INTERIM FINANCIAL STATEMENTS for the period ended on June 30 2015
INTERIM FINANCIAL
STATEMENTSfor the period ended
on June 30 2015
INDEX
1. Key aspects 5
2. Consolidated profit and loss account 11
3. Consolidated balance sheet 13
4. Valuation and EPRA metrics 18
5. Investment and leasing activity 22
6. Stock price evolution 31
7. Events post-closing 32
Interim financial statements ı 5
1. KEY ASPECTS
In addition, MERLIN has signed a forward purchase agreement for the development of three logistics warehouses in Guadalajara-Cabanillas, having disbursed 25% of the price upon signature (€ 11,571 thousand), and has entered into a deposit contract (€ 9,100 thousand including transaction costs) for the future acquisition of 33 supermarkets long-term leased to Caprabo (equivalent to 10% of total price).
3. Commercial portfolio
After the recent acquisitions, and excluding Testa, MERLIN Properties owns a commercial real estate comprising 906 assets, with a gross lettable area (“G.L.A.”) of 758,851 sqm. The acquisition price (including transaction costs) is € 2,229,454 thousand. The portfolio gross asset value (“GAV”) in accordance with Savills valuation as of 30 June 2015 amounts to € 2,415,537 thousand (€ 2,413,706 thousand excluding the logistics land plot). Adding the investments accounted for using the equity method (Testa and a company in Portugal, € 425,115 thousand) and the Cabanillas forward purchase advance payment and Caprabo deposit payment (totaling € 20,671 thousand), MERLIN total GAV amounts to € 2,861,323 thousand. The net asset value, following EPRA recommendations (“EPRA Net Asset Value” or “EPRA NAV”), amounts to € 2,061,947 thousand (€ 10.64 per share).
4. Results
In the first semester, MERLIN recorded revenues of € 67,036 thousand, EBITDA of € 57,295 thousand, a recurring EBITDA of € 55,355 thousand (€0.29 per share), a recurring FFO of € 42,414 thousand (€ 0.22 per share), a FFO of € 41,198 thousand (€ 0.21 per share) and a net consolidated result of € 119,582 thousand (€ 0.62 per share).
1. Capital structure
On 11 May 2015 a capital increase of MERLIN Properties Socimi, S.A. (hereinafter, MERLIN, MERLIN Properties or the Company) took place for an amount of € 613,756 thousand.
2. Investment activity
MERLIN Properties signed on 8 June 2015 with Sacyr, S.A. a binding agreement for the acquisition by MERLIN, in different phases, of a majority stake (99.6%) of Testa Inmuebles en Renta, S.A. (hereinafter, Testa). During the first semester, according to the terms of the agreement, MERLIN has acquired a 25% stake of Testa, by means of the subscription to a capital increase of newly issued shares for an amount of € 430,839 thousand. As of 30 June 2015, the stake has been accounted for using the equity method (capital increase amount less a dividend received from Testa for an amount of € 5,774 thousand).
MERLIN has acquired two office buildings, two logistics warehouses and a logistics land plot for an aggregate amount of € 101,605 thousand, of which € 99,997 thousand correspond to the acquisition price of the assets and € 1,608 thousand to transaction costs.
The acquisitions of the 25% stake of Testa and the five assets resulted in the disbursement of € 503,504 thousand of MERLIN’s equity. The remaining € 28,940 thousand corresponds to the existing financing in two of the acquired assets. MERLIN Properties has assumed these financings.
6 ı
Number of ordinary shares 193,818,000
Weighted number of ordinary shares
148,486,719
Total Equity 2,027,090
GAV 2,861,323
Net Debt 791,602
Net Debt / Net Debt + Equity
28.1%
Net Debt / GAV 27.7%
CAPITAL STRUCTURE KEY DATA
Free Float 83.6%
Marketfield 6.7%
EJF 5.0%
UBS 4.7%
(€ thousand) 30/06/2015
GAV of the commercial portfolio (1) 2,413,706
GAV of the land plot 1,831
Investments accounted for using the equity method 425,115
Forward purchase & deposit payments 20,671
Total GAV 2,861,323
Gross financial debt (1,191,782)
Cash, cash equivalents and short term financial investments 400,180
Net financial debt (791,602)
Working capital (7,774)
EPRA NAV 2,061,945
Number of ordinary shares 193,818,000
Weighted number of ordinary shares 148,486,718
EPRA NAV per ordinary share (€) 10.64
Share Price 30/06/2015 9.65
Premium / (Discount) Share Price – EPRA NAV (10.3%)
PORTFOLIO VALUATION
(1) In accordance with Savills valuation as of 30 June 2015
Interim financial statements ı 7
30/06/2015
Portfolio GAV(1) (€ thousand) 2,413,706
Portfolio acquisition costs (€ thousand) 2,227,602
Gross annualized rents 2015(2) (€ thousand) 134,581
Net annualized rents 2015(3) (€ thousand) 130,228
EPRA gross yield(4) 5.58%
EPRA topped-up Initial yield(5) 5.40%
Total GLA (sqm) 758,851
Occupancy rate 95.8%
WAULT by rents (years)(6) 16.8
KEY ASPECTS OF THE COMMERCIAL PORTFOLIO
(1) As per Savills valuation as of June 30, 2015 excluding the value of the land plot in Zaragoza(2) Gross annualized rents have been calculated as passing monthly rent as of 30 June 2015, multiplied by 12(3) Net annualized rents have been calculated as passing monthly rent as of 30 June 2015, multiplied by 12(4) Calculated dividing gross annualized rents by Portfolio GAV(5) Calculated dividing net annualized rents by Portfolio GAV(6) Weighted unexpired lease term, calculated as the number of years of unexpired lease term, as from 30 June 2015, until the first
break option of the lease contracts, weighted by the gross rent of each individual lease contract
8 ı
Valencia Almussafes
Madrid Meco
WTC Almeda Park, Building 8
Alcalá
Zaragoza Plaza
Madrid Getafe
Vitoria
A1 MadridBuilding 5
Marineda
A1 MadridBuildings 1, 2 and 3
Lisbon -Expo
A1 MadridBuilding 4
# Retail/branches Shopping center Office Logistics
7131 6
96
1010
2263
1534
9124
9312
40
161
109
LOCATION OF THE PORTFOLIO
WTC Almeda Park, Building 6
Madrid Coslada
Interim financial statements ı 9
GLA PER ASSET CLASS GROSS ANNUALIZED RENTS PER ASSET CLASS
49%
26%
11%
14%
66%
7%
13%
14%
GROSS YIELD PER ASSET CLASS
8.05%
LogisticsTree Inversiones
5.16%
Office
6.34%
Retail
6.36%
5.58%
Av. MERLIN
WAULT by rents (years) Occupancy per asset category
7.322.8
100%
89%
79%
98%
3.23.1
OCCUPANCY AND WAULT PER ASSET CLASS
Tree Inversiones
Office LogisticsRetail
95.8%
Av. MERLIN
16.8Av. MERLIN
Tree Inversiones Retail Office Logistics
10 ı
(€ thousand) 30/06/2015
Gross rents 65,444
Net rents before incentives and collection loss 63,886
Net rents after incentives and collection loss 63,113
Personnel expenses (5,063)
Other operating expenses (2,696) Per share
EBITDA recurring (1) 55,355 0.29
EPRA Net Income 44,802 0.23
FFO recurring (2) 42,414 0.22
FFO (3) 41,198 0.21
Net income for the period 119,582 0.62
KEY CONSOLIDATED FINANCIAL AND ECONOMIC INDICATORS (IFRS)
(1) Recurring EBITDA has been calculated as the EBITDA (€ 57,295 thousand) less other operating income (€ 1,939 thousand) (2) Recurring Funds from Operations. Recurring funds generated by the business after deducting operating expenses and deducting
net finance costs. Recurring FFO excludes other operating income (€ 1,939 thousand) and the non-recurring costs related to acquisition of companies and one-off financing costs (€ 1,216 thousand)
(3) It is calculated deducting from recurring FFO the costs associated to acquisition of companies and one-off financing costs
Interim financial statements ı 11
2. CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS TO 30 JUNE 2015 (IFRS)
(€ thousand)ACCUMULATED
up until 30/06/2015
Gross rents 65,444
Tree Inversiones Inmobiliarias 44,531
Retail 9,205
Office 8,078
Logistics 3,630
Other operating income 1,939
Total operating income 67,383
Incentives and collection loss (772)
Total operating expenses (9,316)
Portfolio operating expenses not rechargeable to tenants (1,558)
Personnel expenses (5,063)
General expenses (2,695)
EBITDA 57,295
Depreciation (51)
Gains / (losses) on disposal of assets 12
Provision surpluses 476
Negative goodwill on business combinations (42)
EBIT 57,690
Net interest expense (14,134)
Change in fair value of investment properties 94,954
Change in fair value of financial instruments (12,836)
PROFIT BEFORE TAX 125,674
Income taxes (6,092)
PROFIT (LOSS) FOR THE PERIOD 119,582
12 ı
2.1 Notes to the consolidated income statement
Gross rents (€ 65,444 thousand) less portfolio operating expenses not rechargeable to tenants (€ 1,558 thousand) equals to net rents before incentives and collection loss of € 63,886 thousand. After deducting incentives and collection loss (€ 772 thousand), the resulting amount is € 63,114 thousand of net rents after incentives and collection loss.
Other operating income includes penalties to tenants for early lease cancellations.
Total operating expenses of the Company for this semester were € 9,316 thousand, of which € 3,133 thousand are excluded from the overheads limitation, corresponding to portfolio operating expenses non-recoverable from tenants (€ 1,558 thousand) and € 1,575 thousand mainly to costs associated with the acquisition of companies and one-off financing costs. Out of the total amount of the costs included within the limit of the annual overheads (€ 6,184 thousand), € 5,063 thousand correspond to personnel costs and € 1,121 thousand to running costs of the Company. Personnel costs include an estimate of the variable remuneration component.
The negative goodwill on business combinations corresponds to the difference between the purchase price of 100% of the equity of MPVCI (Portuguese company holding the office asset in Lisbon) and of MERLIN Logistica II, S.L.U., holding company of the logistics asset named Madrid-Meco, and the book value of each company as at the acquisition date, adjusted by the fair market value of the assets acquired net of its tax impact.
Income taxes correspond to the taxation arising as a result of the capital gain produced by the substitution of branches exercised by virtue of the master lease agreement by BBVA, which was signed on 3 February 2015 (45 entry branches and 42 exiting branches). Exiting branches were sold at a price equivalent to the Savills valuation giving rise to a capital gain for the difference between the sales value and the book value of the referred 42 branches sold.
2.2 Reconciliation Gross rents - FFO
The reconciliation between the gross rents of the period and FFO is as follows:
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Gross
rent
s
Proper
ty exp
. not
rech
argea
ble
Net
rent
s bef
ore in
cent
ives
and c
ollect
ion
loss Ren
ts
ince
ntive
s
Net
rent
s
Gener
al
expen
ses
Perso
nnel
Recur
ring
EBITDA
Fina
ncial
inco
me
Fina
ncial
expen
ses
FFO
Non re
curri
ng
expen
ses
Recur
ring F
FO
Collect
ion
loss
65,443.963,886.4
-1,557.5-346.9 63,113.9
-2,696.1-5,063.4
55,354.4 845.5 -15,002.2
41,197.7 1,216.4 42,414.1
-425.6
Interim financial statements ı 13
3. CONSOLIDATED BALANCE SHEET AS OF JUNE 30 2015 (IFRS)
ASSETS 30-06-2015 31-12-2014
NON-CURRENT ASSETS
Intangible assets 137 149
Property, plant and equipment 961 894
Investment property 2,187,001 1,969,934
Investments accounted for using the equity method 425,065 -
Non-current financial assets 268,060 281,192
Embedded inflation derivative 249,206 261,689
Other financial assets 18,854 19,503
Deferred tax assets 7,347 9,369
Total non-current assets 2,888,571 2,261,538
CURRENT ASSETS
Trade and other receivables 5,439 3,340
Other current financial assets 56,944 125,791
Other current assets 76 122
Cash and cash equivalents 343,236 26,050
Total current assets 405,695 155,303
TOTAL ASSETS 3,294,266 2,416,841
(€ thousand)
14 ı
EQUITY AND LIABILITIES 30-06-2015 31-12-2014
EQUITY
Subscribed capital 193,818 129,212
Share premium 1,711,519 1,162,368
Reserves 1,631 (30,475)
Other equity holder contributions 540 540
Valuation adjustments 14,833 (2,636)
Profit for the period 119,582 49,670
Equity attributable to equity holders of the Parent 2,041,923 1,308,679
NON-CURRENT LIABILITIES
Non-current bank borrowings 1,177,102 1,027,342
Other financial liabilities 22,128 21,498
Deferred tax liabilities 22,626 24,432
Provisions 841 476
Non-current accruals and deferred income 125 -
Total non-current liabilities 1,222,822 1,073,748
CURRENT LIABILITIES
Bank borrowings 14,750 10,809
Other current financial liabilities - 190
Trade and other payables 12,916 23,302
Current tax liabilities 292 75
Other current liabilities 1,563 38
Total current liabilities 29,521 34,414
TOTAL EQUITY AND LIABILITIES 3,294,266 2,416,841
(€ thousand)
Interim financial statements ı 15
3.1 Notes to the consolidated balance sheet
The fair value of property investments corresponds to the Savills valuation as of 30 June 2015, except for the assets not included in the perimeter of the valuation: (i) the 25% stake in Testa, which has been valued at acquisition cost (less the dividend received from Testa), and (ii) two assets for which a deposit (Caprabo) or a partial payment of the price (Guadalajara-Cabanillas) has been paid, both of which have been valued at acquisition cost. Investment property includes the fair value of the investments completed by 30 June 2015, minus the fair value of the embedded inflation derivative.
Long term financial investments include the fair value of the embedded inflation derivative, for an amount of € 249,206 thousand. This adjustment corresponds to the annual rent update component included in the BBVA lease agreement. This item has been valued separately from the main contract as a financial derivative. For the valuation of the embedded derivative the Company has based its estimation on the future total revenue derived from the contract adjusted by the credit risk of the counterparty.
The breakdown of the fair value of the assets in MERLIN’s portfolio, as of 30 June 2015, is as follows:
(€ thousand)
Tree Inversiones Inmobiliarias
Investment property 1,477,589
Financial investments (embedded derivative) 249,206
Subtotal Tree Inversiones Inmobiliarias 1,726,795
Retail assets in Investment property 294,971
Office assets in Investment property 279,530
Logistics assets in Investment property 114,241
Subtotal other assets 688,742
Forward purchase and deposit payments 20,671
Investments accounted for using the equity method(1) 425,114
Total fair value of the Portfolio 2,861,323
(1) Includes € 50 thousand of a company incorporated in Portugal.
16 ı
The balance of deferred tax liabilities, which amounted to € 22,626 thousand, corresponded to the estimate of the tax impact of the implicit capital gain when valuing the assets of Tree Inversiones Inmobiliarias at their fair value.
3.2 Capital structure evolution
3.2.1 Equity
On 11 May 2015 a capital increase was executed for € 613,756,990, by means of the issue and placing in circulation of 64,605,999 new ordinary shares, of 1 euro nominal value and a share premium of 8.5 euros per share, of the same class and series as those currently in circulation. The shares were fully subscribed and disbursed. After the capital increase, the equity balance of the Company as of 30 June 2015 amounts to € 2,041,923 thousand.
3.2.2 Financing
On 19 February 2015, MERLIN Retail signed the financing of Marineda, a loan facility agreement signed with Allianz group, with mortgage security on Marineda shopping centre. The loan has a principal amount of € 133,600 thousand, a term of ten years and accrues a fixed interest rate of 2.66% with no annual principal repayment requirement and full repayment of principal upon maturity.
On 13 March 2015, MERLIN Oficinas signed the financing of World Trade Centar Almeda Park building 6, a loan facility agreement signed with Deutsche Pfandbriefbank, with mortgage security on WTCAP 6. The loan has a principal amount of € 22,845 thousand, a term of nine years and accrues a fixed interest rate of 2.41%, with annual principal repayment of 0.5% per annum and repayment of 95.5% of principal upon maturity.
On 26 March 2015, MERLIN Oficinas renegotiated and assumed the existing financing on Alcala 38-40, a loan with Caixabank, with mortgage security over the
The balance of LT debt and ST debt includes Company’s outstanding financial debt, and the mark-to-market of interest-rate and inflation hedging contracts:
Long term Short term Total
Outstanding principal 1,179,222 10,632 1,189,854
Accrued interest 0 1,928 1,928
Total Gross financial debt 1,179,222 12,560 1,191,782
Cash and short-term financial investments (400,180)
Total net financial debt 791,602
Cash and short-term financial investments 400,180
Arrangement expenses (28,305) (28,305)
Market value of interest-rate and inflation hedging contracts
26,185 2,190 28,375
Total financial debt 1,177,102 14,750 1,191,852
Interim financial statements ı 17
asset. The loan has a principal amount of € 21,000 thousand, a term of fifteen years and accrues a variable interest rate of 3-months Euribor plus a margin of 150 basis points. The loan has a grace period of 4 years over principal repayment and full repayment of principal from year 5 until maturity.
On 17 April 2015, the Company, through its subsidiary MERLIN Logistica II, S.L.U., upon acquisition of the company holding the asset Madrid-Meco, assumed the financing with Caixabank, with mortgage guarantee over the asset. The loan has an outstanding balance as at the date of the acquisition of € 7,940 thousand and a variable interest rate of Euribor 6 month plus a 250bps margin.
On 21 June 2015, the Company signed a bridge financing facility for € 500 million with Morgan Stanley, JP Morgan and Goldman Sachs for the financing of the acquisition of Testa. As at 30 June 2015 no amount of the loan facility had been drawn down.
(€ thousand) 30/06/2015
Outstanding amount 1,189,854
Average maturity 9.0 years
Average cost until 31/12/2017
3.8%
Average cost from 31/12/2017 until maturity
2.7%
% of the debt with interest rate hedging
95.5%
KEY FEATURES OF THE GROSS FINANCIAL DEBT
Main features of the outstanding debt are as follows:
18 ı
4. VALUATION AND EPRA METRICS
GROSS ASSET VALUE RECONCILIATION (€ MILLION)
4.1 Portfolio valuation
The GAV of MERLIN as of 30 June 2015 amounts to € 2,861.3 million. The like-for-like increase from 31 December 2014 is +3.6%, due to a yield compression of approximately 20 basis points. The breakdown is as follows:
• Savills has valued all the assets of MERLIN portfolio, with the exception of the stake in Testa and the forward purchase and deposit payments, for a total amount of € 2,415.5 million.
• Testa stake. It has been considered as additional GAV for an amount equivalent to the acquisition cost (€ 430.8 million) less the ordinary dividend received from Testa, paid on 10 July 2015 (€ 5.7 million).
• Forward purchase and deposit payments. It has been considered as additional GAV for the amount disbursed as deposit (Caprabo) and 25% of price of forward purchase (Guadalajara-Cabanillas), for a total amount of € 20.7 million.
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2,231.6
GAV 31/12/2014
80.1
LfL Increase
103.8
1S 2015 Acquisitions
425.1
TestaStake
20.7
Advance payments and
deposits
2,861.3
GAV 30/06/2015
Interim financial statements ı 19
4.2 EPRA Net Asset Value
EPRA NAV as of 30 June 2015 of MERLIN amounts to € 2,061.9 million, equivalent to € 10.64 per share (+1.5% versus 31 December 2014) or €13.89 per weighted number of ordinary shares.
EPRA NNNAV as of 30 June 2015 of MERLIN amounts to € 2,018.3 million, equivalent to € 10.41 per share (+4.6% versus 31 December 2014) or €13.59 per average weighted share.
GAV PER ASSET CATEGORY LIKE FOR LIKE GAV INCREASE PER ASSET CATEGORY
Tree Inversiones Retail Office Logistics
70.9%12.5%
5.2%
11.5%
5.1%
3.4%
2.6%
5.0%
NET ASSET VALUE RECONCILIATION (€ MILLION)
Av. MERLIN 3.6%
3,000
2,500
2,000
1,500
1,000
500
0
EPRA NAV 31/12/2014
1,355.0
Change in net debt
65.7
EPRA NAV 30/06/2015
2,061.9
Testa 25% stake
425.1
lfl Increase
80.1
GAV Acquisitions
124.5
Change in working capital
11.5
20 ı
Performance Measure
Definition 30/06/2015 31/12/2014
€ MillionPer
share€ Million
Per share
EPRA Earnings
Recurring earnings from core operational activities
44.8 0.23 20.4 0.16
EPRA NAV
Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystalise in a long-term investment property business model
2,061.9 10.64 1,354.9 10.49
EPRA NNNAV
EPRA NAV adjusted to include the fair value of financial instruments, debt and deferred taxes
2,018.3 10.41 1,286.5 9.96
EPRA Net Initial Yield
Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with acquisition costs
5.40% 5.86%
EPRA “topped-up” NIY
Adjustment to the EPRA Net Initial Yield in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents)
5.46% 5.93%
EPRA Vacancy Rate
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio
4.2% 3.4%
EPRA Metrics
Interim financial statements ı 21
EPRA earnings have been calculated as follows:
(€ thousand) 30/06/2015
Consolidated net profit in accordance with IFRS 119,582
(i) changes in value of investment properties -94,912
(ii) profits or losses on disposal of investment properties -12
(iii) change in fair value of financial instruments +12,836
(iv) transaction costs in respect of acquisition of companies / joint ventures
+1,216
(iii) tax adjustments +6,092
EPRA Earnings for the period 44,802
EPRA Earnings for the period per share (€) 0.23
EPRA Earnings for the period per weighted share (€) 0.30
RECONCILIATION OF IFRS NET INCOME WITH EPRA EARNINGS
22 ı
5. INVESTMENT AND LEASING ACTIVITY
5.1 Investments
Investment activity in the first half of 2015 has been as follows:
Alcalá 38-40 acquisition
On 26 March 2015, the Group acquired, through MERLIN Oficinas, an office building located in the heart of Madrid,at Alcalá 38-40, for a purchase price of € 38,128 thousand.
ALCALÁ 38-40
Acquisition price of the asset (€ thousand) 38,128
Asset debt outstanding as of the date of purchase (€ thousand) 21,000
Equity disbursement (€ thousand) 17,128
Debt to acquisition price of asset 55.1%
Annualized gross rent 2015 (€ thousand) 1,985
Annualized net rent 2015 (€ thousand) 1,901
EPRA Gross Yield (1) 5.21%
EPRA Topped-up Initial Yield (2) 4.99%
Total G.L.A. (sqm) 9,315
Occupancy rate 100%
WAULT by rents (years) (3) 1.5
(1) Calculated as the gross annualized rent (passing rent as of 30 June 2015 times 12) divided by the acquisition price of the asset(2) Calculated as the gross annualized rent (passing rent as of 30 June 2015 times 12) minus annualized property expenses not
rechargeable to tenant, divided by the acquisition price of the asset(3) Weighted average unexpired lease term, calculated as number of years of unexpired lease term, as from June 30, 2015, until the
first break option window of the lease contracts, weighted by the gross rent of each individual lease contract
The building is located at the junction of the streets of Alcalá and Gran Vía, in an area known for its high density and retail concentration. This area is currently undergoing a redevelopment alongside the Canalejas project, which is taking place at the site of the former Banco Santander headquarters. The building has a GLA of 9,315 sqm, and is fully let to the Home Office, until 31 December 2016.
Interim financial statements ı 23
Madrid-Coslada logistics warehouse acquisition
On 27 March 2015, the Group acquired, through MERLIN Logistica, a logistics warehouse located in Madrid, in the Logistics Transport Centre in Coslada, for a purchase price of € 19,807 thousand.
The asset is located in Coslada (Madrid), a consolidated logistics area, known for its good connection to the A-2 highway and proximity to Madrid (18 kms.) and the airport (7 kms.). The acquired asset has a GLA of 28,490 sqm and is fully let to Azkar (a subsidiary of Dachser, one of the leading logistics operators in Europe).
(1) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) divided by the acquisition price of the asset(2) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) minus annualized property expenses not
rechargeable to tenant, divided by the acquisition price of the asset(3) Weighted average unexpired lease term, calculated as number of years of unexpired lease term, as from June 30, 2015, until the
first break option window of the lease contracts, weighted by the gross rent of each individual lease contract
MADRID-COSLADA
Acquisition price of the asset (€ thousand) 19,807
Asset debt outstanding as of the date of purchase (€ thousand) 0
Equity disbursement (€ thousand) 19,807
Debt to acquisition price of asset 0%
Annualized gross rent 2015 (€ thousand) 1,410
Annualized net rent 2015 (€ thousand) 1,410
EPRA Gross Yield (1) 7.12%
EPRA Topped-up Initial Yield (2) 7.12%
Total G.L.A. (sqm) 28,490
Occupancy rate 100%
WAULT by rents (years) (3) 4.8
24 ı
Madrid-Meco logistics warehouse acquisition
On 17 April 2015, the Group acquired, through MERLIN Logistica II, S.L.U., a logistics warehouse located in Meco, for a purchase price of € 22,210 thousand.
The asset is located in the consolidated industrial area of Meco, Madrid, in the A-2 corridor connecting Madrid with Barcelona and Zaragoza. The acquired asset has a GLA of 35,285 sqm and is fully let to Azkar (a subsidiary of Dachser, one of the leading logistics operators in Europe).
MADRID-MECO
Acquisition price of the asset (€ thousand) 22,210
Asset debt outstanding as of the date of purchase (€ thousand) 7,940
Equity disbursement (€ thousand) 14,270
Debt to acquisition price of asset 35.7%
Annualized gross rent 2015 (€ thousand) 1,799
Annualized net rent 2015 (€ thousand) 1,791
EPRA Gross Yield (1) 8.05%
EPRA Topped-up Initial Yield (2) 8.02%
Total G.L.A. (sqm) 35,285
Occupancy rate 100.0%
WAULT by rents (years) (3) 4.1
(1) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) divided by the acquisition price of the asset(2) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) minus annualized property expenses not
rechargeable to tenant, divided by the acquisition price of the asset(3) Weighted average unexpired lease term, calculated as number of years of unexpired lease term, as from June 30, 2015, until the
first break option window of the lease contracts, weighted by the gross rent of each individual lease contract
Interim financial statements ı 25
Lisbon- Expo office building acquisition
On 5 June 2015, the Group acquired, through MPCVI, a grade-A office building located in Avenida Dom Joao II, in Parque das Nações (Expo discrict), for a purchase price of €18,000 thousand.
The building commands excellent visibility given its privileged location next to Vodafone headquarters, Lisbon Casino, Vasco da Gama shopping center and other prestigious buildings. The area features first-class communication infrastructure, less than 200 meters away from one of the main intermodal transport hubs in Lisbon, only 5 minute-drive from Lisbon airport and 10 minute-drive from the city center. The property, that was designed by Broadway Malyan and built in 2007, has a GLA of 6,740 sqm. The buildings if fully let to Novabase, a leading Portuguese IT company.
LISBON – EXPO
Acquisition price of the asset (€ thousand) 18,000
Asset debt outstanding as of the date of purchase (€ thousand) 0
Equity disbursement (€ thousand) 18,000
Debt to acquisition price of asset 0%
Annualized gross rent 2015 (€ thousand) 1,389
Annualized net rent 2015 (€ thousand) 1,332
EPRA Gross Yield (1) 7.72%
EPRA Topped-up Initial Yield (2) 7.40%
Total G.L.A. (sqm) 6,740
Occupancy rate 100%
WAULT by rents (years) (3) 3.6
(1) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) divided by the acquisition price of the asset(2) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) minus annualized property expenses not
rechargeable to tenant, divided by the acquisition price of the asset(3) Weighted average unexpired lease term, calculated as number of years of unexpired lease term, as from June 30, 2015, until the
first break option window of the lease contracts, weighted by the gross rent of each individual lease contract
26 ı
Portfolio of 33 Caprabo supermarkets acquisition
On 18 June 2015, the Group, through MERLIN Retail, signed a €9,000 thousand deposit contract for the acquisition in September 2015 of 33 supermarkets fully let on a long-term basis to Caprabo, all of them located in Cataluña.
The portfolio, that has a GLA of 64,252 sqm, consists of 19 urban supermarkets and 14 “big boxes”. By rents, 71% of the supermarkets are located in Barcelona region, the remaining 29% located in Tarragona, Lérida and Gerona regions. The properties are well consolidated, with Caprabo operating them since, on average, 1993.
CAPRABO
Acquisition price of the asset (€ thousand) 96,516
Asset debt outstanding as of the date of purchase (€ thousand) 0
Equity disbursement (€ thousand) 96,516
Debt to acquisition price of asset 0%
Annualized gross Rent 2015 (€ thousand) 6,957
Annualized net Rent 2015 (€ thousand) 6,927
EPRA Gross Yield (1) 7.21%
EPRA Topped-up Initial Yield (2) 7.18%
Total G.L.A. (sqm) 64,252
Occupancy rate 100%
WAULT by rents (years) (3) 8.1
(1) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) divided by the acquisition price of the asset(2) Calculated as the Gross annualized rent (passing rent as of 30 June 2015 times 12) minus annualized property expenses not
rechargeable to tenant, divided by the acquisition price of the asset(3) Weighted average unexpired lease term, calculated as number of years of unexpired lease term, as from June 30, 2015, until the
first break option window of the lease contracts, weighted by the gross rent of each individual lease contract
Interim financial statements ı 27
Forward purchase of 3 logistics warehouses in Cabanillas
On 19 June 2015, the Group, through MERLIN Logistica, signed a forward purchase agreement to acquire a plot zoned for the construction of 3 logistics warehouses located in Cabanillas (Guadalajara), Upon signature of the forward purchase agreement, MERLIN disbursed €11,571 thousand, 25% of the total purchase price. The delivery of the finished assets is expected to occur by the end of 2016.
Cabanillas del Campo is located in the third ring of Madrid (50 kms), in the province of Guadalajara, with direct access to the A-2 and R-2 motorways, in the largest logistics hub in Spain, the so called “Corredor de Henares”. The land plot allows for the construction of 3 logistics warehouses, with a total GLA of 103,519 sqm. The agreement establishes the delivery of the 3 finished warehouses no later than December 2016.
GUADALAJARA - CABANILLAS
Acquisition price of the asset (€ thousand) 46,636
Asset debt outstanding as of the date of purchase (€ thousand) 0
Equity disbursement (€ thousand) 46,636
Debt to acquisition price of asset 0%
Annualized Gross Rent (€ thousand) 3,896
Annualized Net Rent (€ thousand) 3,679
EPRA Gross Yield (1) 8.36%
EPRA Topped-up Initial Yield (2) 7.89%
Total G.L.A. (sqm) 103,519
Occupancy rate (forecast) 100%
(1) Calculated as estimate annualized gross rent at full occupancy divided by the acquisition price of the asset(2) Calculated as the estimate annualized gross rent at full occupancy minus annualized property expenses not rechargeable
to tenant, divided by the acquisition price of the asset
The purchase price of € 46,6 million (€ 11,6 million already disbursed), can be increased if an incentive granted to the seller is achieved, dependent upon their ability to sign leases with a minimum mandatory term of 5 years and a minimum rent of € 3.2 / sqm / month.
The main economic data on the assets once leased-up is as follows:
28 ı
Zaragoza-Plaza logistics land plot acquisition
On 9 April 2015, the Group acquired, through MERLIN Logistica, a logistics land plot adjacent to the warehouse already owned in Zaragoza Plaza, for a purchase price of € 1,852 thousand. The land plot has a total surface of 20,347 sqm and buildability for 24,417 sqm.
Testa
The main financial and economic indicators of Testa in the first semester are detailed below:
(€ thousand) 30/6/15
Total revenue (1) 79,919
Gross rental income (1) 78,959
Net rental income (1) 76,917
EBITDA 68,477
Net profit for the period 34,142
Net profit per share (€) (2) 0.28
30/6/15
Gross financial debt 1,663,349
Net financial debt (3) 1,465,295
Net financial debt/GAV 45.8%
KEY CONSOLIDATED FINANCIAL INDICATORS (IFRS)
(1) Does not include amounts recharged to tenants for shared expenses, which as at 30 June 2015 and 2014 amounted to €12,966 thousand and €13,297 thousand, respectively. .
(2) Calculated over weighted number of shares of the period (120.2 million).(3) Includes net financial debt of companies accounted for using the equity method.
Interim financial statements ı 29
(€ thousand) 30/6/15
GAV 3,202,432
Gross financial debt (1,663,349)
Debt arrangement expenses 7,261
Financial derivatives (8,708)
Total financial debt (1,664,796)
Other assets and liabilities 169,822
EPRA NAV 1,707,458
Number of shares 153,967,718
EPRA NAV per share (€) 11.09
EPRA NAV ESTIMATE
TESTA arranged leases for 49,333 sqm of space in the first half of 2015, of which 37,927 sqm correspond to renewals and 11,406 sqm to new contracts.
LEASE AGREEMENTS (sqm)
0
Logistic
0
Hotels
6,045
Retail
43,288
Offices
49,333
Total TESTA
LEASING ACTIVITY
30 ı
Leasing activity
Up to 31 July 2015, MERLIN has signed lease agreements amounting to 60,273 sqm, out of which 48,748 sqm correspond to new leases and 11,524 sqm to renewals.
The breakdown by asset category is as follows:
45,666.7
60,272.6
15014,455.9
Retail Office Logistic TOTAL MERLIN
By asset category, the main achievements have been as follows:
Retail. Marineda is undergoing a strong letting activity, in line with the business plan laid out for the property. Since acquisition, asset management has been focused on three fronts:
• The exit of those tenants with poor sales performance, low footfall and a profile below the standards.
• The enhancement of the food court area, removing the kiosks from the mall and increasing the terrace areas of the restaurants, improving their visibility and sales area. Two kiosks have already exited (291 sqm) and negotiations continue to remove those left, while in parallel negotiations with restaurant operators continue to increase their terrace areas.
• The creation of a sports themed area aimed at revitalizing the area where most of the vacancy is concentrated, with the exit of the few tenants left, relocation of existing sports-related tenants to this area, and new leases with operators related to the concept. During the period, two lease contracts have been cancelled with tenants in this area (120 sqm).
Total take-up has been 14,456 sqm, of which 11,524 sqm are renewals and 2,932 sqm are new leases. Exits amounted to 1,883 sqm, and therefore the net take up is 1,049 sqm, which raised the occupancy to 90.2% (vs. 89.2% as of 31 March)
Footfall performance continues upwards with total visitors in the period of 7.6 million (+8.7% vs. 1H 2014)
Office. Exits were 4,711 sqm and new leases 150 sqm. The exits are concentrated in buildings 6 and 8 of World Trade Center Almeda Park.
Due to an internal restructuring process, Sharp has abandoned its Barcelona HQ, and has therefore terminated their lease in WTCAP building 6 before the first break option (31 March 2017). As a consequence, Sharp has paid all rent from their termination (May) until 31 March 2017 (€ 1.3 million), and has been relocated to a smailler size unit (862 sqm)
Logistics. New leases for 45,667 sqm and exits for 11,559 sqm, and therefore the next take-up is +34,108 sqm. The flow was in Valencia-Almussafes warehouse and Guadalajara-Cabanillas. In Valencia, Johnson Controls exited and most of the space has been taken up by the existing tenants (Ford and Truck & Wheel). In Guadalajara, ahead of business plan, a new lease has been signed with a grade A tenant for 38,054 sqm. The tenant will occupy a complete premise upon delivery after construction, thus evidencing the high demand in logistics for the area as well as the excellent location of the asset.
Interim financial statements ı 31
6. STOCK PRICE EVOLUTION
MERLIN shares closed on 30 June 2015 at € 9.657, an increase of 20.6% versus 31 December 2015 closing price. The share has outperformed in the same period the IBEX-35 (+4.8%) and the sectorial EPRA reference index (+9.0%)
Average daily trading volume during the period has been € 14.7 million, representing 0.8% of the market cap of the company. With respect to the second half of 2014 (€ 6.5 million), the average daily trading volume has more than doubled.
MERLIN Properties is a member of the Euro STOXX 600, IBEX 35 Medium Cap, FTSE EPRA/NAREIT Global Real Estate, GPR Global Index, and MSCI Small Cap indexes.
Source: Bloomberg
MERLIN SHARE PRICE PERFORMANCE VS IBEX 35 / EPRA INDEX
DAILY TRADED VOLUME
11
10
9
8
7
€
March 2015February 2015 May 2015 June 2015January 2015
MERLIN +20.6%
EPRA +9.0%IBEX 35 +4.8%
0
20
40
60
80
€M M
March 2015February 2015 May 2015 June 2015January 2015
Av. MERLIN € 14.7 MM
32 ı
7. POST-CLOSING EVENTS
Capital increase
On 7 August 2015, a capital increase was executed for a total amount of 1,033,696,000 euros by means of the issue and placing in circulation of 129,212,000 new ordinary shares, of 1 euro nominal value and a share premium of 7 euros per share, of the same class and series as those currently in circulation.
Testa
On 23 July 2015, MERLIN has acquired an additional stake of 25.1% from Sacyr for € 861 million, thus becoming majority shareholder of the company, with 50.1% of the equity.
Additionally, on 23 July 2015, MERLIN has registered with the CNMV the previous announcement of the request for authorization to launch a tender offer for 0.4% of Testa owned by minority shareholders. The offered price per share is 13.54 euros.
On 24 August 2015 the request for authorization was registered with the CNMV.
On 12 August 2015, MERLIN has acquired an additional stake in Testa of 26.913% from Sacyr, thus totaling a stake of 77.01%.
Other
In July, private contracts have been signed for the acquisition of 100% of a logistics asset located in Getafe-Madrid, with a GLA of 11,487 sqm, and 50% of a retail asset located in Madrid, with a GLA of 5,981 sqm. In both cases, it is envisaged to sign the public deeds during the month of September.
Interim financial statements ı 33
34 ı
PASEO DE LA CASTELLANA, 42
28046 MADRID
+34 91 787 55 30
www.merlinproperties.com