Merlin Properties Socimi S.A.

Investor Presentation • Jul 29, 2021

https://merlinproperties.webex.com/merlinproperties/j.php?MTID=m9f40bbacb3bc802bd3d7da2efc8d0e 7d

Spain	+34 914143675
UK	+44 (0) 2071 928338
United States	18778709135
France	0805101465
Germany	08007234756
Italy	800131881
Canada	18669250818
Netherlands	08000235015

Nota de prensa 29 de julio 2021

Nota de prensa 29 de julio 2021

●

●

●

●

Nota de prensa 29 de julio 2021

•

MERLIN Properties SOCIMI, S.A www.merlinproperties.com info@merlinprop.com

6M2021 RESULTS PRESENTATION

This presentation has been prepared by MERLÍN 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, and has not been verified by the Company or any other person. The information contained in this document is subject to change 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 employees, officers, directors, advisors, agents or affiliates expressly disclaims any and all liabilities whatsoever (in negligence or otherwise, whether direct or indirect, in contract, tort or otherwise) for any loss howsoever arising from any use of this presentation, the information contained or referred to therein, any errors therein or omissions therefrom or otherwise arising in connection with this presentation. 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. Additionally, certain information in this presentation may be based on management accounts and estimates of the Company and may have not been audited or reviewed by the Company's auditors, whereas the information on Metrovacesa S.A. and on certain competitors contained herein is based on publicly available information which has not been verified by the Company. Accordingly, recipients should not place undue reliance on this information.

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.

Neither this presentation nor any copy of it shall be taken, transmitted into, disclosed, diffused, send, published or distributed in the United States, Canada, Australia or Japan. The distribution of this presentation in other jurisdictions may also be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. In particular, any offer that might result from the transaction herein escribed will not be made, directly or indirectly, in the United States of America, or by use of mails, or by any means or instrumentality (including, without limitation, facsimile transmission, telephone and internet) of interstate or foreign commerce of, or any facilities of any national securities exchange of, the United States, Canada, Australia or Japan. The securities of the Company have not been and, should there be an offering, will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act) and, subject to certain exceptions, may not be offered or sold in the United States. 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 IN THE UNITED STATES OR IN ANY OTHER JURISDICTION, NOR SHALL IT OR ANY PART OF IT FORM THE BASIS OF OR BE

RELIED ON IN CONNECTION WITH ANY CONTRACT OR COMMITMENT TO SELL OR PURCHASE SHARES. ANY DECISION TO SELL OR PURCHASE SHARES IN ANY OFFERING SHOULD BE MADE SOLELY ON THE BASIS OF PUBLICLY AVAILABLE INFORMATION.

This presentation may include forwardlooking statements. These forwardlooking 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 forward-looking 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.

ISMAEL CLEMENTE CEO

MIGUEL OLLERO COO

Contents

6M21 Financial results Offices Logistics Shopping centers Valuation and debt position Sustainability Value creation Digital Infrastructure Plan Closing remarks

FINANCIAL PERFORMANCE

• FFO per share in the period of €0.27. An improving pattern (+4.1% 2Q vs 1Q) that will continue in 3Q and 4Q. 2021 guidance reconfirmed (€0.56 per share)
• Valuations flat vs Dec-20, with offices and logistics on the positive territory while retail down by 1.5%
• Distribution to shareholders of €0.30 per share driving LTV to 40.5%
• € 500m bond issued (9 years) for the repayment of the bond maturing in 2022 with c.100 bps of cost savings

OPERATING PERFORMANCE

• After a decline in occupancy in the first semester, offices should recover slightly for the second half of the year
• Very strong performance in logistics after a record high leasing activity of +275k sqm (c.50% market share) resulting in a hike in occupancy of +151 bps vs 3M21
• Shopping centers are performing better than expected with good signs for the future: release spread of +5.9%, high retenanting rate of spaces vacated since March-20 and 50% of 2022 maturities already out of risk

VALUE CREATION

• Landmark I almost complete. Castellana 85 and Monumental already delivered and fully occupied at compelling returns. Plaza Ruiz Picasso works starting now
• Flagship completed. Porto Pi and Saler delivered on track with business plans
• Best II & III: All assets delivered are 100% let, with additional c.90k sqm of prelets in the period
• Launch of Digital Infrastructure Plan (Mega) for the construction and operation of 4 Data Centers

6M21 FINANCIAL RESULTS

FFO of € 0.27 per share, on track to meet 2021 guidance (€ 0.56 per share)

(€ million)	6M21	6M20	YoY
Gross rents	248.5	256.6	(3.2%)
Gross rents after incentives	219.8	221.2	(0.6%)
Net rents(1)	196.1	198.7	(1.3%)
EBITDA(2)	179.2	184.1	(2.7%)
FFO(3)	129.2	134.3	(3.8%)
AFFO	124.4	125.4	(0.8%)
IFRS net profit	190.3	70.9	+168.3%
EPRA NTA	7,304.2	7,264.7	+0.5%
(€ per share)
FFO	0.27	0.29	(3.8%)
AFFO	0.26	0.27	(0.8%)
EPS	0.41	0.15	+168.3%
EPRA NTA	15.55	15.46	+0.5%

APM: definitions and reconciliation of APMs to the latest audited financial accounts can be found on page 57 of www.merlinproperties.com/wp-content/uploads/2021/07/Results-report-6M21.pdf

(1) Net of incentives

(2) Excludes non-overhead costs items (€ 1.7m) plus LTIP accrual (€ 5.6m)

(3) FFO equals EBITDA less net interest payments, less minorities, less recurring income taxes plus share in earnings of equity method

LfL decrease (2.2%) as the positive release spread in all categories does not offset the increased vacancy and negative CPI indexation in Q1

248.5

248.5

Occupancy now bottoming out after a challenging period of economic trouble

OCCUPANCY AND WAULT TO FIRST BREAK PER ASSET TYPE(1)

OFFICES

Slight rental LfL decline due to buildings vacated for refurbishment (Plaza Ruiz Picasso, Atica 1 and Cerro Gamos 5)

(1) Portfolio in operation for the 6M20 (€ 109.7 m of GRI) and for the 6M21 (€ 106.5m of GRI)

MERLIN continues capturing the reversionary potential in the portfolio (+6.8% release spread)

Demand for flex space is surging ahead of a comeback to the office after the summer

7 spaces ı 12,509 sqm 1,478 desks ı 47% Occ.

Atica exp. 150 desks ı Opening 1Q22

Torre Chamartín exp. 115 desks ı Opening 1Q22

Castellana 85 392 desks ı Opening 2Q22

Pza. Ruiz Picasso 305 desks ı Opening 3Q23

Operating New openings

2 spaces ı 3,865 sqm 348 desks ı 61% Occ.

Torre Glòries exp. 98 desks ı Opening 1Q22

Ferreteria 22@ 233 desks ı Opening 1Q22

Plaza Cataluña 9 271 desks ı Opening 1Q22

LOGISTICS

Logistics continues delivering a good performance both organic (LfL +1.0%) and inorganic

(1) Portfolio in operation for the 6M20 (€ 27.8 m of GRI) and for the 6M21 (€ 28.1m of GRI)

Good release spread (+3.3% whole portfolio)

Logistics | ZAL Port

Outstanding increase in FFO vs 6M20 (+26.9%) as WIP moves into operation

		Stock 728,163 sqm	Delivered in 2021
		WIP 8,168 sqm	95,987 sqm state-of-the-art warehouse to
		Stock incl. WIP 736,331 sqm	Decathlon
		Third parties stock 183,252 sqm
		Stock under management 919,583 sqm
Contracted sqm Release spread #contracts	Tenants
325,586 +0.0% 37
Occupancy by area

€m	6M21	6M20	YoY
Gross rents	30.0	26.7	+12.4%
Net rents	28.0	22.7	+23.3%
EBITDA	26.7	21.8	+22.4%
FFO(1)	16.2	12.8	+26.9%

6M21 97.0%

(64)

FY20 97.6%

SHOPPING CENTERS

Footfall and tenant sales recovering while maintaining the OCR at sustainable levels of 12.7%

(1) Portfolio in operation for the 6M20 (€ 58.3m of GRI) and for the 6M21 (€ 57.1m of GRI) (2) YTD vs same period 2019

Half of the rents expiring in 2022 are out of risk

• Advanced negotiations for the early renewal of the lease contracts

• Economic impact: flat to slightly positive release spread (GRI) and ca. 10% incremental incentives vs pre-Covid

• Several important tenants with rolling breaks have already redefined their footprint in Spain with no meaningful impact in our portfolio

• Tenants with contracts expiring in 2022 and those with advanced early renewal negotiations
• 31,610 sqm vacated since March-20 of which 30,875 sqm have been let already

Occupancy already increasing on a QoQ basis. Positive release spread explained by contractual step-ups

VALUATION AND DEBT POSITION

Overall valuation flat, with logistics up, offices and net leases flat, retail and hotels down

GAV LIKE-FOR-LIKE EVOLUTION(1)

YIELD (COMPRESSION) / EXPANSION (3)

(1) GAV of WIP projects included under offices and logistics for LfL purposes.

(2) Including equity method

(3) Based on exit yields

Strong credit metrics, reinforced by S&P reaffirming the BBB rating

	30/06/2021	31/12/2020
Net debt	€ 5,368m	€ 5,268m
LTV	40.5%	39.9%
Average cost (spot)	2.06% (1.76%)	2.12% (1.80%)
Hedged debt	100.0%	99.8%
Average Maturity (years)	5.9	6.0
Liquidity(1) (€ million)	1,650	1,253

Rating	Outlook
BBB	Stable
Baa2	Negative

Source: Company

(1) Includes available cash plus pending receivable of Juno & Silicius, treasury stock and undrawned credit facilities (€ 786m RCF and EIB loan) in 6M21 and available cash plus pending receivable of Juno & Silicius, treasury stock and undrawned credit facilities (€ 786m RCF and EIB loan) in FY20

€ 500m - 9yr bond issuance to repay the bond maturing in 2022

Minimum collection defaults. Therefore we will discontinue reporting Covid-19 collection rates

(as a % of total invoices due)

6M21	Offices	Logistics	Shopping centers	Net leases
Collected	99.1%	99.8%	72.4%	100%
Commercial policy	0%	0%	24.4%	0%
In process	0.7%	0.2%	0%	0%
Uncollected	0.2%	0%	3.2%	0%

Covid-19 commercial policy 6M21 amounts to € 19.6m (-29% vs. 6M20) in line with the guidance provided to the market in FY20

SUSTAINABILITY

Sustainability | Scoring: energy certifications

Outstanding achievement in terms of energy certifications, with more than 2.6 million sqm certified

Sustainability | Scoring: quality seals

First-rate quality seals in a variety of certificates

EPRA Sustainability Best Practices recommendations 2018

More than 1,1m sqm under certification by the ISO 14001 environmental

management system

64 assets amounting to 0.8m sqm of GLA certified under the ISO 50001 environmental management system

52 offices certified 13 shopping centers certified

24 assets AEO certified, totaling more than 100k sqm Extensive pipeline of 65 office buildings, representing nearly 775k sqm

VALUE CREATION

Value creation | Capital recycling - Divestments

No new investments in the period. € 109m of divestments executed to fund Capex plans YTD

Offices

• Sale of 1 office building in Madrid (NBA A-2)

• Disposal of 3 logistics warehouses, 2 in Madrid and 1 in Zaragoza in February 2021

Logistics Net Leases

• Sale of 2 supermarkets and 1 BBVA branch

Other

• Sale of stake in Aedas

Value creation | Landmark I

• Full refurbishment of the asset, located in the heart of Azca, the best business area in Madrid Prime CBD
• C85 will become the HQ of Accenture and Elecnor

GLA 16,474 sqm Total Capex € 34.8m Yield on cost 8.1% Delivered

• Full refurbishment of the building, located in Duque de Saldanha, one of the most emblematic squares in the city at the core of Lisbon's Prime CBD area
• 10-year term lease agreement with BPI to become their HQ in Lisbon

GLA 25,358 sqm Total Capex € 34.8m Yield on cost 9.4% Delivered

							PRE-LET 28%
	Torre Charmartín	Torre Glòries	Marqués de Pombal 3	Diagonal 605	Castellana 85	Monumental	Plaza Ruiz Picasso
GLA (sqm)	18,295	37,614	12,460	13,244	16,474	25,358	31,576(1)
Acquisition (€m)	31.2	142.0	-	-	-	-	-
Capex (€m)	38.0	26.7	1.6	8.7	34.8	34.8	57.5
Rent (€m)	4.3	11.8	0.2	1.3	2.8	3.3	6.0
Yield on Cost	6.2%	7.0%	8.5%	15.5%	8.1%	9.4%	10.4%
Delivery	2019	2019	2020	2020	2021	2021	2023
Total acquisition € 173.2m		Total Capex € 202.1m	Total investment € 375.3m		Total additional rents € 29.7m		Yield on Cost 7.9%

Value creation | Best II & III

Zal Port WIP(1) Lisbon Park

• XXL Turn-key project in the port of Barcelona
• 100% let to Decathlon

GLA 95,987 sqm

Yield on cost 8.0%(2)

ERV € 4.3m(2)

• Phased project located in the north of Lisbon
• Phase I has already been delivered

A2 Cabanillas Park I-J A2 Cabanillas Park II

• Last available plot in Cabanillas Park. Upon delivery in 2022 the complex will comprise 316k sqm of state-of-the-art warehouses

• 100% pre-let to DSV

• First warehouse in our Cabanillas Park II development

• Turnkey project with Logista

GLA 44,973 sqm

Yield on cost 7.1%

ERV € 2.1m

GLA 44,858 sqm ERV € 1.9m Yield on cost 7.0% GLA 47,403 sqm

ERV € 2.1m Yield on cost 8.1%

(1) MERLIN owns a 48.5% stake in Cilsa (ZAL Port)

(2) Post canon

(3) 93.348 sqm if the preferential right is exercised

							PRE-LET 75%	PRE-LET 100%
	A4 Pinto II B(1)	A2 Cabanillas III	A4 Seseña	A2 Cabanillas F	A2 San Fernando II	A2 Azuqueca II	A2 Cabanillas Park I G, H & J	A2 Cabanillas Park II
GLA (sqm)	29,473	21,879	28,731	20,723	33,592	98,757	92,994	47,403
Capex (€m)	13.7	11.8	15.5	10.8	22.1	54.7	56.0	25.7
ERV (€m)	1.2	0.9	1.2	0.9	1.9	4.4	3.8	2.1
ERV YoC	8.6%	7.8%	7.7%	7.9%	8.5%	8.1%	6.8%	8.1%
Delivery	2019	2019	2019	2019	2020	2021	2020/2021/ 2022	2022/-

GLA 374k sqm(1)

Total investment € 210.3m Total additional rents

€ 16.4m

	Valencia Ribarroja	Zaragoza Plaza II	Lisboa Park(2)	Sevilla(1) ZAL WIP
GLA (sqm)	34,992	11,421	44,973	42,650
Capex (€m)	26.3	7.1	29.5	29.9
ERV (€m)	1.9	0.5	2.1	3.0
ERV YoC	7.2%	7.2%	7.1%	10.2%
Delivery	2019	2020	2021	2019/2020/2021/2022

GLA 134k sqm

Total investment € 92.8m

Total additional rents

€ 7.5m

(1) 27,528 sqm already delivered to Amazon, Collbatallé, Asmadee editions Logistics and 4 Gasa

(2) Including only the GLA and associated Capex of the Phase I

Flagship Plan is now complete

• The refurbishment has consolidated Saler, facing the City of Arts and Sciences, as the leading urban mall in Valencia
• Anchor tenants upsizing and upscaling units

GLA 29,286 sqm (inc. additional GLA) Cost € 37.8m (inc. units acquired) Yield on cost 5.7%

• Full refurbishment of the shopping center
• The asset counts with outstanding exterior terraces overlooking the Mediterranean sea
• The future additional space (2,486 sqm) is fully let

GLA 32,963 sqm (inc. additional GLA) Cost € 43.7m (inc. units acquired) Yield on cost 4.1%

Flagship Plan is now complete

	Larios	Arturo Soria Plaza	X-Madrid	Tres Aguas(1)	Saler	Porto Pi
GLA (sqm)	41,460	7,054	47,170	67,690	47,471	58,779
GLA MERLIN (sqm)	37,957	6,069	47,170	33,845	29,286	32,963
Capex (€m)	Works: 27.5 Ad. GLA: 19.9	5.4	Works: 46.4 Investment: 10.5	12.1(1)	Works: 25.8 Ad. GLA: 12.0	Works: 28.6 Ad. GLA: 15.2
Rent (€m)	3.1	0.6	5.2	1.4(1)	2.1	1.8
Yield on Cost	6.6%	11.3%	9.1%	11.2%	5.7%	4.1%
Delivery	2019	2019	2019	2019	2021	2021
∆ GLA + X-Mad inv. € 57.5m		Total Capex € 145.9m	Total investment € 203.4m	Total additional rents	€ 14.2m	Yield on Cost 7.0%

D I G I T A L I N F R A S T R U C T U R E PLAN (MEGA)

Data centers: expanding our array of client services within our logistics portfolio

• The move to cloud computing by businesses, the exponential generation of streaming content and the immediate adoption of 5G lead to a worldwide increase demand for data centers to store and process the data
• The Iberian Peninsula has the potential to become the future data hub of Southern Europe and North Africa given its prime location in terms of subsea cables communications(1). Amongst others, the following cables enter through Spain and Portugal:
• Project Marea completed in 2017 by Facebook & Microsoft and connecting the US and Europe;
• Project EllaLink to be completed in 2021 and connecting Europe and South America;
• Project Grace Hopper to be completed in 2022 by Google and connecting the US and Europe;
• Project 2Africa to be completed in 2023 and connecting Europe and Africa;
• As part of its logistics portfolio, MERLIN has selected 4 land plots with logistics/industrial use compatible with data centers activity, in the most suitable locations
• This initiative will position MERLIN's portfolio for advanced digital logistics
• Compelling stabilized low double digit YoC, using existing, currently non-productive, land plots

Partnership with

MERLIN will fund and own the real estate assets which will be built and operated through an operational Joint Venture with Edged Energy (subsidiary of Endeavour), who provides years of data center construction and operations expertise to deliver the most innovative technology available in the market coupled with a competitive advantage in terms of sustainability

4 strategic locations in the Iberian Peninsula to develop state-of-the-art data centers

Total GLA 22,508 sqm ı Capacity 20 MW Total GLA 22,131 sqm ı Capacity 16 MW

Within our portfolio, we have selected 4 land plots which comply with the three key characteristics to develop a data center:

• 1. Low latency due to their proximity and direct accesses to big cities and their infrastructures
• 1. Proximity in terms of fiber interconnections and/or cable landing stations
• 1. Proximity in terms of power supply (substations)

Bilbao-Álava and Lisbon-VFX data centers, strategically fit for large cloud players, will be developed on demand

Total GLA 23,153 – 102,466 sqm Capacity 22 – 100 MW

Total GLA 32,982 - 74,555 sqm Capacity 24 – 100 MW

Investment and returns until 2025

Compelling stabilized low double digit YoC of +11.2%(2)

CLOSING REMARKS

OPERATIONS

• Covid-19 impact on business easing. In the absence of new restrictions imposed by the pandemic, incentives will continue reducing YoY helping FFO. Meaningless collection default rates
• After a challenging first semester, occupancy bottoming out in offices, guiding towards ca. 90% at the end of the year
• Excellent performance in logistics. MERLIN's AAA quality portfolio outperforming the market, with ca. 50% market share in leasing activity
• Positive signs in shopping centers, with sound retenanting rates, and advanced negotiations to renew a significant part of 2022 maturities in 2021

VALUE CREATION

• After 4 years of implementation, Landmark is almost complete (Plaza Ruiz Picasso pending) and Flagship complete. All in all, 12 projects executed, delivering attractive returns to shareholders of 7.9% YoC for offices and 7.0% for retail
• Best II & III continue their successful execution. 1.1m sqm of pipeline development, 330k sqm already delivered (100% let), 180k sqm under construction (82% pre-let) and 590k sqm of land bank to be developed strategically to timely suit market needs
• MERLIN launches the Digital Infrastructure Plan to use logistics plots for the surging demand of space to store and process data. Expected returns outperform conventional logistics yields

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