Merlin Properties Socimi S.A.

Investor Presentation • Jul 28, 2022

-

-

Nota de prensa 28 de julio 2022

●

●

●

●

●

Nota de prensa 28 de julio 2022

Nota de prensa 28 de julio 2022

6M22 Results Presentation 29 July 2022

This presentation has been prepared by MERLIN Properties SOCIMI, S.A. (the "Company") for informational use only. The information contained in this presentation does not purport to be comprehensive or to contain all the information that a prospective purchaser of securities of the Company may desire or require in deciding whether or not to purchase such securities. The information contained in this document is subject to change, verification and completion without notice. Neither the Company nor any of affiliates, advisors or agents makes any representation or warranty, express or implied, as to the accuracy or completeness of any information contained or referred to in this document. Each of the Company and its affiliates, advisors or agents expressly disclaims any and all liabilities which may be based on this document, the information contained or referred to therein, any errors therein or omissions therefrom. Neither the Company, nor any of its affiliates, advisors or agents undertakes any obligation to provide the recipients with access to additional information or to update this document or to correct any inaccuracies in the information contained or referred to therein.

Certain statements in this document regarding the market and competitive position data may be based on the internal analyses of the Company, which involve

certain assumptions and estimates. These internal analyses may have not been verified by any independent sources and there can be no assurance that the assumptions or estimates are accurate. Accordingly, undue reliance should not be placed on any of the industry, market or competitive position data contained in this presentation. Additionally, certain information contained herein may be based on management accounts and estimates of the Company and may have not been audited or reviewed by the Company's auditors. Recipients should not place undue reliance on this information. The financial information included herein may have not been reviewed for accuracy or completeness and, as such, should not be relied upon. This information is provided to the recipients for informational purposes only and recipients must undertake their own investigation of the Company. The information providing herein is not to be relied upon in substitution for the recipient's own exercise of independent judgment with regard to the operations, financial condition and prospects of the Company. The distribution of this presentation in some jurisdictions may also be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. The and, should there be an offering, will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or the U.S. Investment Company Act of 1940, as amended (the "Investment Company Act"). Such securities may not be offered or sold in the United States except on a limited basis, if at all, to Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act) in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the Securities Act. The securities of the Company have not been and, should there be an offering, will not be registered under the applicable securities laws of any state or jurisdiction of Canada or Japan and, subject to certain exceptions, may not be offered or sold within Canada or Japan or to or for the benefit of any national, resident or citizen of Canada or Japan. THIS PRESENTATION DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER FOR SALE OR SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES NOR SHALL IT OR ANY PART OF IT FORM THE BASIS OF OR BE RELIED ON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT TO PURCHASE SHARES. ANY DECISION TO PURCHASE SHARES IN ANY OFFERING SHOULD BE MADE SOLELY ON THE BASIS OF PUBLICLY AVAILABLE

securities of the Company have not been INFORMATION ON THE COMPANY.

This presentation may include forwardlooking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the financial position, business strategy, management plans and objectives for future operations of the Company are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause such actual results, performance or achievements, or industry results, to be materially different from those expressed or implied by these forward-looking statements. These forwardlooking statements are based on numerous assumptions regarding the present and future business strategies of the Company and the environment in which they expect to operate in the future.

Forward-looking statements speak only as of the date of this presentation and the Company expressly disclaim any obligation or undertaking to release any update of, or revisions to, any forward-looking statements in this presentation, any change in their expectations or any change in events, conditions or circumstances on which these forward-looking statements are based.

In reviewing this presentation, the recipient is agreeing to, and accepting, the foregoing restrictions and limitations.

DISCLAIMER

ISMAEL CLEMENTE CEO

MIGUEL OLLERO COO

6M22 Financial results Offices Logistics Shopping centers Valuation and debt position Sustainability Value creation Digital Infrastructure Plan Closing remarks

Contents

Operating performance

• Good performance in all three asset categories with outstanding LfL rental growth (+7.1%) and occupancy at 95.1% (+69 bps vs. PF 3M22)

• Offices delivering excelent operating performance: +5.5% LfL rental increase, +6.3% release spread and 90.4% occupancy
• Logistics outperforming with +9.3% LfL growth, +6.7% release spread and 99.2% occupancy
• Solid operating performance in retail, with +6.0% LfL growth, +5.4% release spread and 94.3% occupancy

Financial performance

• Thanks to the BBVA portfolio disposal, € 670m mortage loan and € 850m syndicated loan have been repaid YTD. Additionally, € 548m bond

• € 0.34 FFO per share, +19.5% increase compared to 6M21
• Flat revaluation (+1.2% LfL vs FY21) in the period, taking on some yield expansion (15 bps) offset by rental growth
• was repaid in February reducing the LTV from 39.2%
• bonds requalified as green
• Total shareholder return of +7.7% in the semester

• Strong financial situation: 27.4% LTV (30.4% PF post-dividend), 100% interest rate fixed, 98% of unsecured debt and 100% of outstanding

Value creation

• € 2.1bn of BBVA portfolio disposal at a 17.1% premium to GAV
• € 111m of non-core disposals at an 8.9% premium to GAV
• Landmark plan: Plaza Ruiz Picasso under refurbishment with excellent lease-up prospects
• Mega: Bilbao works underway. Licenses obtained in Madrid-Getafe and Barcelona-PLZF. Works will start in 3Q22

Extraordinary dividend

• The company has approved an extraordinary dividend linked to the disposal of the BBVA portfolio amounting to € 0.75 p.s, it will be paid

on August 18th

6M22 Financial results

(1) As a result of the reclassification of Net Leases as discontinued operations, income from Net Leases is only considered in Net earnings, FFO and AFFO metrics. PF metrics have been added for ease of comparison (2) Net of incentives

(3) Excludes non-overhead costs items (€ 1.1m) plus LTIP accrual (€ 2.9m)

(4) FFO equals EBITDA less net interest payments, less minorities, less recurring income taxes plus share in earnings of equity method APM: definitions and reconciliation of APMs to the latest audited financial accounts can be found on page 56 of https://www.merlinproperties.com/wp-content/uploads/2022/07/Results-report-6M22-12.pdf

(€ million)	6M22	6M21 restated(1)	YoY
Gross rents	222.6	205.4	+8.3%
Gross rents after incentives	209.3	177.0	+18.3%
Net rents(2)	186.4	153.1	+21.8%
EBITDA(3)	165.8	136.2	+21.7%
Margin	74.5%	66.3%
FFO(4)	157.5	131.7	+19.5%
Margin	70.7%	64.1%
AFFO	152.8	124.4	+22.8%
IFRS net profit	491.6 7,682 pro-forma	190.3	+158.3%
EPRA NTA	after extraordinary 8,034.5	7,304,2	+10.0%

1 1	28	+19.5%
	026	8% 1
1		+148 <%
	15 รร	+10.0%

Gross rents		222.6	205.4	+8.3%
Gross rents after incentives		209.3	177.0	+18.3%
Net rents(2)		186.4	153.1	+21.8%
EBITDA(3)		165.8	136.2	+21.7%
Margin		74.5%	66.3%
FFO(4)		157.5	131.7	+19.5%
Margin		70.7%	64.1%
AFFO		152.8	124.4	+22.8%
IFRS net profit	7,682 pro-forma	491.6	190.3	+158.3%
EPRA NTA	after extraordinary	8,034.5	7,304,2	+10.0%
(€ per share)	dividend
FFO		0.34	0.28	+19.5%
AFFO		0.33	0.26	+22.8%
EPS	16.35 pro-forma	1.05	0.41	+158.3%
EPRA NTA	after extraordinary dividend	17.10	15.55	+10.0%

6M22 Financial results |

FFO OF € 0.34 PER SHARE, ON TRACK TO EXCEED OUR 2022 GUIDANCE (€ 0.58 PER SHARE)

6M22

Balance acquisitions, disposals & other

OUTSTANDING RENTAL LFL GROWTH IN THE PERIOD (+7.1%)

(1) Portfolio in operation for 6M21 (€ 196.5m of GRI) and for 6M22 (€ 210.5m of GRI)

-

Source: Company

(1) WAULT by rents means the weighted average unexpired lease term to first break, calculated as of 30th June 2022 (2) PF post - BBVA disposal

Offices

Offices | GRI bridge and breakdown

LFL RENTAL INCREASE (+5.5%) AND RELEASE SPREAD (+6.3%) VS 3M22

(1) Portfolio in operation for 6M21 (€ 103.6 m of GRI) and for 6M22 (€ 109.3m of GRI)

Offices | Flex space

20,708 sqm 2,176 desks 72% occupancy 10 spaces

KPIs

3 NEW SPACES OPENED THIS SEMESTER AND 3 MORE TO COME BEFORE YEAR-END WHICH WILL IMPLY A 51% INCREASE IN FOOTPRINT

New openings 2022

Open

Works ongoing

Atica exp. 155 desks Torre Glòries exp. 87 desks Castellana 93 exp. 69 desks

July September December

13

FULL OCCUPANCY COUPLED WITH RENTAL GROWTH RESULT IN OUTSTANDING LFL GROWTH (+9.3%)

(1) Portfolio in operation for 6M21 (€ 31.4 m of GRI) and for 6M22 (€ 34.3m of GRI)

Logistics | GRI bridge and breakdown

		15

EXTRAORDINARY PERFORMANCE: FULL OCCUPANCY AND DOUBLE DIGIT FFO INCREASE (+35.2% VS 6M21)

€m	6M22	6M21	YoY
Gross rents	35.9	30.0	+19.5%
Net rents	35.4	28.6	+23.7%
EBITDA	33.0	26.7	+23.6%
FFO(1)	20.3	15.0	+35.2%

Stock 736,384 sqm Third parties stock 183,252 sqm Stock under management 919,636 sqm

Tenants

(1) After deducting leasehold concession charge

Contracted sqm	Release spread	# contracts
176,434	(1.9%)	38
Occupancy by area 6M21 97.0%	+305

Logistics | ZAL Port

Shopping centers

FOOTFALL AND TENANT SALES RECOVERING TO PRE-COVID LEVELS, MAINTAINING OCR AT 12.5%

(1) Portfolio in operation for 6M21 (€ 57.1 m of GRI) and for 6M22 (€ 60.6m of GRI)

OCCUPANCY CONTINUES INCREASING FOR THE FIFTH CONSECUTIVE QUARTER

Change vs 31/03/22 (bps)

+4

Valuation and debt position

BROADLY STABLE GAV (+1.2% LFL) WITH LOGISTICS DRIVING THE REVALUATION OF THE OVERALL PORTFOLIO

(1) GAV of WIP projects included under its respective asset class for LfL purposes

(2) Including equity method

(3) Based on passing rent

Valuation and debt position Sound financial structure
LTV REDUCTION AT ITS BEST AFTER TREE DISPOSAL
	30/06/2022		31/12/2021
Net debt	€ 3,216m		€ 5,247m
LTV	27.4%	30.4% PF post-extraordinary dividend	39.2%
Average cost (spot)	1.94% (1.93%)	2.07% (1.76%)
Fixed rate debt	99.6%	100%
Average maturity (years)	5.4	5.3
Liquidity(1) (€ million)	1,772	1,811

Rating	Outlook
BBB	Positive
Baa2	Positive

FINANCIAL DISCIPLINE: GREEN, LONG MATURITIES AND FIXED RATE DEBT TO NAVIGATE CHALLENGING TIMES

Non-mortgage bank debt (incl. RCF) Mortgage debt Corporate green bonds

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

Non-mortgage bank debt (incl. RCF) Mortgage debt Corporate green bonds

Sustainability

Sustainability | 6M22 MILESTONE

INTENSE SEMESTER IN TERMS OF ESG INITIATIVES

• 1. Reducing operational carbon (scope 1+2)
• 1. Reducing embodied carbon (offices & logistics developments)
• 1. Reducing scope 3 emissions
• 1. Offsetting unavoidable emissions

Launching of our Pathway to Net Zero

Succesful requalification of all of our outstanding bonds into green

Certification program in shopping centers completed

3 main milestones achieved this semester

Value creation

EXCELLENT TIMING IN TERMS OF EXECUTION OF THE TRANSACTION

with € 2.1bn of gross debt repaid

€ 670m BBVA portfolio mortgage

€ 850m Syndicated bank loan

€ 548m 2022 bond

€ 351m

Extraordinary dividend

0.75 € p.s to be paid on August 18th

Transformational event for the company

Value creation | Non-core disposals

Offices

Sale of 4 office buildings comprising 33,783 sqm (3 periphery and 1 NBA)

DIVESTMENTS AT 8.9% PREMIUM TO LATEST GAV (EXCL. BBVA PORTFOLIO)

THE MOST TECHNOLOGICAL AND SUSTAINABLE ASSET IN THE IBERIAN PENINSULA

Value creation | Future deliveries: Plaza Ruiz Picasso

Capex € 63.2m

Delivery 2023 Yield on cost 9.2%

Incremental rents € 6.0m

GLA 36,899 sqm After Refurbishment 5,323 sqm created ³⁰

#Asset	License	1st module MW	% Pre-let	Status
Bilbao-Arasur		3	66%	Construction works ongoing
Madrid - Getafe		3	Advanced negotiations for 53%	Construction works start on August 1st
Barcelona - PLZF		3	Advanced negotiations for 20%	Construction works start on August 1st

Lisbon - VFX 1Q23 - -

Digital Infrastructure Plan | Projects status

Outlook 2022

Guidance

New € 0.60 p.s.

New € 0.42 p.s.

Closing remarks

Operations

• MERLIN has delivered a strong performance in all key financial and operating metrics (occupancy, LfL rental

• growth, release spread and FFO generation)
• Occupancy continues increasing in all three asset classes (+69 bps vs. PF 31/03/2022)
• Inflation favoring financials: 56% of rents revised in the semester at a 5.4% average uplift (+13m of additional rents)
• Uplifting our FFO guidance (€ 0.58 per share) to a minimum of € 0.60 per share
• Logistics continues enjoying strong tailwinds with the portfolio fully occupied
• Footfall (+30.6% vs. 6M21) & sales (+44.8% vs. 6M21) continue recovering while maintaining a stable OCR (12.5%)

Value creation

• Strong commercialization interest for the only building remaining in Landmark, to be delivered in 3Q23

- € 2.1bn of BBVA portfolio disposal at a 17.1% premium to GAV

• Works in Bilbao-Arasur (Mega) are underway and the asset is already 66% pre-let
• to sign a pre-let in both assets. Construction works to start in 3Q22

• Licenses for Madrid-Getafe and Barcelona-PLZF (Mega) have been obtained and under advanced negotiations

Dividends

• € 0.75 p.s. of extraordinary dividend to be paid on August 18th
• Upgrade our ordinary dividend guidance from € 0.40 p.s. to € 0.42 p.s

Paseo de la Castellana, 257 28046 Madrid +34 91 769 19 00 info@merlinprop.com www.merlinproperties.com