Acquisition of Barceló s Hotel Portfolio A Compelling Platform for Further Future Growth February 5, 015
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Key transaction terms Transaction Summary Acquisition of a 80.5% stake 1 in a newly-created joint-venture BAY, together with Barceló, which will incorporate 11 Spanish vacation hotels (and 1 shopping center) plus an option for 5 additional hotels (and 1 shopping center), currently owned by Barceló, representing a total of +6,000 keys Assets will be contributed to BAY in two separate phases: June 015 and Q1 016 (in case of option is exercised) Hispania total equity contribution will range from c. 10m to 150m BAY will become the platform for the creation of a pure resort hotel REIT focused on Spain Transaction Price Transaction price Purchase price of 41m, including 34m of debt and 187m of equity (ex. transaction costs), equivalent to 67k per key Hispania total equity contribution of c. 150 million for its 80.5% stake in the joint-venture Attractive transaction multiples: 11.x and 10.x EV/EBITDA 3 014PF and 015PF(B), respectively, below historical average EV/EBITDA 1-yr fwd multiples for US Hotel REITs of 1.7x 4 over the last 11 years (currently at 14-15x) Economics for BAY 89.% of hotels EBITDAR with a fixed rent component 014PF and 015PF gross rental income of 40m and 45m respectively 014PF NOI 3 5 yield of 7.7% and minimum gross yield guaranteed by Barceló of 6.4% (015-019 average) Funding and timing Fully funded with Hispania s own funds First phase is expected to be closed by June 015, with a deployment of funds equivalent to c. 100 million Second phase is expected to be closed by Q1 016, making a potential additional c. 50 million payment Notes: 1 Barceló will have the option to reduce Hispania s stake to 51% through capital increases Excluding implied valuation of shopping centres 3 Pro-forma for the whole portfolio. Excluding transaction costs and refurbishment capex 4 Source: Equity Research as of February 015 5 NOI equivalent to EBITDA minus maintenance capex 3
Direct exposure to Spanish tourism industry combined with a strong cash yield generation Transaction Rationale Direct Exposure to Spanish Tourism Industry Strong Cash Yield Generation (Pro-Forma) 1 Well-located hotel portfolio in the most remarkable Spanish prime vacation areas, specially in Canary Islands, Yield % Gross Rental Income 9.6% 10.6% EBITDA and well-invested, with significant capital deployed over the last years m 40 45 m 37 41 3 combined with a low risk profile given a highly diversified tourist base and limited seasonality 1 1 014PF 015PF (B) 014PF 1 1 015PF (B) 4 have allowed steady growth over the crisis Unlevered NOI 3 Levered NOI 4 Yield % 5 7.7% 8.5% Yield % 5 11.6% 13.3% 5 This platform will benefit from further growth given significant investment opportunities in Spain as one of the largest vacation markets worldwide m 36 m 8 3 5 6 by entering into at the right time of the cycle, driven by internal and international demand Notes: 1 Pro-forma for the whole portfolio. 015 based on Barceló s budget. 014/15 not illustrative of BAY s P&L Calculated over 41m 3 NOI post maintenance capex 4 NOI post maintenance capex and interest expense on expected total leverage of 34m 4 5 Calculated over total equity of c. 10m including transaction costs and financing of refurbishment capex 014PF 1 1 015PF (B) 014PF 1 1 015PF (B) Based on Barceló s budget for 015. This financials are not illustrative of 015 P&L of BAY
Transaction rationale (cont d) Direct exposure to Spanish tourism industry combined with a strong cash yield generation 1 Well-located hotel portfolio in the most remarkable Spanish prime vacation areas, specially in Canary Islands, High quality portfolio (+90% are 4*), located in prime consolidated vacation areas which concentrate +50% of total international overnight stays (%) 3. Balearic Islands 6 hotels As of 014YE Keys Revenues 1 570 11m 1,915 33m Total foreign overnight stays (million) Canary Islands 185 190 7% 9% 1. Andalusia hotels 3. Canary Islands 8 hotels 1 3 3,61 104m 6,097 148m Balearic Islands 7% 5% and well-invested, with significant capital deployed over the last years 013 014 Intense capex effort, especially focused on asset repositioning, but still opportunities to further enhance repositioning Robust program capex already implemented, with c. 10 million invested since 007 4 37 3 +80% of total capex dedicated to fully refurbish and reposition many of the hotels Hispania estimates an additional 35 million capex to further enhance portfolio positioning Source: Barceló and INE Notes: 1 Plus two small shopping centres Hotel revenue including shopping centres 3 Excluding Andalusia region 4 180 million capex invested since 005 m 17 15 34 6 4 1 7 007 008 009 010 011 01 013 014 5 8 13 11 16 3 14 14 3 11 7 5 1 Maintenance capex Refurbishment capex
Transaction rationale (cont d) Direct exposure to Spanish tourism industry combined with a strong cash yield generation 3 combined with a low risk profile given a highly diversified tourist base and limited seasonality Canary and Balearic Islands dependant from an European diversified tourist base Canary Islands enjoys a very limited seasonality: Occupancy only below 80% levels in May and December Year 014 1 18% 4% 6% 10% 3% 30% Germany UK Nordics Belgium & Netherlands France Others Weighted occupancy rate for BAY portfolio in Canary Islands (014) % 100 90 80 70 60 50 Jan-14 Apr-14 Jul-14 Sep-14 Dec-14 4 have allowed steady growth over the crisis Revenue CAGR in 007-14 of 3.% EBITDAR CAGR in 007-14 of 4.3% m 119 118 104 115 18 14 134 148 m 34 31 3 7 33 3 36 45 007 008 009 010 011 01 013 014 007 008 009 010 011 01 013 014 Source: Frontur Notes: 1 Based on.8 million international tourists registered by the Canary and the Balearic Islands 6
Transaction rationale (cont d) Direct exposure to Spanish tourism industry combined with a strong cash yield generation 5 This platform will benefit from further growth given significant investment opportunities in Spain as one of the largest vacation markets Spain is third largest touristic destination worldwide being 80% larger in terms of resort rooms than US (million tourists) Rank Country 009 013 CAGR 700 1 76.8 84.7.5% 55.0 69.8 6.1% 000 rooms 385 +80% Many available investment opportunities 3 5. 60.7 1 3.8% 4 50.9 55.7.3% 6 by entering into at the right time of the cycle, driven international and domestic demand Steady growth prospects of key touristic nationalities targeted by BAY supported by first signs of recovery of domestic demand in terms of GDP and household expenditure GDP growth (%) 013 014 015E 016E Euro area (0.5) 0.8 1. 1.4 Germany 0. 1.5 1.3 1.5 France 0.3 0.4 0.9 1.3 Italy (1.9) (0.4) 0.4 0.8 UK 1.7.6.7.4 US..4 3.6 3.3 Source: Tesoro Público, IMF WEO update as of January 015, ISTAC, IBESTAT and INE Notes: 1 According to latest data reported by Frontur, Spain reached the 65 million of international tourists in 014, implying c.7% increase y-o-y GDP y-o-y growth (%) 5.0%.5% 0.0% -.5% -5.0% -7.5% 7 015E:.0% 016E: 1.8% 08 10 1 14 Household expenditure 4.0%.0% 0.0% -.0% -4.0% -6.0% 10 11 1 13 14
Unique investment opportunity to create a best-in-class hotel platform and become the listed multi-operator pure vacation hotel REIT in Europe Strategy going-forward BECOME FIRST LISTED PURE VACATION HOTEL REIT IN EUROPE FURTHER ENHANCE LOW RISK PROFILE THROUGH INVESTMENTS IN CONSOLIDATED DESTINATIONS ACROSS SPAIN WITH A DIVERSIFIED TOURISTIC BASE MULTI-OPERATOR STRATEGY TARGET CRITICAL MASS OF AT LEAST 1.0 BILLION ENTERPRISE VALUE BECOME AN ATTRACTIVE ALTERNATIVE FOR YIELD INVESTORS PLUS POTENTIAL VALUE UPLIFT DEVELOP PARTNERSHIP WITH A SPANISH HOTEL GROUP WITH PROVEN TRACK RECORD AS BARCELÓ 8
Strategy going-forward (cont d) Unique platform to be further developed by identified solid pipeline to gain a sizeable scale Build up process to capture further profitable growth in the Spanish hospitality landscape and enhance portfolio diversification Portfolio expansion timeline" IPO > 1.0bn 1 >6,300 keys already secured Identified solid pipeline (>8,000 keys) Development 1 BAY PORTFOLIO 16 hotels in the Canary Islands, Balearic Islands and Andalusia small shopping centres 6,097 keys JARDINES DEL TEIDE Hispania s existing asset 1 hotel in South Tenerife 300 keys 1 PROJECTS IN EXECUTION 3 hotels in the Canary Islands and Catalonia c.900 keys IDENTIFIED PIPELINE Nine additional projects in the Canary Islands, Catalonia and Costa Blanca c.7,100 keys distributed across the Canary Islands, Catalonia and Costa Blanca Disciplined and thoughtful ongoing development and sourcing of new vacation hotel investment opportunities, in collaboration with Barceló BAY is targeting a high quality portfolio 1. To take advantage from current positive industry fundamentals;. With attractive entry prices; 3. Well-diversified in terms of geographies but with a clear focus on the Canary Islands, given its limited seasonality; 4. Managed by a diversified renowned operators base, specialised in the vacation segment; 5. With upgrading potential to extract further value from the assets Source: Hispania Note: 1 Enterprise value 9
Transformational deal for Hispania After the completion of the transaction, Hispania will have fully deployed all IPO net proceeds in a portfolio of more than 900 million of assets 534 million of net proceeds raised in the IPO fully committed As % of total net proceeds 75% 104% 108% IPO net proceeds 151 0 553 573 40 Including phase I and phase II, with a final stake of 80.5% Initial committed equity 1 invested Investment in BAY Total initial committed equity invested BAY capex to be financed with new Hispania's equity Total initial committed equity invested Transformational deal for Hispania in terms of size and quality, resulting in a portfolio with a special focus on hotel assets, especially on the resilient Canary Islands vacation segment Hispania will boost its managed asset portfolio value by.1x, after having deployed all net proceeds Consolidated GAV ( m) 433 Hispania's initial GAV 3 7 015 committed capex 41 BAY portfolio value 38 BAY committed capex 919 Hispania's GAV post-transaction & capex Hotels 60% Retail % Residential 11% Offices 6% BAY will contribute with substantial, stabilized and longterm economics to Hispania Hispania will receive 89.% of the EBITDAR generated by BAY, with a fixed rent component Minimum gross yield guaranteed by Barceló of 6.4% (015-019 average) Long-term rental contract signed with Barceló Economics attributable to Hispania (014PF) 40 million Revenues 37 million EBITDA 7.7% Net yield Source: Hispania and Barceló Notes: 1 Including the attributable estimated committed capex for 015 Estimated equity requirement to fund refurbishment capex of Barceló s portfolio 10 3 Based on 014 December appraisal values (except for Málaga Vincci hotel which includes transaction value and acquisition expenses as the deal was fully completed in January 015)
Closing remarks Transformational deal for Hispania, with a strong focus on the Spanish vacation hospitality industry 41 million high quality hotel portfolio, with a strong presence in the Canary Islands NET PROCEEDS FULLY COMMITTED AND TOTAL FIREPOWER QUASI USED UP ON COMPLETION OF BAY TRANSACTION Partnership with Barceló, a leading and fully integrated Spanish leasure company Extensive growth plans based on an already solid pipeline of opportunities 11
Appendix Barceló Group overview
Simplified transaction structure overview The transaction will be structured into two separate phases set to be completed by Q1 016, with a total equity contribution by Hispania of 11-151 million depending on final stake held by Barceló, which will range between 19.5%-35.0% Phase I: expected to be fully completed by June 015 Contribution by Barceló to BAY of 11 hotels and one shopping centres for c. 196 million of enterprise value In June 015, Hispania will acquire a stake of 80.5% in BAY HISPANIA BARCELÓ 80.5% 19.5% BAY Hispania equity investment: c. 100 million c. 70 million of debt attached to the assets contributed will be refinanced with a syndicated loan 1 Once the investment by Hispania is completed, BAY will request for the SOCIMI regime 4 hotels Isla Cristina Cabo Gata Jandía Playa Jandía Mar 5 hotels Cala Viñas Hamilton Ponent Playa Pueblo Ibiza Pueblo Menorca hotels La Galea Varadero Other C. C. El Castillo I La Marina Thalasso SPA Phase II: fully completed by Q1 016 Simultaneously to the first phase, BAY will grant a put option to Barceló to sell an additional hotel portfolio after December 1, 015 and, only if, certain conditions are met Additionally, Barceló will grant a call option to BAY to acquire this portfolio only after March 016, if the put option is not exercised Potential acquisition of five hotels and one shopping centre by BAY for c. 5 million of enterprise value Assuming a final equity structure 80.5%/19.5%, Hispania would contribute, additionally, 50 million in this second phase c. 165 million of debt attached to the assets contributed in the second phase 11 hotels HISPANIA Phase I: already executed in June 015 BAY BARCELÓ 80.5% 19.5% Other Assets 1 Margaritas Lanzarote Fuerteventura Castillo C.C El Castillo II Assets Pueblo Park Phase II: to be potentially executed in Q1 016 Source: Hispania Note: 1 Appetite for financing from Spanish banks already tested 13
BAY portfolio overview Portfolio overview Asset Category Keys % Total Location Fuerteventura 4* 486 8.0% Caleta de Fuste Castillo 4* 480 7.9% Caleta de Fuste SC Fuerteventura Shopping Center - - Caleta de Fuste SC Castillo Shopping Center - - Caleta de Fuste La Marina Retail - - Caleta de Fuste Jandía Playa 4* 634 10.4% Jandía Jandía Mar 4* 485 8.0% Jandía Fuerteventura,085 34.% Lanzarote 4* 46 7.0% Costa Teguise La Galea 4* 305 5.0% Costa Teguise Lanzarote 731 1.0% Margaritas 4* 484 7.9% Mas Palomas Varadero 3* 31 5.1% Tenerife LPGC / TEN 796 13.1% Canary Islands 3,61 59.% Cala Viñas 4* 330 5.4% Mallorca Hamilton 4* 158.6% Menorca Ponent Playa 3* 43 7.1% Mallorca Pueblo Ibiza 4* 346 5.7% Ibiza Pueblo Menorca 4* 374 6.1% Menorca Pueblo Park 4* 75 4.5% Mallorca Balearic Islands 1,915 31.4% Isla Cristina 4* 341 5.6% Huelva Cabo Gata 4* 9 3.8% Almería Andalucía 570 9.3% Total 6,097 100% 14
Barceló Group is an integrated hospitality player, active across the whole hotel value chain Barceló Group overview Key highlights Fully integrated and balanced portfolio, with strong Spanish leisure presence in the high end market segment Well diversified by segments (vacation, urban) and by geography (over 140 hotels) Solid commercial distribution system with a powerful network of its own (over 800 travel agencies, Barceló Viajes) and in a strong position toward other distribution channels Strong relationships with tour operators: more than 5,000 contracts a year with over 500 international travel companies Development of an online platform: own platform and leading positions in over 150,000 tourist service websites Increasing exposure to alternative distribution channels: agreements with international airlines and a distribution channel of over 600,000 agents worldwide Significant know-how of the hotel industry with a focus on turnarounds and cost optimisation strategies providing reliability and stability Soundness operating profile, with 4% revenues CAGR over 006-013 Best-in-class management team committed towards long-term growth, leadership and profitability Acquisition track-record It has doubled the group s size in Spain in less than 7 years Hotels breakdown 014 1 By destination Urban 38% Barceló is a top hotel operator in Spain (013) 91 174 48 4 79 3 83 94 7.17 0.961 Vacation 6% 1.968 1.164 By management Managed 15% Rented 33% Owned 5% 10.06 9.549 9.496 8.847 Key contracts with selected tour operators Peer 1 Peer Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Number of rooms Number of hotels (#) Source: Barceló and Hotel Market 013 Note: 1 Breakdown by number of hotels as of July 014 15