -3,155 -2,918 Net rental income 8
Slide 57: Balance sheet
Balance sheet In thousands of euros December 31, 2017 June 30, 2018 Intangible assets 2,486 2,419 Property, plant and equipment 10 9 Investment property 2,305,414 2,321,810 Investments in associates 38,445 38,695 Other non-current assets 37,529 36,090 Deferred tax assets 319 669 ASSETS Non-current a
Slide 58: Breakdown of assets
Breakdown of assets Average rate of return: 5.07% at June 30, 2018 Appraisal value Appraisal value Gross leasable Appraised net Number (excl. transfer taxes) (incl. transfer taxes) area rental income Type of property of assets at June 30, 2018 at June 30, 2018 at June 30, 2018 at June 30, 2018 In €m
Slide 59: Capitalization rate grid
Capitalization rate grid Applicable under the Partnership Agreement with Casino Type of property Shopping centers Retail parks City center Corsica and Corsica and Mainland Mainland overseas depts. overseas depts. France France & territories & territories Rates applicable > 20,000 sq.m 5.4% 6.0% 6.0%
Slide 60: Disclaimer
Disclaimer This communication contains forward-looking information and statements about Mercialys. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, obj