Slide 1: Full year earnings 2006
Full year earnings 2006 March 6, 2007 Introduction en Bourse de SOF 0
Slide 2: Speakers
Speakers Jacques Ehrmann, Chairman and Chief Executive Officer Géry Robert-Ambroix, Chief Operating Officer Catherine Oulé, Executive Vice President Yves Cadelano, Executive Vice President Full year 2006 earnings 1
Slide 3: Contents
Contents Page Overview of the year 3 Shopping center activity in 2006 12 Full year earnings and investments in 2006 22 Feeding future growth 30 Conclusion and outlook 52 Full year 2006 earnings 2
Slide 4: Overview of the year 2006
Overview of the year 2006 Full year earnings 2006 3
Slide 5: Mercialys' first full year: time for our first progress report
Mercialys' first full year: time for our first progress report Unique culture and positioning 1. A pure player in commercial real estate 2. Strong links with a major retailer 3. Regional roots / values of proximity and partnership 4. Targeted positioning on regional centers and local centers* 9 A re
Slide 6: Slide 6
Slide 7: Acceleration in growth over the year…
Acceleration in growth over the year… Mostly organic growth Growth in rent billed in 2006 9 349 leases renewed or change % 12.4% relet 9 An excellent fourth 8.5% Acquisitions quarter, with strong 1.2% Indexation growth 5.8% 4.7% 9 Record organic growth: Valuation of existing +8.8% including a small
Slide 8: Boosted by effort in realization of reversionary potential
…boosted by a significant effort in the realization of reversionary potential 349 leases renewed or relet 140 lease renewals generating +28% rental revenue growth on an annualized basis 100 leases relet generating +146% rental revenue growth plus 25 Feu Vert leases (+9%) on an annualized basis plus
Slide 9: Investments on good terms
Investments on good terms Euro 154 million of acquisitions with an average yield of 7.9% 9 Acquisitions of existing buildings Euro 111 million including 5 centers* in Corsica for a total of Euro 84 million > Euro 8.6 million annualized additional rental revenue, giving an average yield of 7.7% 9 Acq
Slide 10: Growth boosts profitability at Mercialys
Growth boosts profitability at Mercialys Strong earnings growth Net income, group share Net income before amortization Above the range of 12% to 15% set at the time of the IPO 15.6% 18.6% 73.9 60.5 63.9 51.0 13.4 Net income 12.9 12.4 Amortization Euro million 60.5 51.0 2005 2006 2005 2006 proforma p
Slide 11: A sharp rise in cash flow
A sharp rise in cash flow Euro 2.3 million in non-recurrent lease rights received for the Clermont Ferrand and Poitiers sites opened in Q3 2006 Cash flow* (Euro million) 19.6% • Lease rignts for new 76.4 buildings Non-recurrent items • Eviction compensation for buildings being Interest on net cash a
Slide 12: Dividend increase in line with cash flow growth
Dividend increase in line with cash flow growth* Dividend raised by 20%* 9 Confirmation of the strengths of Mercialys' business model: growth and yield 9 Organic growth: an effective growth model Ö rent billed up +8.8% on a like-for-like basis in 2006 9 Acquisitions made at an average yield of 7.9%
Slide 13: Shopping center activity in 2006
Shopping center activity in 2006 Full year 2006 earnings 12
Slide 14: Activity remained strong in our large centers
Activity remained strong in our large centers Regional centers: one of the strongest performing asset classes Trends in retailer sales of large centers All stores 12 months to end-December 2006 18% Lanester 16% 5.7% 14% 12% Marseille La 3.7% Valentine Besançon Tours La 2.8% 3.2% 10% Riche Niort 8% Q
Slide 15: Relettings and renewals: a strong performance from our teams
Relettings and renewals: a strong performance from our teams Record growth in the year 9 349 leases renewed or relet over 2006 Annualized growth in Change 2006/2005 rental base Euro million 100 leases relet 2.2 146% 140 leases renewed 1.0 28% 25 Feu Vert leases renewed 0.2 9% (outlets alongside car
Slide 16: Solid partnerships with major retail brands
Solid partnerships with major retail brands Full year 2006 earnings 15
Slide 17: Lease quality continues to improve
Lease quality continues to improve A further positive shift in the lease mix Structure of rent at June 12/31/06 9 Rise in proportion of derestricted Change versus December 31, 2005 leases By value Variable rent > Number of 10-year plus Euro 3.3 m commercial leases: 1,582, an Indexed fixed rent incre
Slide 18: Working in partnership with retailers
Working in partnership with retailers Major retailers come in Mercialys centers 9 Major retailers select Mercialys sites Ö Highly favourable positioning for Mercialys 9 Work done is bearing fruit Innovate Attract top retail banners Refine the offering Local design Boost consumer Communication plan t
Slide 19: Communication Action Plan: a tool generating synergies
Communication Action Plan: a tool generating synergies Full year 2006 earnings 18
Slide 20: Opening of Clermont Ferrand and Poitiers centers a major success
The opening of centers acquired from Casino in Clermont Ferrand and Poitiers has been a major success "BeauLieu… pour une promenade", the new flagship center in Poitiers 9 23 new retail brands occupying 5,800m² of new space 9 A brand / A strong theme 9 A 22,000m² site housing a total of 70 stores Fu
Slide 21: Opening of Clermont Ferrand and Poitiers centers a major success
The opening of centers acquired from Casino in Clermont Ferrand and Poitiers has been a major success Nacarat: the new regional retailing powerhouse for the Auvergne 9 22 new retail brands occupying 3,600m² of new space 9 Innovative architecture / strong local links 9 A 14,000m² site housing a total
Slide 22: Sales growth opens the way to rent increases
Sales growth opens the way to rent increases that respect the economic constraints of our retailers Mercialys Klépierre Unibail French Shopping shopping Center division centers Rent billed Rental Net rental Rent billed revenues income Rental revenue growth (like-for- +8.8% +9.7% +4.1% +6.3% like) Re
Slide 23: Detailed earnings and investments in 2006
Detailed earnings and investments in 2006 Full year 2006 earnings 22
Slide 24: Strong growth in rental revenue in 2006
Strong growth in rental revenue in 2006 Exploitation of reversionary potential remains a major driver Source of growth in rent billed Euro million 80.7 5.4 0.9 Like-for-like growth 71.8 2.6 Indexation Organic growth +8.8%* Development and acquisitions +3.6 pts +1.2 pt +7.5 pts = +12.4 % 2005 2006 pr
Slide 25: Growth boosts profitability at Mercialys…
Growth boosts profitability at Mercialys… Strong growth in net income and cash flow* Euro million 2005 2006 Change 9 Net income up +19% driven by proforma > growth in net rental income Rent billed 71.8 80.7 12.4% > Control of structural costs Rental revenues 72.7 82.3 13.3% during the group's expans
Slide 26: A year rich in selective acquisitions
A year rich in selective acquisitions High quality assets bought on highly favourable terms Euro million 9 60% of 5 Corsican shopping centers and their food store • Bastia Port Toga (lot n°2) • Bastia Furiani (lot n°2) 84* • Ajaccio Mezzavia (lot n°1) • Corte (lot n°1) • Porto Vecchio (lot n°2) 9 Th
Slide 27: Asset portfolio valued at Euro 1,347 million
Asset portfolio valued at Euro 1,347 million, including transfer taxes Asset value up +31% over 12 months Appraised value of portfolio including transfer taxes Lot n°2 Euro million Corsica* 41% 1,346.9 + 48.7 = 1,395.6 1,120.0 1,027.0 614,700m² 957.5 06/30/05 12/31/05 06/30/06 12/31/06 Average yield
Slide 28: Replacement NAV amounts to Euro 1,464m, or Euro 20.08 per share
Replacement NAV amounts to Euro 1,464m, or Euro 20.08 per share NAV per share up +29% since the IPO (October 2005) Euro million Dec. 31, 2005 Dec. 31 2006 Change Consolidated restated shareholders’ 1,121.0 1,116.7 -0.4% equity Net unrealized gains on assets 124.0 347.4 180.2% Replacement NAV (includ
Slide 29: Increase significantly affected by changes in appraised value
Increase significantly affected by changes in appraised value on a like-for-like basis Contributors to change in NAV over 2006 Euro 219m 2006 cash flow net of dividend payments: Euro +9 m* Effect of Casino enhanced yield on 2006 acquisitions: Euro +21 m Acquisitions (at acquisition price): Euro +106
Slide 30: NAV does not reflect all sources of growth potential
NAV does not reflect all sources of growth potential at Mercialys NAV falls well short of Mercialys' intrinsic value Appraisals do not reflect the Mercialys is the company in full available potential for the sector whose NAV value creation least reflects this potential 9 Appraised value of asset 9 E
Slide 31: Feeding future growth
Feeding future growth Full year 2006 earnings 30
Slide 32: Mercialys has four main sources of growth
Mercialys has four main sources of growth. The balance between them changes over time Creating new sources of growth wth gr o External growth Other e tu r acquisitions Fu Acquisitions from the Casino pipeline Restructuring and renovation Organic growth Realization of reversionary potential Indexatio
Slide 33: Growth sources complement each other in the creation of value
Growth sources complement each other in the creation of value Building on the effectiveness of our organic growth model Realization of Acquisitions Restructuring Other reversionary from the Casino and renovation acquisitions potential pipeline Impact on Alcudia ÖProfitability ++ Growth in rental + G
Slide 34: Organic growth: a key target over the next few years
Organic growth: a key target for Mercialys over the next few years Narrowing the gap between our rates and the market* Through the creation of Mercialys, the shopping center, as a complement to the shopping center business, has become the driving force in the process of value creation for the site Ö
Slide 35: A portfolio with strong potential for productivity gains
A portfolio with strong potential for productivity gains Rent levels remain below market averages 9 Substantial stock of leases in the 9 Indicators point to further substantial course of renewal or expired by end leeway for value enhancement 2006 (345 leases / Euro 8.4m in rent) > Occupancy cost rat
Slide 36: Alcudia: how to create value over the medium term
“Alcudia” -- or how to create value over the medium term The meeting of organic and external growth 9 The aim of Alcudia is to create commercial and real estate value Ö achievable thanks to a cooperation with our partner Casino Renovated and expanded centers generate additional consumer traffic, thu
Slide 37: Alcudia makes use of different tools
Alcudia makes use of different tools Using all the expertise at our disposal Build Renovate Redevelop • Create additional • Upgrade existing sites • Optimize allocation of commercial surfaces (mall and hypermarket space within sites or supermarket) Relet Promote Standardize • Accessibility: Route •
Slide 38: Managed by a team dedicated to create value
Managed by a team dedicated to create value over the medium and long term Before 1995 Grand Stade de France 1995 - 1999 Groupe Disneyland Paris - Development Manager for Disney Village. 1999 - 2004 Club Méditerranée - Responsible for the redevelopment and improvement of sites in France and abroad 20
Slide 39: A complete and systematic approach
A complete and systematic approach Preliminary analysis Strategic with a “no constraint” Committee approach • Site visits Prioritization • Market studies • Architectural and technical feasibility Approval of • Economic estimates strategic choices Classification • Provisional scheduling with Casino C
Slide 40: A case study: Angoulème - existing spaces
A case study: Angoulème - existing spaces Hypermarket 12,338 surfaces (m²) Shops surface (m²) 5,920 Introduction en Bourse de SOF 39
Slide 41: Angoulème: feasibility
Angoulème : feasibility Hypermarket surfaces 9,935 (m²) Shops surface (m²) 9,252 MSS (m²) excl. Go Sport, 6,579 Cafétéria and Drive Introduction en Bourse de SOF 40
Slide 42: Angoulème: rationale
Angoulème: rationale Optimization of the distribution of retail area between the hypermarket and the mall 9 Casino: > Optimization of retail and storage areas for the hypermarket > 2,400m² of hypermarket retail area and 950m² of storage area transformed into additional surface of mall and shops > Cr
Slide 43: Besançon Châteaufarine: existing spaces
Besançon Châteaufarine : existing spaces Hypermarket surfaces 9,980 (m²) Shops surface (m²) 5,932 MSS (m²) excl. 12,133 restaurants Introduction en Bourse de SOF 42
Slide 44: Besançon Châteaufarine: feasibility phase 1
Besançon Châteaufarine : feasibility phase 1 Hypermarket surfaces 9,980 (m²) Shops surface (m²) 8,418 MSS (m²) excl. 18,044 restaurants Introduction en Bourse de SOF 43
Slide 45: Besançon Châteaufarine: feasibility phase 2
Besançon Châteaufarine : feasibility phase 2 Hypermarket surfaces 9,980 (m²) Shops surface (m²) 8,418 MSS (m²) excl. 23,165 Introduction en Bourse de SOF restaurants 44
Slide 46: Besançon Chateaufarine: rationale
Besançon Chateaufarine: rationale Redeveloping the existing facilities and increasing density by creating a retail park 9 Casino: > store renovation > Increase in parking capacity; 187 additional spaces 9 Mercialys: > Redevelopment and renovation of existing mall, theming, creation of a retail park
Slide 47: Alcudia: how to create value over the medium term
Alcudia -- or how to create value over the medium term The meeting of organic growth and growth through acquisitions 9 Impact for Mercialys > Euro 485 million* of investment over six years » Euro 165 million* in redevelopment and renovation against an initial programme of Euro 100 million over five
Slide 48: Benefiting from the Casino pipeline on favourable terms
Benefiting from the Casino pipeline on favourable terms Maintaining the original economic balance 9 Five-year partnership agreement with Casino: > acquisition at an "enhanced" yield set at the end of each year for the following year > Shared risk: Casino bears the property development risk / Mercial
Slide 49: Pipeline showing strong growth
Pipeline showing strong growth Continued expansion of development teams 9 Development pipeline +81% Value of development pipeline in 12 months Euro million 142% 9 Euro 470 million* against Euro 260 million at December 470 31, 2005 (projects to be delivered 320 between now and 2012) 260 194 06/30/05
Slide 50: Total development pipeline plus Alcudia extensions
Total development pipeline plus Alcudia extensions Significant growth in the secured development pipeline # of Space Investment Completion development m² Euro million* projects 2007 4 19,700 23 2008 12 30,600 75 2009 to 2012 24 217,600 692 Total 40 267,900 790 9 A substantial pipeline that will allo
Slide 51: Maintain a selective approach to acquisitions
Maintain a selective approach to acquisitions Drawing on the Casino network in an increasingly tough market 9 The market is getting tougher 9 The Casino network enabled us to seize opportunities in 2006 and gives us a "local" eye on the market 9 Our investments meet a number of criteria: > Regional
Slide 52: Conclusion and outlook
Conclusion and outlook Full year 2006 earnings 51
Slide 53: The outlook for the sector remains strong
The outlook for the sector remains strong Conditions favour our business model 9 The commercial real estate market remains one of the sector's most attractive segments > Consumer spending remains quite buoyant and spending patterns are favourable to regional commercial centers > Big national and int
Slide 54: Prospects that encourage confidence in our future
Prospects that encourage confidence in our future 2007 will be better than 2006 9 Growth in rental revenues (+13.3% in 2006) will remain strong over the next few years > An objective of a double-digit growth in rental revenues for 2007 to 2010 9 Strong visibility on recurring operating cash flow (+1
Slide 55: Q&A
Q&A Full year 2006 earnings 54
Slide 56: Appendices
Appendices Full year 2006 earnings 55
Slide 57: Condensed P&L
Condensed P&L Euro million 2005 2006 Change Proforma Invoiced rents 71.8 80.7 +12.4% Lease rights 0.8 1.6 Rental revenues 72.7 82.3 +13.3% Non-recovered property tax -0.1 -0.1 Non-recovered rental expenses -1.1 -1.4 Building expenses -3.5 -3.8 Net rental income 67.9 77.0 +13.4% Management, administr
Slide 58: Condensed balance sheet
Condensed balance sheet Assets Euro million 12/31/05 12/31/06 Investment properties 893.4 989.3 Financial assets 9.7 10.3 Total non-current assets 903.0 999.6 Cash and cash equivalents (incl. Casino CA) 237.9 128.4 Trade and other receivables 11.5 28.7 Total assets 1,152.4 1,156.8 Equity and liabili
Slide 59: Asset portfolio valued at Euro 1,347 million
Asset portfolio valued at Euro 1,347 million, including transfer taxes Portfolio up +31% over 12 months Real estate Number of Appraisal value inc. Gross leasable area at Appraised net rents asset class assets at transfer taxes 12/31/06 12/31/06 12/31/06 Euro mill. % sqm % Euro mill. % Large shopping