2016 EXTRAORDINARY GENERAL SHAREHOLDERS MEETING

Transcription

1 2016 EXTRAORDINARY GENERAL SHAREHOLDERS MEETING Madrid, 15 September 2016 LARGER BROADER STRONGER

2 DISCLAIMER 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. 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3 2016 EXTRAORDINARY GENERAL SHAREHOLDERS MEETING Madrid, 15 September 2016 Integration of Metrovacesa 2 ı 4 Transaction highlights Metrovacesa overview MERLIN post-transaction Agenda items Board of directors 3 Distribution to shareholders 1 Timetable and conclusions

4 INTEGRATION OF METROVACESA Agenda items 2 ı 4 ı 4 ı

5 TRANSACTION HIGHLIGHTS ı 5 ı

6 Transaction highlights INTEGRATION OF METROVACESA: COMPELLING STRATEGIC RATIONALE Unparalleled footprint Consolidation of the #1 office portfolio Dramatic scale-up in shopping centers, becoming the #2 player in Spain Leadership and European scale Undisputed Spanish leader One of the largest diversified commercial REIT in Continental Europe Tangible embedded upside Company poised for compelling short-to-medium term value and FFO growth Management to tighten overheads cap Management to adjust stock plan by reducing participation levels (1) Enhanced options for noncore assets Leading Spanish rented residential platform, while deconsolidating from MERLIN Attractiveness and liquidity of the hotel division (#1 net lease hotel operator in Spain) NOL carry forwards (1 ) Subject to AGM approval ı 6 ı

7 Transaction highlights STRUCTURE & TERMS Pre-transaction status quo 2. Full spin-off of MVC in 3 business lines Excluded from transaction scope Transaction structure MERLIN commercial real estate MERLIN rented residential MVC commercial real estate MVC rented residential MVC commercial land Contributed to: JV Residential Company MVC Shareholders ı 7 ı

8 Transaction highlights STRUCTURE & TERMS Acquisition of MVC s commercial property in exchange for m MERLIN shares Shareholders structure MERLIN Shareholders MVC Shareholders 68.76% 21.95% Transaction structure 6.41% 2.86% 0.02% Santander BBVA Popular MVC s minorities 31.24% MERLIN commercial real estate MVC commercial real estate Current MERLIN shareholders ı 8 ı

9 Transaction highlights STRUCTURE & TERMS Simultaneous merger of MVC s rented residential platform into MERLIN s platform Shareholders structure Transaction structure Service Level Agreement JV Residential Company MVC Shareholders 34.24% JV Residential Company Santander BBVA Popular 65.76% MERLIN rented residential MVC rented residential 0.05% 6.01% 13.49% 46.21% MVC s minorities MERLIN ı 9 ı

10 Transaction highlights STRUCTURE & TERMS Shares disposal terms 180-day initial lock-up for MVC shareholders Orderly sale mechanism 90 days lock-up for future sell-downs for blocks over 1% of TSO MVC shareholders are restricted from dribbing-out over 20% the average daily volume Governance and Management Enlargement of MERLIN BoD to reflect new shareholding structure: 15 members (60% independent) MERLIN management team to remain unchanged JV Residential Company: internally managed by the Testa Residencial management team under the supervision of MERLIN, through a Service Level Agreement ( 7.7m annual fee) Approvals and timing Transaction subject to antitrust approval Transaction subject to approval of MERLIN and MVC shareholders (15 September 2016) Expected closing: Q Other Reciprocal 75m break-up fee if transaction not approved by either EGM MERLIN and MVC will distribute to shareholders 66m and 50m, respectively, before transaction closing ı 10 ı

11 Transaction highlights APPEALING TRANSACTION FROM A FINANCIAL PERSPECTIVE 1 2 Stock for stock transaction: MERLIN new shares issued at per share NAV accretive 15.8% premium to NAV (1) ; 22.6% to unaffected share price (2) and 16.9% to L3M VWAP (3) 5.7% accretive in NAV p.s. (1) : combined company pro-forma NAV of p.s (vs p.s) MERLIN s residential portfolio contributed at a 30.1% premium to NAV Highly attractive acquisition capital values Very attractive acquisition capital values vs. comparable market transactions (4). Office: 3,192/sqm (5) Shopping centers: 2,735/sqm (5) Hotels: 115k/room (5) (1) Based on 31 December 2015 reported NAV of 9.85 per share (2) Based on 20 June 2016 close price 9.30 per share (3) L3M Volume Weighted Average Price of 9.75 per share (4) Selected market transactions comparable to MVC s assets in each asset class, mostly completed within the last 18 months (5) Not adjusted for MERLIN NAV increase from implied new shares issuance premium ı 11 ı

12 Transaction highlights APPEALING TRANSACTION FROM A FINANCIAL PERSPECTIVE 1 2 Transaction FFO accretive from day 1 FFO accretive since year 1 3.4% accretive in FFO p.s. (from 0.55 p.s. to 0.57 p.s.) (1) Assumes MVC s post-transaction overhead expenses fulfill MERLIN s current overhead policy Reconfirmed commitment to distribution policy of 80% of FFO Sound capital structure preserved Enhancement of MERLIN s credit profile Decrease in LTV from 50.6% to 49.0% post transaction (2) Maintenance of healthy financing ratios within MERLIN s policy and S&P guidelines Transaction does not trigger an early termination event in MERLIN or MVC s bank debt / bonds (1) MERLIN s FFO based on 2016 market consensus DPS of 0.44 and implied FFO of 0.55 p.s. (2) Based on March 2016 GAV for MERLIN and December 2015 GAV for MVC ı 12 ı

13 METROVACESA OVERVIEW

14 Metrovacesa overview SUPERB PORTFOLIO FIT WITH MERLIN 1 2 Key figures (1) Office and shopping centers: ~90% of MVC (4) 1,277,373 sqm GLA 81.4% OCCUPANCY 8% 3% 58% 10% 2% 50% 152 m GRI (2) 4.8% GROSS YIELD 124 m NRI (2) 3,190 m GAV 31% BREAKDOWN BY GAV 38% BREAKDOWN BY GRI 1,539 m NET DEBT (3) 1,673 m NAV 2.4 years WAULT Office Shopping Centers Hotels Other (5) (1) As of 31 December Excludes rented residential assets to be contributed to JV Residential Company (2) Annualized gross rents / net rents calculated as passing gross rent / net rent as of 31 December 2015, multiplied by 12 (3) Based on GAV (4) Other composed of miscellaneous including logistic assets, retail premises, senior residences, parkings and others. Land excluded from the transaction ı 14 ı

15 Metrovacesa overview SUPERB PORTFOLIO FIT WITH MERLIN 1 2 Irreplicable high quality portfolio ı 15 ı

16 Metrovacesa overview VERY WELL POSITIONED TO BENEFIT FROM THE RECOVERY CYCLE Diversified across MERLIN s core divisions 3,192 2, k (1) n.m. 1,835 1, Office Shopping centers GAV (3) ( m) Hotels GAV (3) ( /sqm) Other (2) (1) Refers to /room (2) Other composed of miscellaneous including logistic assets, retail premises, senior residences, parkings and others. Land excluded from the transaction (3) As of 31 December 2015 ı 16 ı

17 Metrovacesa overview VERY WELL POSITIONED TO BENEFIT FROM THE RECOVERY CYCLE Significant upside in rental levels ERV yield 5.9% 6.8% 6.1% n.m. Gross yield 4.1% 5.8% 5.8% n.m. 76m 58m 14.1 Office GRI (2) 17.4/20.1 (3) Shopping centers 15m 5.5 Hotels Passing rent (2) ( /sqm/m) 3m Other (1) (1) Other composed of miscellaneous including logistic assets, retail premises, senior residences, parkings and others. Land excluded from the transaction (2) Annualized gross rents calculated as pro-forma passing gross rent as of 31 December 2015, multiplied by 12. Passing rent as of 31 December 2015 (3) Excluding a shopping center currently under repositioning ı 17 ı

18 Metrovacesa overview VERY WELL POSITIONED TO BENEFIT FROM THE RECOVERY CYCLE Suboptimal occupancy levels and short WAULT 78% 76%/84% (3) 100% 62% 81.4% AVERAGE OCCUPANCY (2)(4) AVERAGE WAULT (2) Office Shopping centers Hotels Other (1) (1) Other composed of miscellaneous including logistic assets, retail premises, senior residences, parkings and others. Land excluded from the transaction (2) As of 31 December 2015 (3) Excluding a shopping center currently under repositioning (4) Not adjusted for assets under repositioning. If adjusted, average occupancy would be 82.1% ı 18 ı

19 Metrovacesa overview Office portfolio PRIME PORTFOLIO OF HIGH QUALITY PROPERTIES IN MADRID AND BARCELONA 1 2 MVC office KPIs (1) Located in MERLIN s core markets Broad offer spectrum 37 # ASSETS 574,781 sqm GLA 11% 89% 18% 34% 1,835 m GAV 76 m GRI 3,192 / sqm CAPITAL VALUE PSM 4.1% GROSS YIELD BREAKDOWN BY MARKET (BY GAV) 48% BREAKDOWN BY LOCATION (BY GAV) 5.9% ERV YIELD 78% PHYSICAL OCCUPANCY 1.8 years WAULT Madrid Barcelona CBD NBA Periphery (1) As of 31 December 2015 ı 19 ı

20 Metrovacesa overview Office portfolio PRIME PORTFOLIO OF HIGH QUALITY PROPERTIES IN MADRID AND BARCELONA 1 2 Large portfolio of prime assets High quality tenants Remarkable footprint in prime CBD, including trophy assets complemented by presence in high growth areas in the North of Madrid ı 20 ı

21 Metrovacesa overview Shopping centers UNIQUE PORTFOLIO IN STRATEGIC LOCATIONS WITH UPSIDE POTENTIAL 1 2 MVC Shopping centers KPIs (1) Footprint in high GDP / capita regions 14 # ASSETS 367,090 sqm GLA 1,004 m GAV 58 m GRI 6.8% ERV YIELD 2,735 / sqm CAPITAL VALUE PSM 5.8% GROSS YIELD 76% / 84% (2) PHYSICAL OCCUPANCY 2.9 years WAULT 49 m 2015 FOOTFALL (1) As of 31 December 2015 (2) Excluding a shopping center currently under repositioning ı 21 ı

22 Metrovacesa overview Shopping centers UNIQUE PORTFOLIO IN STRATEGIC LOCATIONS WITH UPSIDE POTENTIAL 1 2 Dominant malls in prime urban locations Top-tier tenants ı 22 ı

23 MERLIN POST- TRANSACTION

24 MERLIN post-transaction CONTINENTAL EUROPE S LARGEST DIVERSIFIED COMMERCIAL REIT AND UNDISPUTED SPANISH LEADER 1 2 Europe s largest diversified pure commercial REIT (1) By GAV (2) ( billion) Player type: Shopping centers Shopping centers UK diversified UK diversified Shopping centers Office pure play Commercial and residential Commercial diversified Shopping centers Office pure play UK players Continental European players (1) Only including commercial real estate players (2) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 ı 24 ı

25 MERLIN post-transaction CONTINENTAL EUROPE S LARGEST DIVERSIFIED COMMERCIAL REIT AND UNDISPUTED SPANISH LEADER 1 2 Undisputed leader in the Spanish real estate market across all asset classes By GAV (1) ( billion) By GRI (1) (3) ( million) 9.3 (2) 483 (4) Spanish Non-Spanish (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 (2) Includes JV Residential Company contribution at proportional NAV. Includes non-material Paris assets from MVC (3) Annualized gross rents calculated as passing gross rent as of March , multiplied by 12 (4) Includes income from minority stake in JV Residential Company ı 25 ı

26 MERLIN post-transaction LARGER, BROADER, STRONGER Breakdown by asset class (1) MERLIN pre-transaction MERLIN post-transaction MERLIN pro forma (Excluding non-core) 4% 6%(2) 5% 7% 2% (3) 5% (2) 3% 9% (5) 2% 6% 37% 44% 48% 11% 18% 19% 31% 21% 22% 6.2 Bn (4) 9.3 Bn (4) 8.7 Bn Office High street retail Shopping centers Hotels Logistics Rented residential Other (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 (2) Other includes land and projects under development (3.6%), minority stakes (2.2%) and other miscellaneous assets (3) Corresponds to MERLIN s 34% minority stake in JV Residential Company NAV (4) Total portfolio GAV (Including land and development GAV) (5) Including current WIP at total expected investment value and SLP ı 26 ı

27 MERLIN post-transaction LARGER, BROADER, STRONGER Pro-forma EPRA gross yield per asset type (1)(2) 4.7% 5.1% 5.8% 6.9% 5.8% 5.3% AVERAGE GROSS YIELD Office High street retail Shopping centers Logistics Hotels (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 (2) Gross yield is calculated dividing annualized gross monthly rents by GAV ı 27 ı

28 MERLIN post-transaction LARGER, BROADER, STRONGER Pro-forma Occupancy and WAULT (1) per asset type (years) #1 irreplicable office portfolio with shorter WAULTS 84.0% % % % % % AVERAGE OCCUPANCY 7.1 AVERAGE WAULT Dramatic scale-up in shopping centers to benefit from the Spanish consumer recovery Resilient high street retail to navigate the cycle Office High street retail Shopping centers Logistics Hotels Leading logistic platform (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 ı 28 ı

29 MERLIN post-transaction LARGER, BROADER, STRONGER Pro-forma combined financial metrics m MERLIN (1) (Dec-15) MERLIN ex. residential Metrovacesa (1) Impact from JV Residential Company MERLIN Post-transaction GAV (2) 6,053 5,764 3, ,166 NAV (2) 3,181 3,005 1, ,890 GRI (3) NRI (3) GRI/NRI ratio 94% 95% 81% n.a. 90% FFO (4)(5) (6) 267 (1) MERLIN pre-transaction includes rented residential. MVC excluding rented residential (2) Including minority stakes (3) Annualized gross rents / net rents calculated as passing gross rent / net rent as of 31 March 2016, multiplied by 12 for MERLIN and pro-forma passing gross rent /net rent as of 31 December 2015 for MVC (4) For MERLIN based on 2016E broker consensus (5) Assumes (i) MVC s post-transaction overhead expenses fulfill MERLIN s current overhead policy and (ii) current MVC cost of financing (6) Includes revenues from residential Service Level Agreement and attributable FFO from JV Residential Company ı 29 ı

30 MERLIN post-transaction REINFORCED INVESTMENT GRADE CREDIT (BBB / STABLE BY S&P) WITH ENHANCED BUSINESS PROFILE, LOWER LEVERAGE AND IMPROVED FINANCIAL RATIOS 1 2 Key metrics (as of Mar-16) Policy MERLIN pre-transaction (1) MERLIN post-transaction Gross debt 3,271 m 4,730 m Net debt 3,138 m 4,565 m Undrawn revolving facilities Avg interest rate 2.3% 2.2% LTV <50% 50.6% 49.0% ICR >2.5x 3.5x 3.5x Average maturity 7.0 years 6.2 years Unsecured debt >50% 59% 69% Fixed rate debt >60% 87% 82% (1) Pro-forma to bond issuance in April-16 ı 30 ı

31 MERLIN post-transaction REINFORCED INVESTMENT GRADE CREDIT (BBB / SATBLE BY S&P) WITH ENHANCED BUSINESS PROFILE, LOWER LEVERAGE AND IMPROVED FINANCIAL RATIOS 1 2 Combined debt maturity profile (1) Combined debt breakdown , ,013 24% 36% 3% 4% , % Unsecured bank debt Unsecured bonds Secured loans & other Mortgage loans - bank Mortgage loans - non bank Leasings 4 Authorization to issue up to 2,700m of debt obligations to manage balance sheet efficiently ( 1,500m approved in AGM ,200m to account for MVC) (1) Pro-forma to bond issuance in April-16 ı 31 ı

32 MERLIN post-transaction TANGIBLE EMBEDDED UPSIDE IN METROVACESA S PORTFOLIO Significant upside in MVC s recurrent FFO ( million) Pro-forma transaction FFO (1) Commitment to tighter overheads cap MVC reaches MERLIN's 95% occupancy MVC reaches MERLIN's NRI/GRI ratio MVC at ERV rents Pro-forma FFO including MVC upsides MERLIN FFO MVC FFO Succesful integration of Testa in record time MERLIN Management has proved to have the experience and skills to execute a smooth integration Solid track record implementing asset management plans and crystallizing synergies (1) MERLIN s FFO based on 2016 Bloomberg consensus of 0.55 p.s. ( 178 m) adjusted for the deconsolidation of residential activity (- 6 m) and for the impact of the JV Residential Company(+ 10 m) ı 32 ı

33 MERLIN post-transaction OVERHEAD TIGHTENED AND REDUCED STOCK PLAN Management commitment to tighten overheads cap and adjust stock plan PRE-TRANSACTION POST-TRANSACTION ONWARDS OVERHEADS CAP GREATER OF 6% OF GRI 0.6% OF NAV 5.75% OF GRI 0.575% OF NAV 5.5% OF GRI 0.55% OF NAV STOCK MANAGEMENT PLAN ABOVE 8% HURDLE ABOVE HURDLE 12% 10% OF TSR (1) 15% OF TSR 6% OF TSR 9% OF TSR (1) Total shareholders return ı 33 ı

34 MERLIN post-transaction OFFICE LEADERSHIP REINFORCED BY INCREASED CBD PRESENCE AND DIVERSIFICATION 1 2 MERLIN post-transaction office KPIs (1) Enlarged presence in Madrid and Barcelona CBD (2) 84 # ASSETS 1,159,750 sqm GLA GLA Evolution ( 000 sqm) 340 4,104 m GAV 3,539/sqm CAPITAL VALUE PSM x m GRI 84% PHYSICAL OCCUPANCY 4.7% GROSS YIELD 3.3 years WAULT MERLIN pre-transaction Madrid CBD Barcelona CBD 277 MERLIN post-transaction (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 (2) Madrid CBD includes inside M-30. Barcelona CBD includes inside Ronda de Dalt and on the east, the beginning of 22@ ı 34 ı

35 MERLIN post-transaction OFFICE LEADERSHIP REINFORCED BY INCREASED CBD PRESENCE AND DIVERSIFICATION 1 2 Portfolio breakdown 4% 13% 83% 42% 29% 71% BY CITY (GAV) 47% 11% BY LOCATION (1) (GAV) BY PRODUCT (GLA) Madrid Barcelona Other CBD New business areas Periphery Multi-tenant Single-tenant (1) Only includes assets located in Madrid and Barcelona ı 35 ı

36 MERLIN post-transaction DRAMATIC SCALE-UP IN SHOPPING CENTERS, BECOMING #2 PLAYER IN SPAIN 1 2 MERLIN post-transaction shopping centers KPIs (1) Significant upgrade in scale 20 # ASSETS 96 m GRI GLA Evolution ( 000 sqm) ,165 sqm GLA 5.8% GROSS YIELD 3.2x 531 1,677 m GAV 81%/87% (3) PHYSICAL OCCUPANCY ,138/sqm CAPITAL VALUE PSM 2.9 years WAULT 98 m FOOTFALL (2015) MERLIN pre-transaction #assets MERLIN post-transaction (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 ı 36 ı

37 MERLIN post-transaction DRAMATIC SCALE-UP IN SHOPPING CENTERS, BECOMING #2 PLAYER IN SPAIN 1 2 on par with the #1 player Ranking of Spanish shopping center players Player Owned GLA (sqm) 1 Unibail-Rodamco 570k sqm 2 MERLIN 531k sqm 3 Klepierre 359k sqm 4 CBRE GI ~ 325k sqm (2) 5 LAR 312k sqm (2) Estimated ı 37 ı

38 Transaction rationale 4 ENHANCED OPTIONS FOR NON-CORE BUSINESSES 1 2 Pro-forma Rented residential KPIs (1) Geographical split 47 # ASSETS 4,706 # UNITS 92% OCCUPANCY 4% 16% Madrid San Sebastian 35 m GRI 3.5% GROSS YIELD 980 m GAV 5% 12% 63% Pamplona Mallorca Other 361 m NET DEBT 37% LTV 619 m NAV JV Residential Company to adopt SOCIMI status immediately and list within the next 2 years (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 ı 38 ı

39 MERLIN post-transaction ENHANCED OPTIONS FOR NON-CORE BUSINESSES 1 2 Pro-forma Hotels KPIs (1) Hotels GAV evolution GLA Evolution ( million) 24 # ASSETS 4,495 # ROOMS 100% OCCUPANCY m GRI 5.8% GROSS YIELD 6.0% ERV YIELD x 654 m GAV 154k GAV PER ROOM 3.8 years WAULT MERLIN pre-transaction MERLIN post-transaction #assets (1) MERLIN figures as of 31 March 2016 and MVC as of 31 December 2015 ı 39 ı

40 BOARD OF DIRECTORS COMPOSITION Agenda items 3 ı 40 ı

41 BoD composition 15 reputed and committed members 9 INDEPENDENT / 4 PROPRIETARY / 2 EXECUTIVE Mr. Javier García-Carranza Proprietary Director Mr. Agustín Vidal-Aragón Proprietary Director Ms. Francisca Ortega Proprietary Director Mr. Rodrigo Echenique Non Executive Chairman Mr. Ismael Clemente Executive Vice-chairman Mr. Miguel Ollero Executive Director Ms. María Luisa Jordá Independent Director Ms. Pilar Cavero Independent Director Ms. Ana García Fau Independent Director Mr. Juan María Aguirre Independent Director Ms. Ana de Pro Independent Director Mr. Fernando Ortiz Independent Director Mr. Alfredo Fernández Independent Director Ms. Mónica Martín de Vidales Secretary Mr. Ildefonso Polo del Mármol Vice-secretary Mr. John Gómez-Hall Independent Director Mr. Donald Johnston Independent Director Remuneration and nomination committee Audit and control committee Independent directors Up for election ı 41 ı

42 DISTRIBUTION TO SHAREHOLDERS Agenda items 1 ı 42 ı

43 Distributions Shareholder Distribution guidance on 2016 results MINIMUM OF 140 M ( PER SHARE) AGAINST FY 2016 RESULTS: ALL CASH & PAYMENT IN TWO INSTALMENTS Interim September 2016 Final 2017 Total 66m 74m 140m ( p.s.) ( p.s.) ( p.s.) 0.02 p.s p.s. Subject to EGM Sep 2016 approval Subject to BoD approval Subject to AGM 2017 approval ı 43 ı

44 TIMETABLE AND CONCLUSIONS ı 44 ı

45 Timetable and conclusions TIMETABLE Independent Expert report MERLIN and Metrovacesa General Shareholders Meeting 21 June 2016 Late July 2016 Q September 2016 Q Transaction announcement Antitrust approval Closing of the transaction ı 45 ı

46 Timetable and conclusions LARGER, BROADER, STRONGER A perfect industrial fit Tangible embedded upside in Metrovacesa Optionality for MERLIN s non-core assets Irreplicable, diversified and balanced resulting portfolio Appealing financial terms Sound capital structure preserved Enhanced scale and capital markets profile ı 46 ı

47 2016 EXTRAORDINARY GENERAL SHAREHOLDERS MEETING Madrid, 15 September 2016 LARGER BROADER STRONGER ı 47 ı