Slide 1: First Half 2008 Results
First Half 2008 Results July 24, 2008
Slide 2: Speakers
Speakers Jacques Ehrmann, Chairman and Chief Executive Officer Géry Robert-Ambroix, Chief Operating Officer First Half 2008 Results 2
Slide 3: Contents
Contents Page Overview of the first half 4 Activity 10 Strategy fitted to our environment underpinned by solid fundamentals 27 Outlook 39 First Half 2008 Results 3
Slide 4: Overview of the semester
Overview of the semester
Slide 5: First half marked by a strong rise in invoiced rents
First half marked by a strong rise in invoiced rents Organic growth still robust Sources of growth in invoiced rents Million euros 55.9 +1.9 +1.9 Organic growth +4.6 –0.1 47.6 Valuation of +8.0%* Strategic Indexation existing vacancies assets Acquisitions in 2007 and 2008 +9.7 pts –0.2 pt +4.0 pts +
Slide 6: Strong growth in the different performance indicators
Strong growth in the different performance indicators Rental revenues Recurring operating Cash flow* cash flow** +17.7% +17.2% +15.8% 57.0 49.3 50.3 48.4 million euros 42.1 43.5 55.9 47.6 1H07 1H08 1H07 1H08 1H07 1H08 * Net income before depreciation and other non-cash items ** Cash flow excluding i
Slide 7: Net asset value and appraisal values buoyed by rental revenue growth
Net asset value and appraisal values buoyed by rental revenue growth Appraisal value tops Euro 2 billion Appraisal value of portfolio, Replacement NAV including lease rights (euros per share) (million euros) 2,073.9 1,913.8 27.91 Impact of rental 25.70 revenue growth on 1,613.3 a like-for-like basis
Slide 8: A fast-changing environment …
A fast-changing environment … An environment that calls for vigilance … but a business underpinned by solid and quick reaction … fundamentals 9 Volatile consumer demand in France 9 Regulated offer (‘CDAC’ Administrative over the first six months authorization required) > Unfavourable weather in Marc
Slide 9: … and an unchanged rule for interim dividend distribution
… and an unchanged rule for interim dividend distribution 9 1st half 2007 : adopted guideline on 9 1st half 2008 : confirmation that this paying an interim dividend (barring rule will be applied this year major events that would change the rule): An interim dividend will be paid equal Interim divide
Slide 10: Business and results in 1H08
Business and results in 1H08
Slide 11: Robust organic growth
Robust organic growth Significant impact from acquisitions Rental revenues million euros Impact of acquisitions in +17.7% 2007 and 2008 57.0 +9.7 points 48.4 Strategic vacancy (Alcudia-related) Invoiced rents +17,5% –0.2 point 51.3 47.6 Organic growth* Lease rights (IFRS) (constant scope) Invoiced r
Slide 12: Dynamic activity in renewal and reletting
Dynamic activity in renewal and reletting 9 New retailers in the portfolio 9 122 lease contracts processed during (negotiations in progress) 2008 first half. > Mezzo di Pasta Significant impact on annualized rental > Pause Café revenues: > Geox > CC Confidential > +26%** on lease renewals signed ove
Slide 13: Average rental values continue to rise, with no notable deterioration for tenants
Average rental values continue to rise, with no notable deterioration for tenants > Occupancy cost: 7,9%* 8.1% 7.9% Decrease due to a change in 7.3% 7.4% scope. 8.2% on an unchanged 7.1% basis between December 2007 and June 2008. 31/12/05 31/12/06 30/06/07 31/12/07 30/06/08 > Average gross rental re
Slide 14: Growth in rental revenues passes through to operating income and cash flow
Growth in rental revenues passes through to operating income and recurring operating cash flow Operating income Recurring operating cash flow (Million euros) (Million euros) +17.2% +16.9% 49.3 41.1 42.1 35.1 1H07 1H08 1H07 1H08 * Cash flows less interest on cash and equivalents, net of income tax 14
Slide 15: Decrease in financial income impacts net income and cash flow
Decrease in financial income due to investments has an impact on net income and cash flow 9 Decrease in net financial income due to 9 Growth in cash flow* higher than consumption of cash growth in net income: impact of > Cash balance at 30/06/07: Euro +99.4m lease rights received during the half (Eu
Slide 16: Investments including the acquisition of a portfolio of three malls
Investments including the acquisition of a portfolio of three malls in south of France Euro 74 million of investments signed or committed during the half Portfolio of three shopping malls (Pau, Istres, Narbonne) 39.2 Meuros (Acquisition to be closed in 2H08) Valence Sud – Alcudia extension (Acquisit
Slide 17: Agreement signed to acquire a portfolio of shopping malls in south of France
Agreement signed to acquire a portfolio of shopping malls located in south of France Strong reversionary potential + potential for extensions 9 Acquisition in partnership with Carrefour Property and Immochan of a portfolio of six assets: one of the few market transactions during the half 9 Mercialys
Slide 18: Asset values driven by organic growth
Asset values driven by organic growth Appraisal values up 8% over six months at a stable capitalisation rate 2,073.9 Appraisal value of portfolio 1,913.8 including lease rights* million euros 1,613.3 1,346.9 1,120.0 1,027.0 957.0 30/06/05 31/12/05 30/06/06 31/12/06 30/06/07 31/12/07 30/06/08 Average
Slide 19: 2008 first half market transactions in line with appraised yields
2008 first half market transactions are in line with appraised yields on our portfolio No turnaround on observed capitalisation rates for shopping centers during 1H08 Observed capitalisation rates on retail property assets disposals in France in 2008 Initial yield Saler/buyer Date Les Cordeliers – P
Slide 20: 2008 market transactions: a risk premium that remains rational
2008 market transactions: a risk premium that remains rational 9 The initial yield on these investments, fully protected from inflation effects by indexation (ILC*), is to be compared with the deflated OAT (or OATi) yield 9 Strong and mutualized rental revenues Ö a moderate risk well-paid with a min
Slide 21: The average yield of Mercialys assets offers a significant margin over OAT
The average yield of Mercialys assets offers a significant margin compared with the risk-free OAT yield Organic growth : a strong mitigation to the effect of a potential increase in capitalization rates 11.5% to 13.5% Rents revaluation 3% to 5% potential (Renewals / relets) + 3.0% Average inflation
Slide 22: NAV driven primarily by organic growth of rental revenues
NAV driven primarily by organic growth of rental revenues Replacement NAV Components of the change in NAV between (euros per share) December 2007 and June 2008 Euro +166m 27.91 25.70 2008 Cash flow : Euro +50m 20.08 17.07 Acquisitions : Euro +5m 15.62 Impact on appraisals of +9% redevelopments under
Slide 23: The Alcudia programme takes shape: works under way on 19 sites
The Alcudia programme takes shape : Works under way on 19 sites 9 Extensions and simultaneous renovations 39,000 m² of extension already launched Delivery in 2008 Delivery in 2009 Delivery in 2010 9 Lanester 9 Annecy Seynod 9 Arles phase 1 9 Le Puy (HM + shopping 9 Le Puy (retail park) center) 9 Bre
Slide 24: Brest: extension of the shopping center on a former DIY store
Brest : extension of the shopping center on a former DIY large specialized store + renovation TODAY TOMORROW Key dates Latest news • Building permit under • CDEC obtention OK examination process • Start of woks Sept. 08 • Opening (projected) Sept. 09 Today Tomorrow Hypermarket 9,699 m² 9,699 m² Mall
Slide 25: Brest
Brest TODAY TOMORROW First Half 2008 Results 25
Slide 26: Letting of the extensions in line with our objectives
Letting of the extensions in line with our objectives Capitalization rate under the Partnership Agreement improved thanks to outstanding performance of Mercialys letting teams 9 Higher performance than anticipated by RCG appraisals Progress of letting to Initial cap rate Projected Projected Retailer
Slide 27: Strategy fitted to our environment underpinned by solid fundamentals
Strategy fitted to our environment underpinned by solid fundamentals
Slide 28: Mercialys is a one-of-a-kind portfolio of shopping centers with potential
Mercialys is a one-of-a-kind portfolio of shopping centers with potential 9 A portfolio of substantial size 9 A pure player > Assets of more than Euro 2 billion > 100% retail property assets > 665,000 m² of leasable area > 167 sites including 97 shopping malls 9 A portfolio with strong reversionary
Slide 29: A portfolio of leases with value creation potential
A portfolio of leases with value creation potential Opportunities to modernise the portfolio through reletting and renewals Breakdown of leases at 30/06/08 9 More than 2,400 leases: an efficient By annual rental value mutualization of risks Variable rent* Euro 3.3m 9 Proportion of non restricted lea
Slide 30: Large and neighbourhood centers: 89% of Mercialys assets value
Large and neighbourhood centers: 89% of Mercialys assets value Breakdown of Mercialys portfolio by type of assets Appraised value 29 sites 4% 4% 3% 62% 27% 68 sites Large shopping centers > 20 000 m2 GLA 2 89% of assets value Neighbourhood centers > 5 000 m GLA Independent cafeterias Others (service
Slide 31: Large and neighbourhood centers are more resilient and grow faster
Large and neighbourhood centers are more resilient and grow faster in average than the other retail segments A trend intensified by the economic trends (fuel price) Retailers sales growth Source CNCC – Comparable scope +3.4% +3.6% +3.2% +3.3% +2.8% +2.7% +2.8% +3.0% +2.9% +2.7% +2.5% +2.5% +2.1% +0.
Slide 32: The development pipeline: a secured access to external growth
The development pipeline: a secured access to external growth 9 A stable development pipeline valued approximately Euro 700 million (Euro 710* million at June 30, 2008 on a weighted value basis) splitted on a 50/50 basis between : > Alcudia extensions. Renovation and redevelopment investments to be
Slide 33: Mercialys' strategy aimed at adapting to a changing environment
Mercialys' strategy aimed at adapting to a changing environment 2008: Acceleration of major fundamental trends that were already expected in the medium-term outlook Anticipate fundamental trends Capitalize on our strengths Focus on the customers / consumers 9 Good mutualization of risks 9 Build up t
Slide 34: Consumers tend to settle in the South of France and on the waterfront
Consumers tend to settle in the South of France and on the waterfront Mercialys sites: On a national scale, locations in the fastest- growing regions Projected population growth, GDP per resident 2005-2030 Location of Mercialys sites Growth rate from 2005 to 2030 (%) GDP per resident (temporary data
Slide 35: Consumers are back to proximity
Consumers are back to proximity: They will reduce the distance covered to go on shopping On a local scale, strategically placed locations Economic cost Environmental cost Barrel of crude oil « 60% of the French intend 120 usd to cut down on their travel 100 80 to fight pollution » 60 Cofremca survey
Slide 36: Consumers are anxious and responsive: proximity is key
Consumers are anxious and responsive: proximity is key Well-placed marketing positioning Our legitimate "historical" positioning matches what consumers are looking for. Major behavioural trends Values and identity of our shopping centres The tradeoffs: resources / pleasure, time / Proximity: "go loc
Slide 37: Knowing and understanding the consumer of today and tomorrow
Knowing and understanding the consumer of today and tomorrow A fundamental trend in the consumption landscape From a consumption having based on hoarding (mass retail) to a thoughtfull THE RESOURCEFUL consumption (focused commerce). 32.2%* Lifestyle best represented changes THE MODERNISTS roots in M
Slide 38: Detailed analysis of our customer base and changing trends
Detailed analysis of our customer base and changing trends: a tool to guide strategy Targeting what we offer based on knowing our customers intimately … … households of over-50s households with children, well-off, and seniors, well-off consumers intellectually curious, innovative … who want an ethic
Slide 39: Conclusions and outlook
Conclusions and outlook
Slide 40: 2008: an acceleration, more than a breaking off, for consumers and commerce
2008: an acceleration, more than a breaking off, for consumers and commerce 9 Inflation due to cost of raw materials (emerging countries) and its effects on purchasing power: a Indexation fundamental trend that was expected for a long time 9 Cost of the barrel of crude oil was to increase: the cost
Slide 41: Fast changing commerce: Mercialys well armed to evolve
Fast changing commerce: Mercialys well armed to evolve in accordance 9 Retailing, retailers are responsive and 9 Mercialys is « in the place to be » fastly adapting to changes of > South and waterfront, society > Proximity, town immediate outlying area 9 Mercialys « does what is required» and 9 Shop
Slide 42: Resilience of the sector combines with Mercialys performance
Resilience of the sector combines with Mercialys performance 9 Risk is moderate 9 1H08 results confirm the robustness of > Predictibility of cash flow the business model and the potential > Low retailers turnover (French lease for the future right system) > Mutualization of risks 9 With an organic g
Slide 43: 2008 / 2009: no extrapolation of first half results but an interesting outlook
2008 / 2009: no extrapolation of 2008 first half results but an interesting outlook 9 2008 performance set to surpass the objectives set by Management Ö Growth faster than anticipated 2008 Management 2009 / 2007 Growth of approx. 12%* objectives Growth of approximately (guidance February 2009 23%* 2
Slide 44: Appendices
Appendices
Slide 45: Detailed income statement
Detailed income statement In million euros 30/06/07 30/06/08 Change 2008/2007 Invoiced rents 47.6 55.9 +17.5% Lease rights 0.9 1.1 Rental revenue 48.4 57.0 +17.7% Non-recovered property taxes -0.1 -0.1 Non-recovered service charges -0.9 -1.1 Property operating expenses -1.9 -1.9 Net rental income 45
Slide 46: Condensed balance sheet
Condensed balance sheet Assets In million euros 31/12/07 30/06/08 Investment property 1,165.2 1,165.8 Financial assets 11.0 11.8 Other assets 1.0 1.0 Total fixed assets 1,177.1 1,178.5 Cash and Casino current account 70.7 61.6* Trade and other receivables 12.5 9.5 Total assets 1,260.3 1,249.6 Equity
Slide 47: Asset portfolio valued at Euro 2,074 million including transfer taxes
Asset portfolio valued at Euro 2,074 million including transfer taxes Portfolio value up 8.4% over 6 months Type of asset Number of Appraisal value incl. Gross leasable area at Appraisal net rents assets at TT at 30/06/08 30/06/08 30/06/08 Euro m % m² % Euro m % Large shopping centers 29 1,288 62 31
Slide 48: Valuing the pipeline taking into account the stage of completion
Valuing the pipeline taking into account the stage of completion of each project Each stage of completion is worth its probability 9 The development pipeline as it currently stands contains projects with widely varying stages of completion and chances of going ahead 9 Until December 31, 2006,, we va