Slide 1: 2017 Half Year Results
2017 HALF YEAR RESULTS JULY 27, 2017
Slide 2: Preliminary remarks
Preliminary remarks The consolidated financial statements for the 1st half of 2017 were approved by the Board of Directors on July 26, 2017 A limited scope review of these financial statements was performed by the statutory auditors - 2017 HALF-YEAR RESULTS – JULY 2017 2
Slide 3: Contents
Contents 1 STRATEGY & KEY MESSAGES 4 2 ACTIVITY 17 3 COMPLETIONS & PROJECTS 26 4 FINANCIAL STRUCTURE & RESULTS 34 5 CONCLUSIONS & 2017 OBJECTIVES 41 - 2017 HALF-YEAR RESULTS – JULY 2017 3
Slide 4: Strategy & key messages
1 Strategy & key messages Eric Le Gentil Chairman & CEO
Slide 5: Mercialys delivers strong organic growth in a more challenging market
Mercialys delivers strong organic growth in a more challenging market, with France offering a fertile environment for retailers Mercialys’ agile model enables constant adaptations Reversionary potential renewed Sustained effort to diversify the Extension and reinforcement of through redevelopments a
Slide 6: Steady demographic growth: key positive trend for French shopping centers
Steady demographic growth: key positive underlying trend for French shopping centers over the long term Population forecasts through to 2070 (1) Population expected to grow +15.1% to 76.4m by 2070 90 81.2 79.3 -2.3% France remains the most dynamic market in Continental 80 76.4 +15.1% Europe in terms
Slide 7: Solid economic drivers benefiting retail, with convenience offering an alternative to e-retail
Solid economic drivers benefiting retail, with efficient convenience offering an alternative to the shift in consumer habits towards e-retail Shopping center sector is expected to continue benefiting from the underlying economic trends Household consumption in France remains strong, even through eco
Slide 8: Retail sector to benefit from overall improvements in the economic environment
Retail sector to benefit from overall improvements in the economic environment in France Business climate on the rise (1) Consumption environment improving (1) Retail trade business climate at a 9-year high and above Consumer confidence at its highest level since June its long-term average 2007 and
Slide 9: Growth prospects: France is a major core market for retailers
Growth prospects: France is a major core market for retailers and its commercial equipment shows no global oversupply France is ranked as the 2nd most attractive destination in the Top target markets in EMEA for 2017 (1) whole EMEA for retailers (1) Rank % of retailers Country targeting market 43% o
Slide 10: Mercialys' locations in key growth areas are generating outperformance
Mercialys’ locations in key growth areas are generating outperformance Cumulative change in footfall at end-June 2017 (1) 3.3% 2.9% 2.4% 2.1% 0.8% +1.9% +1.4% +1.2% +0.8% -0.9% -0.7% CNCC -1.0% -1.2% -1.7% -2.5% -3.1% cumulative performance at end-April 2013 2014 2015 2016 June 2017 Turning point en
Slide 11: Outperformance drivers: Quimper
Outperformance drivers: Quimper, improved accessibility and up-to-date offer in a prosperous and growing area Impact of a successful adaptation of the retail mix through a global project completed in May 2017 Transformation of 7,150 sq.m of hypermarket space to create 1 medium-sized store and 12 new
Slide 12: Outperformance drivers: Grenoble
Outperformance drivers: Grenoble, site located in the center of a dynamic, innovative city… Young, sporty city, with a strong ecology focus… France’s 11th biggest city, with mountain sports and nature at the heart of the lifestyles of residents and tourists in Grenoble With several centers of academ
Slide 13: Successful re-tenanting of the merchandizing mix
…benefiting from a successful re-tenanting of the merchandizing mix Successful letting strategy better adapting the offer for city-center customers 16,300 sq.m shopping center built in 2010 with 50 shops and 10 restaurants, initially let on a mass-market basis weighting on the site’s performance Re-
Slide 14: Effective asset rotation strategy in H1 2017
Effective asset rotation strategy in H1 2017 €177.2m including transfer tax of asset sales overall at end-July 2017, concerning 8 assets: 5 service galleries, transformed Toulouse hypermarket, Poitiers and Dijon sites Disposal strategy deployed in LTV down to 39.6% at end-June, LTV heading towards 3
Slide 15: Poitiers and Dijon: assets outside core geographical sectors
Poitiers and Dijon: 2 assets located outside of Mercialys’ core geographical sectors Poitiers Sale of the Poitiers site for €78m incl. TT in June 2017 Sale of the Dijon site for €27.5m incl. TT in July 2017 Sale to an independent private investor Sale to an institutional investor Asset sale followin
Slide 16: Key figures
Key figures In millions of euros H1 2016 H1 2017 % change Invoiced rents 91.9 92.1 +0.2% Organic growth in invoiced rents excluding indexation +2.9% +2.8% Rental revenues 93.0 93.1 +0.1% FFO 58.7 59.6 +1.6% Underlying FFO (excl. impact of 2017 asset sales) 56.6 59.6 +5.3% EPRA earnings 58.7 59.6 +1.
Slide 17: Activity
2 Activity Vincent Ravat Chief Operating Officer
Slide 18: Solid organic growth driven by the portfolio's appeal
Solid organic growth driven by the portfolio’s appeal 5% 4.3% Renewals & relettings: +16.7% 3.7% 4% 3.5% 3.2% 3.1% 3.5% 2.9% 3% 3.4% 3.4% Casual Leasing 2.7% 2.8% 2.8% 2% 0.8% 2.3% Actions on 1% 1.7% the portfolio 0% 2.0% 2011 2012 2013 2014 2015 2016 H1 2017 Organic growth of invoiced rents, excl.
Slide 19: French market's medium-term trends in consumption habits
French market’s medium-term trends: impact of structural changes in consumption habits in a growing retail environment Overall medium-term growth for retail sectors, with some significant changes in consumption patterns marked evolution of purchasing behaviors resulting in limited increase in fashio
Slide 20: Balanced portfolio combining upside potential and strong occupancy
Balanced portfolio combining upside potential and strong occupancy levels Breakdown of rental income by business sector (% of annualized rental income at June 30, 2017) Services: Brive, +15% on a lease Reintegration of some Focus on national, Personal items: Angers, +18% on a reletting with a travel
Slide 21: Sustained commercial dynamics adding new strong brands
Sustained commercial dynamics adding new strong brands to the portfolio 151 leases signed in H1 2017, +10% vs. H1 2016 103 renewals and relettings, 48 signatures linked to extension and transformation projects 22 new brands - local, national and international - in Mercialys’ portfolio Further divers
Slide 22: Casual Leasing: source of mix diversification and value creation
Casual Leasing: source of mix diversification, new concepts and continuous value creation Trade marketing gaining momentum “Phygital” as a new vision Producers of mass market products and specialized Pop-up store used as an extension of digital retailers getting strongly involved business Targeted c
Slide 23: La Galerie des services: tools empowering retailer sales
La Galerie des services: new set of tools empowering retailer sales Platform designed specifically to meet the Core operational features: operational needs of our 2,200 tenants Personalized data to help retailers upgrade store performance Consolidation of the toolkit available for our Free opportuni
Slide 24: Better understanding and engaging our customers
Better understanding and engaging our customers Example of heatmap Check-in beacons Wi-Fi hotspots Targeted action plan built around our capacity to identify customer behaviors within our malls Retail letting Improve brand targeting Monitor retailer performance Refine merchandising mix Marketing ope
Slide 25: Taking a step towards marketing automation
Taking a step towards marketing automation Extended tracking of Deep knowledge of individual Personalized content customer behaviors customer drivers on digital media Stores (beacons) Wifi connections AUTOMATED & AUTOMATED PERSONALIZED App’ La Galerie Outbound emails La Galerie Web sites Outbound SM
Slide 26: Completions & projects
3 Completions & projects Vincent Ravat Chief Operating Officer
Slide 27: Significant progress with hypermarket transformations in 2017
Significant progress with hypermarket transformations in 2017 H1 2017 Q4 2017 4 successful completions 5 new completions Toulouse (ph. 2) Quimper Rennes Fréjus Angers (ph. 2) Saint-Étienne Nîmes (ph. 2) Poitiers Narbonne €1.9m of annualized rent on 2017 projects Overall yield on cost of 7.5% - 2017
Slide 28: Hypermarket transformations completed in H1 2017
Hypermarket transformations completed in H1 2017: high profile brands brought on board Quimper 1 medium-sized store and 12 news shops opened in April 2017 3,700 sq.m of gross leasable area Fréjus 2 medium-sized stores opened in May 2017 1,630 sq.m of gross leasable area Saint-Étienne 2 medium-sized
Slide 29: Hypermarket transformations to be completed in Q4 2017
Hypermarket transformations to be completed in Q4 2017 Angers Narbonne 800 sq.m of transformed space 400 sq.m of transformed space letting underway extension of H&M Rennes 1,940 sq.m of transformed space opening of Kiabi Nîmes Toulouse 1,830 sq.m of transformed space 1,830 sq.m of transformed space
Slide 30: Rennes extension
Rennes extension: comprehensive redevelopment and extension to better connect the center with its booming residential and tertiary neighborhood 6,320 sq.m of new leasable space Redevelopment of the Brico Dépôt, Maison du Monde and Casino Cafétéria units, in order to create 5 medium-sized stores and
Slide 31: Morlaix extension
Morlaix extension: broader commercial offering to further strengthen the local leading position 6,230 sq.m of new leasable space Space acquired and center extended to create 2 medium-sized stores and 16 new shops - 2017 HALF-YEAR RESULTS – JULY 2017 31
Slide 32: Saint-Étienne extension
Saint-Étienne extension: ambitious architectural development within a wider local re-urbanization project 3,500 sq.m of new leasable space Center extended and asset’s commercial appeal enhanced thanks to the opening of 21 new shops, in addition to the 2 medium-sized stores opened in the transformed
Slide 33: Development pipeline overview: €586m of gross investments
Development pipeline overview: €586m of gross investments Total Investment still to Net rental income Net yield on cost (in millions of euros) Completion date investment be initiated forecast forecast Transformation of large food stores acquired in H1 2014 12.3 8.8 0.9 6.9% 2017 and 2018 Transformat
Slide 34: Financial structure & results
4 Financial structure & results Elizabeth Blaise CFO
Slide 35: Financial structure: LTV down on asset disposals
Financial structure: LTV down 210 bp on assets disposals Net debt: €1,390m, including LTV of 39.6% at June 30, 2017 €1,230m of bond debt 39.1%(2) pro-forma for the Dijon site disposal completed in July €272m of commercial paper LTV heading towards 37% at year-end 2017 Undrawn committed credit lines:
Slide 36: Further decrease in the cost of debt in H1 2017
Further decrease in the cost of debt in H1 2017 10bp decrease in the cost of debt over the half-year to 1.9% H1 2017 net financial charges of €15.1m, down -1.3% vs. H1 2016 (excluding the one-off impact of marking-to market financial instruments) Commercial paper cost remained negative over the peri
Slide 37: Excellent performance on organic growth: +2.9%
Excellent performance on organic growth: +2.9% €93.0m Rental revenues: +0.1% €93.1m Lease rights Lease rights €1.2m €1.0m +€2.6m +€3.8m -€0.1m +€0.1m Increase in -€6.1m Indexation invoiced rents Acquisitions and Strategic vacancy(1) like-for-like Disposals completions + non-recurring items Organic g
Slide 38: FFO up +1.6%, with +5.3% increase in underlying FFO
FFO up +1.6%, with a significant +5.3% increase in underlying FFO Impact of the 2016 asset disposals to Schroders and Amundi +€0.1m €59.6m €59.6m EBITDA margin 85.2% +€1.0m vs. 85.4% in H1 2016 +€0.2m +€0.2m €58.7m €58.7m -€2.1m +€0.5m -€0.5m -€0.6m Lower average real cost of debt +1.6% +5.3% €56.6m
Slide 39: Portfolio value down -2.6% on disposals, up +1.5% like-for-like
Portfolio value down -2.6% on disposals, but up +1.5% like-for-like Breakdown of change in the portfolio’s appraisal value, including transfer taxes(1) €3,699m €3,474m excluding transfer taxes €3,797m +€18m +€35m -€152m -2.6% (+1.5% like-for-like) December 31, 2016 Chg. in scope of Lower appraisal c
Slide 40: Change in NNNAV: +2.1% over 12 months
Change in NNNAV: +2.1% over 12 months, +0.5% over 6 months NNNAV (EPRA, in €/share) +€0.18 +€0.04 €20.31 €20.22 +€0.54 -€0.04 €19.89 -€0.63 EPRA NNNAV at EPRA NNNAV at Dividend paid Net income Chg. in fair value of Chg. in fair value of Other items EPRA NNNAV at end-June 2016 end-December 2016 asset
Slide 41: Conclusions & 2017 objectives
5 Conclusions & 2017 objectives Eric Le Gentil Chairman & CEO
Slide 42: 2017 objectives
2017 objectives Organic growth in invoiced rents > 2% above indexation confirmed Change in FFO The decrease of around -5% reflecting scope impacts announced in February will be lower, taking into account the schedule for disposals and the excellent operational performance achieved in H1 2017 Dividen
Slide 43: Appendices
Appendices PIERCIALYS
Slide 44: Financial calendar
Financial calendar October 17, 2017 Activity at September 30, 2017 (after market close) - 2017 HALF-YEAR RESULTS – JULY 2017 44
Slide 45: Asset locations
Asset locations A leading listed French real estate company that is a pure 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 most dynamic French r
Slide 46: Mercialys portfolio
Mercialys portfolio Decreasing exposure for Mercialys rents to the 55.1%57.6% Casino Group: 30.3% of rents, -240 bp vs. H1 2016 Change in the share of Casino brands in Mercialys’ annualized rental income (Rent paid by Casino brands as % of total rental income) 25.4%23.2% 12.2%12.2% 6.4% 6.5% 1.0% 0.
Slide 47: Financing structure & debt schedule
Financing structure & debt schedule Debt schedule at end of H1-2017 (1) 800 750 700 600 RCF 500 480 Bonds €m 400 Casino cash advance 300 240 200 Confirmed bank facility 100 50 30 30 60 0 2017 2018 Mar. 2019 Jul. 2019 Dec. 2019 Dec. 2020 Jul. 2021 2022 Mar. 2023 Unchanged vs. December 31, 2016 (1) Ex
Slide 48: Mercialys shareholding and number of shares
Mercialys shareholding and number of shares 2015 2016 June 30, 2017 Number of shares outstanding at end of period 92,049,169 92,049,169 92,049,169 Average number of shares outstanding 92,049,169 92,049,169 92,049,169 Average number of shares (basic) 91,767,764 91,856,715 91,804,967 Average number of
Slide 49: FFO, EPRA earnings & net income group share
FFO, EPRA earnings & net income group share In thousands of euros June 30, 2016 June 30, 2017 Invoiced rents 91,869 92,098 Lease rights 1,155 1,020 Rental revenues 93,025 93,118 Non-recovered service charges and property taxes -2,910 -3,508 Property operating expenses -3,042 -3,155 Net rental income
Slide 50: Balance sheet
Balance sheet ASSETS (in thousands of euros) December 31, 2016 June 30, 2017 Intangible assets 2,016 2,353 Property, plant and equipment other than investment property 12 10 Investment property 2,325,268 2,258,069 Investments in associates 39,039 38,806 Other non-current assets 54,672 40,497 Deferre
Slide 51: Breakdown of assets
Breakdown of assets Appraisal value (incl. Number of assets Gross leasable area taxes) Appraised net rental income Type of property at June 30, 2017 at June 30, 2017 at June 30, 2017 In €m % Sq.m % In €m % Regional / large shopping centers 24 2,825.1 76% 628,302 72% 139.4 73% Neighborhood shopping c
Slide 52: Capitalization rate grid under the Partnership Agreement
Capitalization rate grid applicable under the Partnership Agreement Applicable capitalization rate grid for reiterations in the second half of 2017 under the Partnership Agreement with Casino Shopping centers Retail parks Type of property City center Mainland Corsica and overseas Mainland Corsica an
Slide 53: 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, obje