2018 ANNUAL GENERAL SHAREHOLDERS MEETING · 2018. 5. 7. · ANNUAL GENERAL SHAREHOLDERS MEETING....

Madrid, 7 May 2018

2018ANNUAL GENERAL

SHAREHOLDERS MEETING

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 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”), 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 INFORMATION ON THE COMPANY.

This presentation may include forward-looking 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 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.

DISCLAIMER

2

Financial results 2017 1 ı 2 ı 3 ı 4

Portfolio performance 1 ı 2 ı 3 ı 4

Board of Directors composition 5

Capital and debt events 6 ı 7 ı 8 ı 9

Remuneration report 12

Future outlook

Agenda items

2017 Highlights | Financial and business performance

• +2.0% FFO per share YoY, equivalent to +11.9% LfL growth, after overcoming € 0.06 per share due to the disposal of hotels in 2016

• +18.0% EPRA NAV YoY, capturing the value created across the portfolio

• DPS € 0.46, exceeding February 2017 guidance (€ 0.44)

• Outstanding 21.6% total shareholder return

• Capital structure: reduce leverage and limited exposure to future interest rate hikes

Financial performance

• Excellent performance in office, shopping centers and logistics, with positive LfL growth and release spread across the board

• Occupancy growing at a steady pace in offices and shopping centers and accelerated in logistics

Businessperformance

• Substantial value creation from WIP and refurbished assets delivered in the period

• Development and refurbishment plan being executed on targetValue creation

4

Fuente: Compañía

13.65

EPRA NAV+DPS 2017

11.23

EPRA NAVDec-16

0.40

DPS2017

EPRA NAVDec-17

13.25

NAV growth2017

2.02

TSR + 21.6%(€ per share)

2017 Highlights | Total shareholders return (TSR)

EXCELLENT RETURN TO SHAREHOLDERS IN 2017

Source: Company and Bloomberg

Share revaluation in 2017 +9.4%

Revaluation + dividend per share in 2017 +13.3%5

€ 0.20

October 2017(1)

€ 0.20

AGM 2017(2)

€ 0.40

Total

€ 0.20

September 2016(1)

€ 0.26

AGM May 2018(1)

€ 0.40

Total

€ 0.20

September 2016(1)

€ 0.20

AGM 2017(2)

€ 0.46

Total

COMPLEMENTARYDIVIDEND

PER SHARE(2)

TOTAL PER SHARE

TOTAL FY 17 DIVIDEND

€ 216M

Fuente: Compañía(1) El número de accionistas con derecho a percibir el dividendo son 323,0 millones.(2) El número de accionistas con derecho a percibir el dividendo son 469,7 millones.

INTERIMDIVIDEND

PER SHARE(1)

2017 Highlights | Proposed 2017 dividend

TOTAL DISTRIBUTION OF € 216M FY 2017, € 29M AHEAD OF FEBRUARY GUIDANCE (+4.3%)

Source: Company(1) Dividend holders are 469.7m shares(2) Subject to AGM approval

6

1 ı 2 ı 3 ı 4Agenda items

FINANCIAL RESULTS 2017

Financial results 2017 | Key metrics

+11.9%(1) INCREASE IN FFO PER SHARE AND +18% IN NAV PER SHARE

Recurring FFO

289.2

+11.9%(1)

Recurring AFFO

0.58

Recurring AFFO(2)

270.9

EPRA NAV

13.25

EPRA NAV

6,224.7

+18.0%Per share vs 2016

€ per share

€ million

+47.1%

IFRS net profit

1,100.4

IFRS net profit

2.34

(1) Pro-forma YoY after overcoming € 0.05 net per share between 2016 sales and 2017 acquisitions(2) Recurring FFO less recurring investments in the portfolio

Recurring FFO

0.62

+11.7%(1)

8

Financial results 2017 | Bridge gross rents

OFFICE AND SHOPPING CENTERS SHOWING ROBUST UPWARDS TREND, ACCELERATED GROWTH IN LOGISTICS

(1) Portfolio in operation in 2016 (€ 257.6m GRI) and in 2017 (€ 264.7m GRI)(2) Vestas, Endesa-Sevilla, UPS and Logista

(€m)

2016

351.0

2017

469.4

Like-for-Like growth

+7.0

LfL(1)

+2.7%

Offices +2.9%Shopping centers +3.6%

Logistics +8.4%High Street retail +0.9%

Other +7.2%

Balance acquisitions, disposals and other

+111.4

Mainly Metrovacesaand Adequa

9

0.62

FY 2017

0.60

FY 2016

0.07

Growth2017

0.55

Disposals 2016

Acquisitions 2017

(0.06)

0.01

+ 11.9%(€ per share)

FY 2016 net of disposals

and acquisitions

MEANINGFUL FFO GROWTH OVERCOMING CASH FLOW LOST DUE TO 2016 DISPOSALS

Financial results 2017 | Bridge FFO

Hotelsdisposal

10

Financial results 2017 | Assets valuation summary

GAV (€ million)

Like-for-LikeGAV evolution Average

MERLIN(2)

10.5%

Offices

+13.2%

Shoppingcenters

+7.3%

Logistics

+17.5%

High street retail

+6.4%

866

5,219

1,7532,348

648

11,254

421

Other(1)Offices Shoppingcenters

High street retail

Logistics TotalMinoritystakes

Source: Company(1) Other includes logistics WIP developments, hotels, land under development, non-core land and miscellaneous(2) Including minority stakes and other assets

GAV (€ million)


MERLIN(2)

10.5%

Offices

+13.2%

Shoppingcenters

+7.3%

Logistics

+17.5%

High street retail

+6.4%

866

5,219

1,7532,348

648

11,254

421


High street retail


GAV (€ million)


MERLIN(2)

10.5%

Offices

+13.2%

Shoppingcenters

+7.3%

Logistics

+17.5%

High street retail

+6.4%

866

5,219

1,7532,348

648

11,254

421


High street retail


APPRAISALS PROGRESSIVELY REFLECTING IMPROVEMENTS IN THE QUALITY AND OCCUPANCY OF OUR PORTFOLIO AS WELL AS PREVAILING MARKET YIELDS, UNDERPINNED BY RECENT TRANSACTIONS PROVIDING GOOD BENCHMARKS

11

Financial results 2017 | Financial debt breakdown

(€ million)

(509)(1)

Cash

4,904

Total net debt

% Over Gross Debt

Average Cost (%) vs 2.3% en 2016

% Hedged

874

Unsecuredbank loans

16.1%

2.0%

96.7%

1,166

Secured loans

21.5%

2.7%

99.4%

3,250

Unsecuredbonds

60.0%

2.1%

100.0%

124

Leasings

2.3%

3.1%

67.6% vs 88.7% en 2016

Totalgross debt

5,413

100.0%

2.2%

99.6%

Fuente: Compañía (1)

REDUCTION OF COST OF DEBT AND LIMITED EXPOSURE TO INTEREST RATE HIKES

Source: Company(1) Cash balance includes cash avaliable at 31/12/2017 (€ 457.4m) and net receivables from the sale of hotels(€ 50,8m)

12

Unsecured loans

Secured loans

Leasing

Unsecured bonds

59124

2018

2714

2019

283

2020

840

138

4185

856

719

869 838

758

1,110

16

2021

700

19

2022

850

19

2023

838

2024

600

158

2025

1,100

10

+2026

Average maturity

6.1 years

Financial results 2017 | Debt schedule and metrics

Source: Company

Liquidity position

€ 929m

Average maturity

6.1 yearsLTV

43.6%

Unsecured debt

78.5%

FURTHER LEVERAGE REDUCTION AND MATURITY PROFILE OPTIMIZED

CONTINÚA LA REDUCCIÓN DE APALANCAMIENTO Y SE OPTIMIZA EL CALENDARIO DE VENCIMIENTOS

13


PORTFOLIO PERFORMANCE

Portfolio performance | Breakdown

INCREASE OF LOGISTICS WEIGHT

Source: Company2017 includes offices and logistics development(1) Other includes hotels, non-core land and others

Offices LogisticsHigh street retail Shopping centers Other

47%

23%

20%

7%3%(1)

46%

20%

18%

13%

3%(1)

Offices LogisticsHigh street retail Shopping centers Other

47%

23%

20%

7%3%(1)

46%

20%

18%

13%

3%(1)

GRI

2016

GRI

2017 (PRO-FORMA)

15

89.4%

Occupancy31/12/17

WAULT(1)

3.12.7

1.4

88.2%

76.7%

Offices Shopping centers(2)

6.7 years

AverageMERLIN

92.6%(91.3% in 2016)

3.7

98.5%

Logistics

19.3

99.4%

High Street retail Other

Portfolio performance | Occupancy and WAULT

INCREASE IN OCCUPANCY WITH STABLE LEASE MATURITY PROFILE

Source: Company(1) WAULT weighted by the gross rent, calculated as the average period until the lease contract expiration, as from 31 December 2017(2) Excluding Opción SC

16

LfL rent growth

17vs16(1)

sqm contracted

Release spread(2) #contracts

Occupancy 31/12/17

Occupancy YoY (bps)

Offices +2.9% 456,921 +3.4% 237 88.2% +28

Shopping centers +3.6% 108,411 +4.7% 166 89.4% +78

High Street retail +0.9% - - - 99.4% (59)

Logistics +8.4% 284,667 +13.4% 13 98.5% +315

Other +7.2% - - - 76.7% +20

TOTAL +2.7% 849,999 416 92.6% +132

Portfolio performance | Business performance in 2017

GOOD TRADING PERFORMANCE ACROSS THE BOARD

(1) Assets in operation in 2016 as well as 2017 according to EPRA standards. Office portfolio comparable as being in operation in 2016 (€ 97.0m) and 2017 (€ 99.8m). Shopping centers portfolio comparable as being in operation in 2016 (€ 39.1m) and 2017 (€ 40.5m). Logistics portfolio comparable as being in operation in 2016 (€ 15.8m) and 2017 (€ 17.1m).

(2) Variation in the nominal rent in renewals and relets occurred in the entire portfolio in 2017

17

Portfolio performance | Projects delivered in 2017

Puerta de las Naciones 3

+18%

Eucalipto 33

+15%

Avda. Europa 1A

+34%

Juan Esplandiu

+24%

Office

Thader

+44%

Shopping Centers

Zal Port

+42%

Testa Residencial

+18%

Minority stakes

Madrid-Meco II

+56%

Madrid-Pinto

+27%

Cabanillas Park I

+33%

Logistics

STRONG REVALUATION IN THE ASSETS REFURBISHED OR DEVELOPED IN 2017

18

BOARD OF DIRECTORS COMPOSITION

5Agenda items

BoD composition | BoD / Audit &Control / Remuneration & Nomination

BOARD REDUCED TO 12 MEMBERS: 8 INDEPENDENT / 2 PROPRIETARY / 2 EXECUTIVE

Appointments and Remuneration CommitteeAudit and Control Committee Independent Directors

Mónica Martín de Vidales

Secretary

Ildefonso Polo del Mármol

Vice-Secretary

Javier García-Carranza Non-Executive Chairman

Ismael Clemente CEO & Executive Vice-Chairman

Miguel Ollero

Francisca Ortega

María Luisa Jordá

Ana García Fau

Fernando OrtizChairman A&R Committee

Donald Johnston

John Gómez Hall

Juan María AguirreChairman A&C Committee

Pilar Cavero

Emilio Novela

Appointments and Remuneration Committee

Audit and Control Committee

Independent Directors

Executive Director

Proprietary Director

20

CAPITAL & DEBT EVENTS


Capital & debt events | Proposal to shareholders

STANDARD AUTORIZATIONS TO MANAGE BALANCE SHEET EFFICIENTLY

#6 Equity

Delegation to the Board (5 years) of the power to increase capital up to:

• 50% of current capital, with rights

• 20% of current capital, without rights

Delegation to the Board (5 years) to issue up to € 1bn of convertible debt obligations

#8 Convertibles

Delegation to the Board (5 years) of the power to issue up to € 5bn of bonds and € 500m of commercial paper#9

Debt

Treasury stock up to 10% of current capital#7 Treasuty stock

22

REMUNERATION REPORT

12Agenda items

Comp 1 Comp 3 Comp 4 Comp 5 Comp 6 Comp 7 Comp 8 Comp 9 Comp 10

AVERAGE

European peers

Comp 2

7056

2723 22 21 20 19 18

1025

43

Remuneration report | Productivity

HIGHEST GAV/EMPLOYEE RATIO IN EUROPE

Source: Companies reported financial statements

(€ million)

24

Remuneration report | Efficiency

OVERHEADS AND LONG TERM INCENTIVES

AS A % OF NAV

MERLIN2017

1.0%0.4%

LTIP

0.6%Overheads & salaries

Europeanpeers 2017(1)

1.5%

0.3%LTIP

1.2%Overheads & salaries

Source: Company(1) Colonial, Axiare, Hispania, Lar España, Klapierre, Unibail Rodamco, British Land, Gecina, Land Securities, Foncière des Régions, Hammerson, Icade, Segro e Intu

LOWEST COST BASE IN SPAIN AND ONE OF THE LOWEST IN EUROPE

25

Remuneration report | Equality

MERLIN IBEX-35

€52,405Total

Variable

Fixed

Total

Average compensation per employee (ex- 2 Executive Directors)

Lead executive pay / Average pay

Highest average compensation in IBEX-35

Lowest salary discrimination in IBEX-35

LTIP applied to 25% of staff

Variable remuneration represents 53% of compensation

All employees receive a cash bonus

Source: Towers Watson (ex-LTIP) and Company

€67,866

€60,568

€128,434

19x

117x

MERLIN IBEX-35

26

Remuneration report | Numerical test by ISS

Alignment between MERLIN’s performance and pay vs comparables

MERLIN has achieved average score in the multiple over median analysis due to the inclusion by ISS of two non-comparable companies. If excluded the score would have been High

Multiple MERLIN’s pay over median pay of comparables

Score: Average

A BP

erf

orm

an

ce

Pay

100%

50%

0%

0% 50% 100%

High Average LowScore

ISS multiple 2.9x 4.0x

Score: High

MERLIN

MERLIN2017

(2.7x) 3.0x

MERLIN2016

4.3x

27

Remuneration report | Non-numerical test by ISS

ISS non-numerical test is based upon a matrix with 17 items scored by ISS with a “tick the mark” approach. These items are: disclosure, individual and global caps, dilution of share plans, alignment between pay and performance, long-term orientation and a generic item called “Other”

MERLIN has obtained a “Good tick” in 16 out of 17 items (11 out of 17 in 2016)

ISS has recommended voting against in the “Other” chapter due to the potential maximum pay opportunity for executive directors in case of outstanding performance

We think that ISS focuses their analysis on the individual compensation of executive directors but does not factor the overall compensation of a given company or its efficiency ratio

ISS approach ranks better companies with executives paid below average but leading low efficient companies instead of companies with well paid executives leading highly efficient companies

ISS misses perks in their analysis, namely personal expenses of executive directors that are accounted for as overheads instead of salaries. No perks exist in MERLIN

28

OUTLOOK 2018

Future outlook | Our forecast for 2018

Office• Growth in employment drives up occupancy and rents

• Strong lease-up activity maintaining incentives at bay

• Implementation of Landmark Plan I

• Growth in private consumption underpins footfall and retail sales

• Growth in occupancy is expected

• Implementation of Flagship Plan, with the imminent delivery of Arturo Soria, start of works in Larios and substantial progress in the works for X-Madrid

Shopping centers

• Spain expected to be one of the countries where on-line sales will grow the most

• Prices on new contracts and release spreads expected to continue increasing

• Best Plan II: rapid implementation to accommodate a rapidly growing demand

Logistics

• Future investments focused in expanding footprint in Portugal: target to become a leading office and logistics player combined with gaining presence in prime retail

• Divestment activity will resume in 2018: Testa Residencial, Aedas Homes and non-core

• Higher critical mass will translate into lower overheads expense which will be reduced from 0.6% of NAV to 0.575% for 2018 and 2019 (0.55% from 2020 onwards)

• Prudent management of balance sheet to continue reducing leverage

Corporate

30

DIVIDEND GUIDANCE CALCULATED

ON THE BASIS OF 80% OF AFFO

+ GAINS FROM ASSETS DISPOSALS

October 2018

€ 0.20

AGM 2018

€ 0.26

Total

€ 0.40

September 2017

€ 0.17

AGM 2019

€ 0.30

Total

€ 0.40

September 2017

€ 0.17

AGM 2018

€ 0.26

INTERIM FINAL(1)

Total

€ 0.50

TOTAL

Payment in two instalments in cash

MANAGEMENT GUIDANCE FOR DISTRIBUTION FY 2018: MINIMUM OF € 235M (€ 0.50 PER SHARE) (+9% VS 2017)

Outlook 2018 | Shareholders remuneration guidance 2018

Source: Company(1) Following approval by AGM of 2018 accounts 31

Future outlook | Landmark Plan I

Investment € 250 million

Delivery Torre Chamartín

Start of works Adequa

Plan Upscaling refurbishments

Prime locations

Quick growth in rents and

valuation

2018

Monumental

2020

Diagonal 605

Plaza Ruíz Picasso

Marqués de Pombal 3

2019

Alcalá 40

2021

Alfonso XI

Assets

Torre GlòriesCastellana

85

New developments

32


Torre Glòries

One of the most iconic buildings in BarcelonaReconversion into multitenancy

Creation of a unique observatory in Barcelona33


Torre Glòries

G.L.A. 37,614 sqm Investment € 15 million 34


Monumental

Full reburbishment to create the best building in prime CBD Lisbon

Façade | Lobby | Common areas

Elevators | Installations | Retail area35


Monumental



Diagonal 605

Full reburbishment Façade | Lobby | Common areas | Installations

Diagonal access | Flagship unit37


Diagonal 605




Reburbishment of lobby and common areas Creation of a new outdoor area 39





Castellana 85

Full reburbishment Façade | Lobby | Common areas | Installations 41


Castellana 85



Plaza Ruíz Picasso

Full reburbishment to create the building with the largest floorplants and highest specifications in Azca 43


Plaza Ruíz Picasso



Alcalá 40

Full reburbishment and creation of ground floor + mezzanine area for flagship store 45


Alcalá 40



Alfonso XI

Full reburbishmentFaçade | Lobby relocation | Common areas

Installations | Outdoor garden47


Alfonso XI


Torre Chamartín

Future outlook | Developments

Strategic location between the M-30 and M-11

Excellent vilisibility and accesses LEED Platinum building 49

Torre Chamartín




Adequa

PHASE I PHASE IIIntegrated complex | Demolition of physical barriers Parking | Services building

Development of tower + building51


Adequa

PHASE I G.L.A. 75,928 sqmPHASE II G.L.A. 44,886 sqm

Investment € 10 million Investment € 60 million

52

Future outlook | Plan Flagship

Investment € 120 million

Assets

PlanRefurbishment of shopping centers

Convert our shopping centers in the flagship store of online retail

• Create experience• Implement technology• Convergence of online

and physical sales

2018

Arturo Soria Plaza

Artea

20212020

Porto Pi

2019

Larios El Saler Tres Aguas

Start of works X-MadridNew developments

53

Future outlook | Flagship Plan

Arturo Soria

Deep renovation Façade | Common areas | Terraces | Parking 54


Arturo Soria



Larios

Full refurbishmentFaçade | Common areas | Vertical communication

Convert part of supermarket into fashion | Reconversion of cinemas into F&B56


Larios



El Saler

PHASE IAccesses from parking completed

PHASE IICommon areas

PHASE IIIFaçade + extension (2,700 sqm)

Full refurbishment in 3 phases

58


El Saler



Tres Aguas

Full refurbishment Façade | Common areas | Terraces 60


Tres Aguas



Porto Pi

Full refurbishment Façade | Common areas

Vertical communication | Terraces62


Porto Pi



X-Madrid

Creation of a unique and groundbreaking concept

Shopping center focused on experiences and cutting edge retailersDiving | Surf | Climbing

Gourmet dining | VIP cinemas64


X-Madrid


Future outlook | Best Plan II

€ 250 million

Development of the best

footprint in the Iberian market

• Best specifications• Best locations• Widest array of product

Investment

Assets

Plan

2018

Madrid Pinto II B

Madrid San Fernando II

Guadalajara Cabanillas

Park I F

Madrid Azuqueca II

Zaragoza Plaza Logistics Seseña Cabanillas X

2019

Guadalajara Cabanillas

Park II

20212020

Madrid Azuqueca III

66

Future outlook | Best Plan I

67

Madrid, 7 May 2018

2018ANNUAL GENERAL

SHAREHOLDERS MEETING

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