Mercialys Sa · EURONEXT:MERY
Mercialys Sa — IPO Roadshow (September 2005)
46 slides from Mercialys Sa's IPO roadshow presentation, Sep 28, 2005
Slide 1: Initial Public Offering
Initial Public Offering September - October 2005 Introduction en Bourse de SOF 0
Slide 2: Disclaimer
Disclaimer This document has been prepared by Mercialys (the "Company") solely for use at its meetings with investors held in connection with the proposed initial public offering of ordinary shares of the Company in France and the international offering to institutional investors in and outside of F
Slide 3: Team
Team Jacques Ehrmann, Chairman and Chief Executive Officer Géry Robert-Ambroix, Chief Operating Officer Introduction en Bourse de SOF
Slide 4: Agenda
Agenda Offering p.4 Overview p.6 The Shopping Center Market in France p.11 Mercialys’ Asset Portfolio p.14 Investment Program p.19 Financial Highlights p.22 Strategy and Outlook p.27 Appendices p.31 Introduction en Bourse de SOF
Slide 5: The offering
The offering Capital increase: €214m Additional greenshoe of: Up to 7.5% (primary shares) Price range of: €15.62 to €18.13 per share AXA will separately buy from Casino at the price of the IPO approx. €25m of Mercialys’ shares 180 days lock-up for Casino, Mercialys and AXA Shareholding structure pre
Slide 6: Timetable
Timetable Signature of assets contribution agreements (subject to listing) 23 August EGM 26 September Roadshows and bookbuilding 28 Sept - 11 October (noon Paris) Pricing 11 October Start of trading on Eurolist by Euronext Paris 12 October Settlement 14 October REIT-type tax regime (SIIC) adopted 1
Slide 7: Retailers' property portfolios comprise various asset types and require customised strategies
Retailers' property portfolios comprise various asset types and require customised strategies Retailers gradually acquire > A strategic portfolio comprised of stores related to their core business > A general portfolio comprised of offices and warehouses > A high-yield portfolio mainly comprised of
Slide 8: Mercialys: a unique portfolio of retail properties
Mercialys: a unique portfolio of retail properties Consistent > Composed exclusively of retail assets > 89% of rents collected from sites ranging from 5,000 to 40,000 sq.m., the fastest growing segment of the shopping center market > 79% of the portfolio rented to non - Casino tenants Sizeable > Val
Slide 9: Mercialys' two founding shareholders support its growth strategy
Mercialys’ two founding shareholders support its growth strategy Creation of Mercialys Pre-transfer Groupe AXA CASINO Simultaneously with the IPO: Patounor 146 sites 1 site "Mercialys" > AXA transfers one of its major commercial property assets to Mercialys Post-transfer > AXA will invest approximat
Slide 10: Mercialys is focused on the value-added side of the business
Mercialys is focused on the value-added side of the business Business model Asset management Strategic action plan for each asset Renovating and extending existing centers Buying and selectively selling assets Sales and marketing Shopping center management Defining marketing action plans Managing si
Slide 11: Mercialys has strong organic growth potential
Mercialys has strong organic growth potential Sources of value creation in a retail property company Continuous optimisation of existing assets > Reinvigorating sites, boosting traffic and sales > Renovation Active management of leases and expiry dates > Lease rights and despecialisation premium > C
Slide 12: Tenants are remarkably stable in retail
Tenants are remarkably stable in retail Termination rate of commercial leases in 2003 60% 50% 40% 30% 20% 10% 0% Warehouses Offices Retail 3 years 6 years 9 years Source: IPD France Introduction en Bourse de SOF
Slide 13: Focus is on renovating and extending existing centers
Focus is on renovating and extending existing centers A market with high barriers to entry New shopping center openings Breakdown between renovations and openings in 2004 Number GLA in sq.m. 38 sites 200,000 sq.m. 1973: Royer Act 35 1993: Sapin Act 875 000 84% 63% 30 750 000 25 126,100 sq.m. 1996: R
Slide 14: Shopping centers offer highest total yields
Shopping centers offer highest total yields Yield by type of asset in 2004 14.1% 11.6% 11.8% 10.9% 9.1% 8.0% 7.1% 6.6% 7.1% 7.0% 6.5% 4.3% 4.5% 1.5% 1.7% Offices Manufacturing Residential Multi-use Shopping centers Rent yield(1) Asset yield(2) Total yield (1) Net rent invoiced during the year (inclu
Slide 15: Mercialys is established in the regions with the fastest-growing demographics
Mercialys is established in the regions with the fastest-growing demographics Portfolio by region Expected population flows Asset locations National average: 4.9% 5.8% 5.8% Brest 3 St Brieuc Chartres Paris 5.1% Quimper 5.1% Rennes 7.0% 7.0% Lanester Angers 6.3% 6.3% Besançon St Nazaire Tours Dijon C
Slide 16: Mercialys has a balanced portfolio
Mercialys has a balanced portfolio Breakdown of rents By type By business segment 3% 4% 27 27 sites sites 4% 6% 60 60 sites sites 12% 23% 58% 31% 14% 22% 18% 89% of rents generated on sites > 5,000 sq.m. Personal wear Large shopping centers (> 20,000 sq.m.) Food and restaurants Neighbourhood shoppin
Slide 17: Mercialys knows how to attract leading retailers
Mercialys knows how to attract leading retailers A majority of national retailers > Higher sales densities > More traffic > Less cyclical Breakdown of rents by type 30 largest tenants (excluding Groupe Casino) of retailer (1) account for less than 27% of rents Groupe Casino chains 0.4% 0.5% 0.7% 1.0
Slide 18: Significant reversionary potential
Significant reversionary potential Careful management of renewals Average rent in 2004: €124/sq.m. 24% growth in rents generated by the 85 leases renewed in 2004 Reversionary potential Expiring leases in % Expiring leases amount 18,0% 16.6% 12 16,0% 13.9% 13.5% 10 14,0% 12,0% 8 9.6% 10,0% 8.7% 6.5%
Slide 19: Continuously managing rent structures
Continuously managing rent structures Key management indicators Rent structure as of 31 December 2004 Guaranteed Variable rent A reasonable 7% occupancy cost minimum rent €3.6m Fixed rent ratio* as of 31 December 2004 €39.5m €26.8m 5% More than 99% recovery rate 38% 97.9% occupancy rate in 2004 57%
Slide 20: €500 million in investments over 2006-2010
An ambitious development strategy €500 million in investments over 2006-2010 55% of current portfolio* Pipeline of projects represents 75% of planned investments In €m By 2007 By 2010 Purchase of assets through properties development programs 72 194 Renovation and restructuring programs 38 100 Buyou
Slide 21: Mercialys has priority access to Casino's pipeline of development projects
Mercialys has priority access to Casino’s pipeline of development projects Key terms of the contract Call options on all projects for 5 years Up to 31 December 2006, purchase price based on a fixed capitalization rate > 8% of forecast annual net rents for shopping centers > 8.5% of annual net rents
Slide 22: Corporate governance
Corporate governance Board of Directors 11 members > of which 4 independent Directors (including the AXA representative) Directors: Independent directors Bernard Bouloc Law professor Philippe Moati Research Director, Credoc Eric Sasson Managing Director, Carlyle Real Estate Europe Pierre Vaquier Cha
Slide 23: Independent property valuation based on 7.3% rental yield
Independent* property valuation based on 7.3% rental yield Portfolio value NAV as of June 30 (before IPO) Including stamp duty: €957m Excluding stamp duty: €903m Type Number Valuation* at GLA 2004 of property of properties 30 June 2005 at 30 June 2005 invoiced rents** In €m Opening balance sheet at
Slide 24: Key figures 2002-2004
Key figures 2002-2004 Accounting principles and procedures Pro forma historical financial French GAAP IFRS statements In €m (pro forma) 2002 2003 2004 2004 Financial statements in French GAAP Rental revenue 56.9 65.7 67.8 68.4 for 2002, 2003 and 2004 (FYE 31/12) Growth (%) - 15.4 3.2 - IFRS for fina
Slide 25: Sustained strong growth in rental revenue
Sustained strong growth in rental revenue Rental revenue Revenue growth drivers: investment French GAAP and value enhancement Rental revenue 02-04: 9.1% CAGR Invoiced rents* growth (€m) 65.7 67.8 1.5 56.9 5.4 1.6 66.3 3.0 1.8 66.3 2.6 60.3 1.4 60.3 Enhancing 1.1 Index- the value of 53.9 3.9 Developm
Slide 26: Continued cash flow growth
Continued cash flow growth Net cash flow 02-04: 10.4% CAGR IFRS 8.3% 16.9 18.6 15.1 55.7 58.7 48.2 6.1 5.9 30.1 32.6 33.1 38.8 40.1 In €m In €m 24.5 26.8 - 0.3 - 9.6 - 0.3 - 4.0 - 26.1 - 19.8 - 48.2 - 38.8 - 46.9 - 33.1 - 38.8 2002 2003 2004 H1 - 04 H1 - 05 Net profit Depreciation Investment Dividen
Slide 27: Consolidated balance sheet
Consolidated balance sheet Assets French GAAP IFRS In €m 31 Dec. 2004 31 Dec. 2004 30 June 2005 Investment properties 515.7 895.2 893.2 Financial assets 9.9 10.1 Total non-current assets 515.7 905.1 903.3 Cash and cash equivalents 10.1 10.1 0 TOTAL ASSETS 525.8 915.2 903.3 Equity and Liabilities Sha
Slide 28: Step up organic growth and acquisitions
Step up organic growth and acquisitions Enhance the value An ambitious development strategy of the existing portfolio Increase the profitability of existing Benefit from call options on shopping leases center development programs implemented by Casino Optimise the portfolio by refurbishing and renov
Slide 29: Long-term strategy
Long-term strategy Seek attractive development opportunities resulting from Casino’s acquisitions that include a retail property portfolio Become a consolidator for retail assets > A large number of quality portfolios are held by independent owners > Tax window for transfers to a SIIC that allows (t
Slide 30: Double-digit medium-term growth objective
Double-digit medium-term growth objective 2005-2006: Organic growth objectives > 2005 » Rental revenue 6 - 7% » Cash flow 6 - 7% > 2006 » Rental revenue 5 - 7% » Cash flow 12 - 15% (including income on cash proceeds of the capital increase) 2007-2010: Total growth objectives > Faster growth in the m
Slide 31: Mercialys: key investment highlights
Mercialys : key investment highlights A yield and growth property stock Percentage of rental revenue derived A pure play in the established yet dynamic from retail property assets in 2004 shopping center segment 100% 84% Profitable, sustained growth 37% Steady cash flow and strong earnings visibilit
Slide 32: Initial Public Offering
Initial Public Offering September 28, 2005 Introduction en Bourse de SOF 31
Slide 33: Appendices
Appendices J mercialys
Slide 34: Restrictive regulatory environment favours historic players
Restrictive regulatory environment favours historic players The French regulatory environment Articles L.145-1 et seq of the French Commercial Code > Commercial leases of at least nine years > Termination by the tenant possible after three or six years > Rents adjusted annually based on variation in
Slide 35: Retail property is driven by consumer spending
Retail property is driven by consumer spending France: one of the fastest growth rates of consumption in Europe 150 140 130 Spain France base 100 in 1996 120 Euro zone 110 Germany 100 Italy 90 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: EcoWin Introduction en Bourse de SOF
Slide 36: Shopping centers generated over a quarter of retail sales in France in 2004
Shopping centers generated over a quarter of retail sales in France in 2004 Shopping centers in France 613 shopping centers(1) representing a GLA(2) of 13.5 million sq.m. Total sales of €87 billion Shopping centers breakdown in 2004 3% 373 neighborhood shopping centers 9% 5,000 to 20,000 sq.m. 167 l
Slide 37: Intercommunity and downtown shopping centers have posted the highest growth
Intercommunity and downtown shopping centers have posted the highest growth Sales growth by type of center in 2004 (in %) Mercialys’ portfolio consists mainly 7.2 of intercommunity centers 4.1 3.8 3.7 2.7 2.8 2.4 2.2 2.2 2.1 1.7 1.2 All shopping Regional Intercommunity Downtown centers centers cente
Slide 38: High level upstream involvement of Mercialys in the Casino development process
High level upstream involvement of Mercialys in the Casino development process Involvement Involvement for for Mercialys Mercialys Acceptance/Operation Acceptance/Operation No No development development risks risks by by Mercialys Mercialys Project Project Call Call option option exercised exercised
Slide 39: Innovative, secure IPO structure
Innovative, secure IPO structure Patounor converted into a property company SIIC 2 Patounor changes name to Mercialys SIIC 2 (Dec 2004) applies to: Asset transfer agreements between - asset transfers Groupe Casino and AXA - a listed property company > Signed 23 August 2005 > Subject to successful IP
Slide 40: Casino self-service restaurants account for 15% of rents
Casino self-service restaurants account for 15% of rents Relations with Casino as tenant Tenant more present than others 103 Casino self-service restaurants: €10.5m in rent, or 15% at April 30, 2005 rent roll Leases: > A two-tier rent structure: » A guaranteed minimum rent, based on market value » A
Slide 41: Mercialys expects to become a SIIC by end-2005
Mercialys expects to become a SIIC by end-2005 Timeline Characteristics of the REIT-type tax regime (SIIC) 23 August: Signature of assets At least 85% of tax-exempt profit contribution agreements from rental activities (subject to listing) to be distributed to shareholders 26 September: Extraordinar
Slide 42: The Board committees are chaired by independent directors
The Board committees are chaired by independent directors Three committees Audit Committee > Majority of independent members > Chaired by Bernard Bouloc (independent director) Nominations and Remunerations Committee > Re-appoints members of the Board committees > Approves management team appointment
Slide 43: Mercialys is led by a full management team
Mercialys is led by a full management team Jean-Marc GOTHARD Géry ROBERT-AMBROIX Bruno DUGAS Large Shopping Centers Chief Operating Officer Neighborhood Centers Operations and Finance Jacques EHRMANN Catherine OULÉ Chairman and Chief Executive Officer Executive Vice President Marketing and Value Enh
Slide 44: Corporate governance and relations with Casino
Corporate governance and relations with Casino Cash management and current Related party agreements account agreement with Casino Creation of a shareholder current account The following services/contracts will be in line with Article L.511-7 covered by related party agreements governed by Articles L
Slide 45: Property management and support functions are outsourced
Property management and support functions are outsourced Property management outsourced to Sudeco, a Groupe Casino property manager Management of tenant relations, shared occupancy expenses and building administration activities performed by the Casino subsidiary under management agreements Sudeco,
Slide 46: Mercialys has prepared formal procedures for the Investment Committee
Mercialys has prepared formal procedures for the Investment Committee Mercialys Investment Committee Investment Committee: 2 independent directors including an AXA representative + 2 Casino representatives + the Chairman of Mercialys Standard role > Review investment strategy > Review and make recom