Corporate Presentation September 2018
Disclaimer This document has been prepared by Testa Residencial SOCIMI, S.A. (the Company ) and comprises slides for a presentation to the market of the Company. For the purposes of this disclaimer, Presentation means this document, its contents or any part of it. This Presentation may not be copied, distributed, reproduced or passed on, directly or indirectly, in whole or in part, or disclosed by any recipient to any other person, for any purpose other than the above. The information contained in this Presentation does not purport to be comprehensive or to include all information that may be required to fully analyze the issues referred to therein. Accordingly, no representation or warranty, express or implied, is made as to the truth, accuracy or completeness of the information in this Presentation. Neither the Company, nor any of its subsidiaries, nor any of their respective directors, officers or employees, accepts any responsibility or liability whatsoever for any loss howsoever arising from any use of this Presentation or otherwise arising in connection therewith. The information and opinions contained in this Presentation are provided as at the date of the Presentation and are subject to verification, correction, completion and change without notice. In giving this Presentation, no obligation to amend, correct or update this Presentation or to provide the recipient with access to any additional information that may arise in connection with it is undertaken. The information contained in this Presentation has not been produced in accordance with regulation intended to promote investment report independence, does not contain objective explanations, has not been subject to independent verification, and does not express any opinions regarding the possible existence of specific prohibitions which prevent the negotiation of the financial instruments referred to herein, before their disclosure. This Presentation may, if applicable, include forward-looking statements relating to, among others, the Company s financial position, operating results, strategy, plans, targets or goals. Forward-looking statements are subject to risks, uncertainties and factors beyond the Company s control that may result in actual results materially differing from prospective results or the results implied in the forward-looking statements. No undue reliance should be placed in such forward-looking statements. This Presentation does not constitute or form part of, and should not be construed as, any offer to sell or issue or invitation to purchase or subscribe for, or any solicitation of any offer to purchase or subscribe for, any securities of the Company in any jurisdiction, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. This Presentation is for informational purposes only. Any purchase of or subscription for securities of the Company should be based solely on each investor s own analysis of all public information, the assessment of risk involved and its own determination of the suitability of any such investment. No reliance should be placed and no decision should be based on this Presentation. 1
Testa at a Glance Leading Multi-family Housing REIT in Spain Portfolio Highlights Key Financial Highlights Features of the Portfolio Platform 10,615 Apartments 1 c. 85.0m GRI 2,4 ( 7.63/sqm/month) 1,5 c.9 of GAV 2,6 Freehold 8 Largest Internally Managed Multi-Family Housing Platform in Spain 1002k sqm GLA 2 91% Occupancy Apartments 1,3 c.60% of GAV 2,6 in Madrid Region c. 2.6bn GAV 2,6 ( 2,636/sqm) 1,6 24% LTV6,7 (Target <35%) c.1 l-f-l rent increase 1,11 80% Apartments in Majority-Owned Buildings 1,9 84% of GRI Free-rent 2,4,10 84% of the Apartments 1 <20 years old 90sqm Avg. Apt. Size 1 +18 years of Average Management Team Experience in the Real Estate Industry c.80 Employees Source: Company Information Global note: Figures as of June 30, 2018. Figures are provided on a 100%-ownership basis with respect to Coto, in which the Company owns a 99.65% interest. References to our apartments include (i) properties in respect of which the Company has surface rights for a defined period of time; (ii) 58 townhouses located in Aranjuez (Madrid); and (iii) except as otherwise indicated, parking spaces and storage rooms rented together with apartments. ¹ Only includes residential units. ² Includes both residential and commercial units. 3 Rented GLA as of June 30, 2018 divided by GLA as of June 30, 2018, in each case including the floor area of rented apartments and their respective quota of halls, stairs and hallways but no other common areas. 4 Annualized gross rents calculated as passing gross rents per company s lease agreements as of June 30, 2018, multiplied by 12. 5 Calculated as passing gross residential rents ( /sqm/month) as of June 30, 2018, based on the company s lease agreements over the rented residential GLA as of June 30, 2018, in each case including the floor area of rented apartments and their respective quota of halls, stairs and hallways but no other common areas. 6 Based on Savills valuation report as of June 30, 2018. 7 LTV defined as Net financial debt divided by total GAV. 8 Company owns the unit outright, in perpetuity, as opposed to holding only a surface right for a limited period of time. 9 Buildings where Testa owns 50% or more of the properties. 10 Not subject to (i) social housing regime; or (ii) contracts under old rent regime ( renta antigua ). 11 Increase of residential rent in between June 30, 2017 and June 30, 2018, excluding assets acquired or sold 2
Testa s History at a Glance Solid Track Record in the Spanish Market 5 Company and Asset Contribution by Acciona Real Estate (Sep-2017) 3 Integration of MVC Rented Residential into Testa Residencial (Sep-2016) Santander and BBVA become key shareholders Merlin integrates the multifamily rented residential portfolio of Metrovacesa (3.2k apt./ 690m GAV) into Testa Residencial ( 340m GAV) 1.1k apartments (c. 400m GAV) contributed in exchange for 21% stake in Testa Residencial becoming the company s third largest shareholder 9.0k apt. 1 Foundation (2000-2012) 4.7k apt. Sep-2017 Jun-2018 Shareholder Structure Merger of several existing traditional RE groups creating Testa Inmuebles en Renta Years later spun-off its rented residential business in Testa Residencial Sep-2016 Mar-2017 20% 17% 37% Jun-2015 25% 2000 2012 2 Acquisition of Testa Inmuebles en Renta by Merlin Properties (2015) 4 Asset Contribution by Santander and BBVA (Mar-2017) 6 Recent Acquisitions (Sep-2017 Jun-2018) Merlin s acquisition of 100% Sacyr s stake in Testa Inmuebles en Renta in 2015 (including the commercial property business and Testa Residencial) 3.3k rented apartments contributed worth 665m to Testa Residencial Testa Residencial acquires 203 apartments from Building Center (Caixabank) in 4Q 2018 Testa acquires a portfolio of 1,450 apartments from Caixabank in May and June 2018. 1.5k apt. 8.0k apt. 10.6k apt. Source: Company Information 3
Portfolio Overview Focused on Some of Spain s Most Attractive Regions c.60% of the portfolio GAV 1,2 located in Madrid Expected Household Growth 2014-29E Heatmap 1 and % of GAV La Coruña Oviedo 2% San Sebastián 7% GDP per Capita by Region as of 2017A ( k) 5 34 33 30 25 GAV Breakdown by Location (%) 5% 6% 18% 7% 59% Total: c. 2.6bn 1,2 GRI Breakdown by Location (%) Vigo Orense Valladolid 2% Toledo 2% Madrid 59% Pamplona 2% Zaragoza Valencia Lérida Barcelona 6% Palma de Mallorca 5% Madrid Basque Country Catalonia Spain Testa s portfolio is concentrated in regions exhibiting some of the highest GDP per capita (median of 30k 6 vs 25k GDP per capita on average for Spain in 2017) 5% 5% 5% Madrid Barcelona Valencia Others 21% 57% Total: c. 85.0m 1,3 San Sebastián Mallorca Canary Islands Sevilla Málaga Almeria Expected Household Growth 2014-29 (%) 4 >24% 18% 24% 12% 18% 0% 12% Expected Average Household Growth in Regions where Testa is Present, Weighted by Testa s GAV, is at c.120-160% 7 of the National Average Note: Figures as of June 30, 2018. Source: Expected Household growth 2014-2029E from Bank of Spain and GDP per Capita figures from INE; Company Information 1 Includes both commercial and residential units. 2 Based on Savills valuation report as of June 30, 2018; 3 Annualized gross rents calculated as passing gross rents per company s lease agreements as of June 30, 2018, multiplied by 12. 4 Expected household growth 2014-2029 based on Bank of Spain Max Scenario, which is based on household growth projections published by the INE in October 2014 but then assumes growing headship rates (tasas de jefatura) until reaching, in 2019, the annual average growth rate of 2002-2014 or, if such growth is negative, it assumes constant growth so that the maximum headship rates reached in the 2002-2014 period are achieved in 2029 and assumes the existence of growing immigration which stabilizes from 2019 onwards at the average rate of the 2002-2014 period. 5 Values calculated at level of each Autonomous Community. 6 Median GDP per Capita of the five Autonomous Communities where Testa has a larger presence: Madrid, Basque Country, Catalonia, Canary Islands and Balearic Islands. 7 Expected average household growth in regions where Testa is present, weighted by Testa s GAV as % of the national average, is at 124% assuming Bank of Spain 2014-2029 Max scenario and 159% assuming INE s 2016-2031 base scenario. Alicante Las Palmas de Gran Canaria 4
Portfolio Overview High-Quality Portfolio with c.60% in Madrid Plaza Castilla (Madrid) Coto (Madrid) Costa Brava (Madrid) Las Tablas (Madrid) Can Mates (Barcelona) Mérida (Barcelona) Bentaberri (San Sebastián) Moncada (Palma de Mallorca) Above average building quality with amenities oriented at upper middle class Source: Company Information 5
Portfolio Features Typology Largely free-rent apartments, built less than 20 years ago, and in majority-owned 1 buildings By Type of Asset % of GAV Commercial 5% 3 By Year of Construction % of Apartments 6 84% of apartm. <20 years old 64% 20% 9% Residential 95% 2 1952-1966 1967-1981 1982-1996 1997-2008 2009-2018 By Regime By Degree of Ownership Over Building % of GRI 4,5 Social Housing Regime 15% Old Rent Regime 1% % of Apartments by Ownership of Apartments in Building 24% 80% 20% 100% Free Rent 84% 39% 100% Owned >50% Owned Majority- Owned <50% Owned Total Source: Company Information 1 Buildings where Testa Residencial owns 50% or more of the properties. 3 Residential GAV as per Savills report includes apartments, parking spaces and storage rooms rented together with the apartments. 3 Commercial GAV includes retail units located in residential buildings, parking spaces not rented together with our apartments and an office building. 4 Includes both residential and commercial units. 5 Annualized gross rents (94% GRI residential and 6% GRI commercial) calculated as passing gross rents per company s lease agreements as June 30, 2018, multiplied by 12. 6 Only includes residential units. 6
The Testa Team Experienced Management Team with a Solid Track Record Formed by c.80 Employees Dr. Wolfgang Beck CEO 10 years of industry expertise Francisco Suárez CFO Javier Catena COO 20 years of industry expertise Finance & IT 1 Accounting Controlling Tax Invoicing Cash Management IT 20 years of industry expertise Asset Management Commercial Team Technical Team Operational Legal Team Regional Teams IR, M&A, Legal and HR Investor Relations Acquisitions Compliance Legal Counsel Human Resources Facility Management: +109 Outsourced Professionals 1 Cleaning Concierge Ancillary Services 2 Maintenance & Repairs Leasing Real Estate Agents Source: Company Information 1 Number of outsourced professionals as of 15-Mar-2018. Includes both full-time and part-time outsourced professionals. 2 Ancillary services refers to auxiliary third party services such as handyman services, electrician services, etc. 7
Financial Structure Flexible and Attractive Capital Structure Providing Firepower to Grow Balance Sheet Structure ( m) 30-Jun-2018 Key P&L Items ( m) 30-Jun-2018 1 GAV (Jun-18) 2,3 2,637m Gross Debt 703m Cash 67m Net Financial Debt 4 636m LTV (%) 5 24% Adj. EPRA NAV (adjusted) 6 1,982m Annualized Gross Rents (GRI) 2,7 85m NRI Margin (as % of GRI) 8,9 77% Adj. Rental EBITDA Margin (as % of GRI) 10 66% Total Liquidity (Cash + Undrawn RCF) 167m Rating (contingent on IPO) Investment Grade (BBB- with positive outlook) Long-dated Maturity Profile with a WAL of c.6 Years Financial Targets Gross Debt by Security (%) Maturity Schedule ( m) 11 Unsecured Debt 50% 350 Includes 220m financing of new Caixa acquisition: 7-years bullet at 1.6% LTV < 35% Average loan maturity >6 years (current: 6) ICR above 3x (current: 6x) Secured Debt 50% Avg. Spot Cost of Debt as of 30-Jun-2018 1.6% 266 2 2 2 2 81 2018E 2019E 2020E 2021E 2022E >2023E Rental Mortgages Term Loan Hedging against interest rate risks >80% (current: 80%) Dividend policy ~80% of FFO1 12 Source: Company information as of June 30, 2018 ¹ Unaudited figures based on management accounts. ² Includes both residential and commercial units. ³ Based on Savills valuation report as of June 30, 2018. 4 Calculated as non-current bank borrowings plus current bank borrowings less cash and cash equivalents and other current financial assets as reported in the Company s balance sheet. 5 LTV defined as Net financial debt divided by GAV. 6 Adj. EPRA NAV calculated as EPRA NAV as of June 30, 2018 plus the expiration of Acciona s redemption rights (upon which liabilities amounting to 376m will become equity), the revaluation of investment properties and the deferred taxes. 7 Annualized gross rents calculated as passing gross rents per company s lease agreements as of June 30, 2018, multiplied by 12. 8 NRI Margin calculated as 1H 2018 NRI divided by 1H 2018 GRI. 9 NRI calculated as passing gross rents minus cost of rental activities. Cost of rental activities consists of the aggregate amount of a) repairs; b) property expenses; c) utilities; d) property-related expenses; other expenses and e) recoveries from tenants. 10 Adjusted rental EBITDA calculated as 1H 2018 EBITDA excluding Merlin management fee cancellation and accrued expenses (pursuant to an agreement which was terminated on January 19th, 2018) and other one-off cost. EBITDA margin calculated as 1H 2018 Adjusted rental EBITDA divided by 1H 2018 GRI. 11 Includes 36m of secured debt to mature from 2023 onwards. 12 FFO1 calculated as Adjusted Rental EBITDA less net cash interest and current income taxes. Net cash interest is equal to interest on loans and borrowings. Current income taxes only include current income taxes relating to rental activities. This dividend policy applies provided that Company complies with Spanish REIT dividend distribution requirement and any other requirements applicable to the company. 8
Listing of Testa shares Testa shares are listed in the MAB market since July 26 th 2018 Listing in the Alternative Stock Market (MAB) Testa s shareholder structure Stock Exchange: Market segment: MAB (Alternative Stock Market) Non-regulated market Others: 0.94% Ticker symbol: YTST 17,0% 36,9% ISIN code: ES0105210019 20,0% First day of trading: 26/07/2018 Initial reference price: Eur 13.90 per share 25,2% Total number of shares: 132,270,202 Initial market capitalisation: Eur 1,839m Others: treasury shares 0.46%; free float 0.48% 9
10