VALUE CREATION September 2019 - Merlin Properties

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VALUE CREATION September 2019 - Merlin Properties
VALUE CREATION
September 2019
VALUE CREATION September 2019 - Merlin Properties
DISCLAIMER

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                                                                                                                                                                                       ı2ı
VALUE CREATION September 2019 - Merlin Properties
Portfolio composition

           Value creation plans

            Offices
Contents
            Retail

            Logistics

            Summary: effects
            on MERLIN topline

           Technology
VALUE CREATION September 2019 - Merlin Properties
Portfolio
composition
VALUE CREATION September 2019 - Merlin Properties
Portfolio composition    |    By asset category

      MERLIN is now approaching its initial target at IPO: Offices (40%), SC, HSR and Logistics 20% each

                            5%                                       5%        12         %      2%                               2%                                3%                                    3%
                                        12   %

   14%                                        14    %
                                                                             16%                           16%                              10%
                                                                                                                                      Hoteles
                                                                                                                                                                                   10%
                                                                                                                                                                                Hoteles
                                                                                                                                                                                                                20%
                                                                                                                                                                                                           Hoteles

                                                                                                                                      Residencial en alquiler                   Residencial en alquiler    Residencial en alquiler

                                                                                                                                      Otros                                     Otros                      Otros

                                                                2014%                                                                 Logístico                    2018         Logístico                  Logístico
                                                    69%               16                        69%   16% 45%                      18High%Street Retail            45%
                                                                                                                                                                        18High%Street Retail
                                                                                                                                                                                       46% 20   %
                                                                                                                                                                                             High Street Retail
                                                                                                                                                                                                                                     4
            Offices                                                                                                                    Centros comerciales                       Centros comerciales           Centros comerciales

                                                                                                                                       Oficinas                                  Oficinas                      Oficinas
            High Street Retail
                                                                                 21       %                       21   %
                                                                                                                                            23      %
                                                                                                                                                           (1)                       23      %
                                                                                                                                                                                                    (1)

            Shopping centers                                                                                                                                                                                                         2
            Logistics
5% 12%                    2%                                         2%                         3%                                3%
 16%Other                                     16%                       10                                 10%                       20                                            20%
                    (2)
                                                                     Hoteles %                          Hoteles                    Hoteles %                                    Hoteles

                                                                     Residencial en alquiler            Residencial en alquiler     Residencial en alquiler                     Residencial en alquiler

                                                                     Otros                              Otros                       Otros                                       Otros
                                                  6M19
16%                       69%                  %    Logístico
                                         16% 45pro-forma
                                                  18% (1)                                       45%
                                                                                                        Logístico
                                                                                                      18High%Street46     %
                                                                                                                            20  %   Logístico                    Target
                                                                                                                                                                  46% 20
                                                                                                                                                                        Logístico
                                                                                                                                                                            %
                                                                                                                                                                                  40       %
                                                                                                                                                                                                                                     4
                                                                     High Street Retail                            Retail    High Street Retail                         High Street Retail

                                                                      Centros comerciales                Centros comerciales         Centros comerciales                          Centros comerciales

                                                                      Oficinas                           Oficinas                    Oficinas                                     Oficinas
      21       %
                                                  21    %
                                                                          23      %
                                                                                          (1)                23      %
                                                                                                                            (1)

                                                                                                                                                                   20%                                    20%
      (1)
            Pro-forma to include logistics WIP and offices WIP
      (2)
            Other includes hotels, non core land and miscellaneous
                                                                                                                                                                                                                          ı5ı
VALUE CREATION September 2019 - Merlin Properties
Portfolio composition    |    By geography

MERLIN has increased exposure to Portugal, a market showing strong performance

                           Geographical breakdown

                                     9%                                                     Dual listing to gain visibility
                                                                     Portugal
                                                                                     1      in the local market
                                                       91%           47
                                                                     Spain
                                                                           %
                                                                                              53%
                Spain
                Portugal             By GRI(1)                                  By GRI(1)
                                                                                            Continue exploring
                                                                                     2      the possibility of adopting
                                                                                            the SIGI regime

             sqm           Offices      Shopping centers     Logistics

      Operating            95,677            60,098              -

      Landmark I           16,892              5,495             -                          Selective acquisitions to
      Best III                -                -
                                                             224,864                 3      further consolidate MERLIN’s
                                                                                            prime positioning

                                          Almada, dominant mall in the
                       #2 Player
                                          south bank of river Tagus
(1)
      2018 figures

                                                                                                                              ı6ı
VALUE CREATION September 2019 - Merlin Properties
Value
creation
plans
VALUE CREATION September 2019 - Merlin Properties
Value
creation
plans
Offices
VALUE CREATION September 2019 - Merlin Properties
Value creation plans    |    Offices    |    Strategy

                                                 INTRODUCTION
                                                 OF HOSPITALITY
                                                                                         ROLL OUT
    1        LANDMARK I
                                          2      SERVICES ACROSS
                                                 THE ENTIRE
                                                                              3          OF LOOM
                                                 PORTFOLIO

 • Full refurbishment of               • Fully developed cluster of       • Flex space brand recently fully
    assets with high and quick             common services to tenants          integrated to accelerate the
    reversionary potential due             located within a specific zone      rapid expansion plan
   to its prime location
                                        • MERLIN Hub Castellana Norte     • 9 spaces within 18 months,
 • Enhacements of common                   will be the inaugural hub,         comprising 12,790 sqm
    areas and latest technical              covering the A-1 corridor          and 1,645 desks
    especifications in working              (> 330k sqm). Launch in 3Q19
    areas, including sensorisation                                          • Commercial synergies:
                                        • Common services organized
                                           around 5 items: mobility,          - Capturing new clients
                                           sustainability, technology           (start-ups)
                                           and connectivity, community
                                                                              - Broadening our offer
                                           and branding
                                                                                to traditional corporates
                                        • Next Hubs will be Azca and
                                           Campo de las Naciones

                                                                                                             ı9ı
VALUE CREATION September 2019 - Merlin Properties
Value creation plans    |    Offices    |    Landmark I

                                                           Upcoming refurbishments

                  Torre        Torre      Marqués de               Castellana      Diagonal    Adequa    Adequa      Plaza Ruiz    Alfonso
                                                     Monumental
                Charmartín    Glòries      Pombal 3                   85             605         7         4          Picasso         XI

GLA (sqm)        18,295       37,614        12,460       22,387     15,254         14,795      32,109    15,793       31,576        9,945

Acquisition
(€m)               31.2        142.0          -             -            -            -         64.5      28.2           -            -

Capex (€m)        38.0          27.2         1.6          28.9          25.1         8.6        43.8      16.8         49.7          13.0

Rent   (€m)        4.6          11.8         0.2           2.5          2.4          1.8        8.4       3.6           3.2          1.4

Yield on Cost     6.7%         7.0%         9.4%          8.7%          9.7%       20.9%        7.8%      7.9%         6.5%         11.1%

                  2019         2019
Delivery                                    2019         2020       2020            2020       2021      2022          2022         2022
                (Phase II)   (Phase II)

Total Acquisition             Total Capex            Total investment          Pending Capex      Additional Rents           Yield on Cost
€ 266.0m                     € 252.6m                € 518.6m                  € 200.6m               € 40.0m                  7.7%
                                                                                                                                            ı 10 ı
Value creation plans    |    Offices    |    Landmark I: Monumental

The project

                                                                      ı 11 ı
Value creation plans    |    Offices    |    Landmark I: Monumental

Lisbon’s prime office area is located within the surroundings of Marquês de Pombal & Duque de
Saldanha squares and the main avenues linking them (Av. Libertade & Fontes Pereira de Melo)

                                                                          Prime rent
                                                                          € 22.0

                                                                          Total stock
                                                                          552,918 sqm

                                                                          Availability
                                                                          16,809 sqm

                                                                          Vacancy rate
                                                                          3.0%

                                                                          Future offer
                                                                          25,819     (1)

Source: Prime Watch 2019: Relatório do mercado inmobiliário de Portugal
(1)
    Expected offer to come to the market until 2021
                                                                                                ı 12 ı
Value creation plans    |    Offices    |    Landmark I: Monumental

Monumental is located in Duque de Saldanha, one of the most emblematic squares
in the city and the core of Lisbon’s Prime CBD area

                                        Av.
                                            Fo
                                           nte
                                             sP
                                                 ere
                                                  ira
                                                   de
                                                       Me
                                                         lo           Monumental

                                                                  Av
                                                                    .R
                                                                      ep
                                                                        úb
                                                                           lica

                                                                                   ı 13 ı
Value creation plans    |    Offices    |    Landmark I: Monumental

      •F
        ull refurbishment                                 •O
                                                             ffice floors will
       that will include                                    become more
       an active façade,                                    efficient by moving
       improving the                                        the corridor and
       building’s energy                                    optimizing the
       efficiency                                           distribution
      •A
        ll installations will                             • The shopping center
       be replaced, adding                                    will be transformed
       a VRV HVAC(1)                                          into 1-3 high-end
                                                              retail units

                                                                                                        € 2.5 m
                                                                                                        INCREMENTAL

                                                              € 28.9 m              4Q 2020             NET RENTS

                                                              CAPEX                 EXPECTED DELIVERY
                                                                                                        8.7%
                                                                                                        ROI(2)

(1)
      Variable Refrigerant Volume Heating, Ventilating and Air Conditioning
                                                                                                                      ı 14 ı
(2)
      Incremental rent divided by Capex
Value creation plans    |    Offices    |    Landmark I: Castellana 85

The project

                                                                         ı 15 ı
Value creation plans    |    Offices    |    Landmark I: Castellana 85

Castellana 85 is located in the heart of Azca, the best business area in Madrid Prime CBD

Azca comprises:                        Over                              Extraordinary
• Office: 450,000 sqm                  35,000 employees                  infrastructure
• Retail: 100,000 sqm                  daily traffic                     and communications
• Residential: 1,200 houses                                              to be the best connected
                                       Over
                                                                         hub of Madrid
                                       100,000 visitors
                                       per day

Main office landlords                  Top tier tenants                  MERLIN is leading, together
                                       in the area                       with other landlords,
                   98k sqm                                               the creation
                                                                         of a BID for AZCA
                                                                         to further enhance the area,
                   59k sqm                                               common services
                                                                         and branding
                   50k sqm

                   43k sqm

                   27k sqm
                                                                                                    ı 16 ı
Value creation plans    |    Offices    |    Landmark I: Castellana 85

Azca achieves the highest rents in the Madrid office market

                                                        Castellana 93

                                                            Castellana 85

                      Plaza Ruiz Picasso

                                                                            ı 17 ı
                                                                            ı 17 ı
Value creation plans    |    Offices    |    Landmark I: Castellana 85

                                                                                                                                            732.85 TOB

                                                                                                                                            728.70 ROO

                         Level 11
                                                                                                         Current GLA
                                                                                                                              3.30 m
                      1,842 sqm                                                                                                             725.40 LEVE

                         Level 10
                      1,842 sqm
                                                                                                         15,254 sqm           3.30 m
                                                                                                                                            722.10 LEVE

                        Level 09                                                                                              3.30 m

                      1,842 sqm                                                                                                             718.80 LEVE

                                                                                                         Post-refurbishment
                        Level  08SPACE
                           OFFICE                                                                                             3.30 m

                      1,842 sqm
                            (9 FLOORS)                                                                   GLA                                715.50 LEVE

                        Level 07
                      1,842 sqm                                                                          16,474 sqm           3.30 m

                                                                                                                                            712.20 LEVE

                        Level 06                                                                         AEO (1)
                                                                                                                              3.30 m

                      1,842 sqm                                                                                                             708.90 LEVE

                        Level 05                                                                                              3.30 m

                      1,842 sqm                                                                                                             705.60 LEVE

                        Level 04                                                                                              3.30 m
                       1,816 sqm                                                                                                            702.30 LEVE

                        LevelTERRACE
                              03                                                                                              3.30 m

                       1,761 sqm                                                                                                            699.00 LEVE

                     Level 03
             Terrace 995 sqm                                                                                                  4.00 m

                                                                                                                                            695.00 LEVE

               Entrance lobby                                                                                                 4.40 m

                                                                                                                                            690.60 LEVE

                               LOBBY
                                                                                                                              4.10 m

                                                                                                                                            686.50 GRO

(1)
      AEO (Asociación Española de Oficinas - Spanish Offices Association) standard for offices measure
                                                                                                                                   ı 18 ı
Value creation plans    |    Offices    |    Landmark I: Castellana 85

The business plan

      •V
        ery efficient floor              •T
                                            otal refurbishment
       plants (≈80%) with                  of the building
       rectangular shape                   systems and
       built around a central              improvement of the
       core (elevators and                 exterior image by
       common areas),                      changing façade and
       boasting 1,842 sqm                  removing the current
       per floor                           exterior stairs
                                          •N
                                            ew common
                                           areas (lobby,
                                           restrooms, parking
                                           enhancements)

                                                                                      € 2.4 m
                                                                                      INCREMENTAL
                                          € 25.1 m                4Q 2020             NET RENTS
                                          CAPEX                   EXPECTED DELIVERY
                                                                                      9.7%
                                                                                      ROI(1)

(1)
      Incremental rent divided by Capex
                                                                                                    ı 19 ı
Value creation plans    |    Offices    |    Landmark I: Diagonal 605

The project

                                                                        ı 20 ı
Value creation plans    |    Offices    |    Landmark I: Diagonal 605

Diagonal 605 is located in the best tranche of the upper diagonal

                                                                        Diagonal 605

                                                                                       ı 21 ı
Value creation plans    |    Offices    |    Landmark I: Diagonal 605

                                             Offices

                                             Restaurant        Hall                     Retail

                Parking

              • All office floors will be       • The retail unit will be             • A new park including a
                 updated                            extended. This flagship,               restaurant unit will be created
              • The office lobby will be           already signed with Benetton,          above the parking structure,
                 moved to Diagonal, enlarged,       will enjoy outstanding visibility      offering a high-end exterior
                 improved and raised to a           from Diagonal                          terrace for dining
                 double height ceiling
                                                                                                                             ı 22 ı
Value creation plans    |    Offices    |    Landmark I: Diagonal 605

The business plan

       Value will be created
       by upgrading the
       office floors and
       increasing the retail
       area (Benetton
       flagship)

                                                                               € 1.8 m
                                                                               INCREMENTAL
                                          € 8.6 m          4Q 2020             NET RENTS
                                          CAPEX            EXPECTED DELIVERY
                                                                               20.9%
                                                                               ROI(1)

(1)
      Incremental rent divided by Capex
                                                                                             ı 23 ı
Value
creation
plans
Offices
Hospitality services
Value creation plans    |    Offices    |    Hospitality services

MERLIN is developing a cluster of common services to tenants on its key submarkets

     SUSTAINABILITY
     AND WELLNESS                                                              MOBILITY
          Certifications                                                      Public and private
                                                                           transport improvement
                                                • Cluster of common
                                              services to tenants to be
                                                  launched in 3Q19
          LED lighting                       • MERLIN Hub App will be
       Self-comsumption                       released in October 2019
                                             • The program will be later   New mobility solutions
                                             extended to Azca, Campo
                                             de las Naciones, Barcelona
                                                      or Lisbon
   COMMUNITY AND
  BRAND AWARENESS                                                          INNOVATION
       Community services                                                     Smart Buildings

            Branding                                                           MERLIN App

           MERLIN Hub                                                          3D rendering
    Individual assets branding

                                                                                                    ı 25 ı
Value
creation
plans
Offices
Roll out of LOOM
Value creation plans    |    Offices    |    Roll out of LOOM: Madrid

                                                                1                           2
       •L
         OOM’s footprint in Madrid currently stands at                    TAPICES                    HUERTAS
        4 spaces with a combined GLA of 4,578 sqm                   1,102 sqm ı 179 desks       1,188 sqm ı 165 desks
                                                                         In operation                In operation
        and a total of 627 dedicated desks
       •A
         fter the opening of Salamanca, Eucalipto and
        Torre Chamartin, LOOM’s footprint in Madrid
        will grow to 7,500 sqm and 1,019 dedicated desks

                                                               3                            4
                                                                          PRINCESA                   EUCALIPTO
                                                                    1,122 sqm ı 123 desks       1,166 sqm ı 160 desks
                                                                         In operation                In operation

                                                               5                            6
                                                                        SALAMANCA                TORRE CHAMARTÍN
                                                                    1,931 sqm ı 270 desks       1,049 sqm ı 122 desks
                                                                      To open in Sep-19           To open in Feb-20

                                                                                                                        ı 27 ı
Value creation plans    |    Office    |    Roll out of LOOM: Barcelona

                                                                1
                                                                             TORRE GLÒRIES
                                                                          1,562 sqm ı 160 desks
       •O
         nce all 3 pipeline projects are delivered, LOOM’s                  To open in Oct-19
        footprint in Barcelona will be over 5,000 sqm
        and 620 dedicated desks

                                                                2
                                                                              WTC ALMEDA
                                                                          1,544 sqm ı 200 desks
                                                                            To open in Sept-19

                                                                3
                                                                            22@ FERRETERIA
                                                                          2,018 sqm ı 260 desks
                                                                            To open in Jun-20

                                                                                                  ı 28 ı
Value
creation
plans
Retail
Value creation plans    |    Retail    |    Strategy

                                                  CREATING
                                                  EXPERIENCE                           CALLAO 5
    1          FLAGSHIP                    2      AND EMBRACING             3          HIGH-STREET
                                                  TECHNOLOGY

 • Refurbishing 5 shopping             • Digitalization project for     • Callao 5 refurbishment, will
    centers and developing                 the entire portfolio              convert the building into a
    X-Madrid                                                                 flagship asset:
                                        • Development of apps for each
 • Retenanting by expansion of            mall + geotracking               - FNAC flagship
    selling areas, upscaling food
    and beverage including exterior     • Smart WI-FI                      -2
                                                                              retail shops with street
    dining and refresh of common                                             access
    areas
                                                                            -F
                                                                              ine dining in the top floors
                                                                             with exterior terraces

                                                                          • Callao 5, located in one of
                                                                             the highest footfall areas in
                                                                             Europe, will become a tourist
                                                                             destination in its own right

                                                                                                            ı 30 ı
Value creation plans    |    Retail    |    Flagship

                                                  Upcoming refurbishments

                                                Arturo Soria
                                  Larios                           X-Madrid        Tres Aguas(1)     El Saler        Porto Pi           Callao 5
                                                   Plaza

 GLA (sqm)                        41,460           6,985             47,424           67,690          47,013          58,779             11,629
 GLA MERLIN (sqm)                 37,822           6,069             47,424           33,845          28,978          32,568             11,629

                                Works: 28.1                       Works: 35.2                       Works: 25.1     Works: 21.1
 Capex (€m)                                         5.4                                10.1                                               19.4
                               Ad. GLA: 19.9                    Investment: 10.5                   Ad. GLA: 12.0   Ad. GLA: 15.2

 Rent       (€m)                    3.1             0.6               5.4               1.5            2.0              1.7               3.9

 Yield on Cost                     6.4%             11.1%             11.8%            15.1%           5.5%            4.6%              20.2%

 Delivery                          2019             2019              2019             2019           2020             2021              2021

  ∆ GLA + X-Mad inv.                       Total Capex         Total investment      Pending Capex       Additional Rents          Yield on Cost
         € 57.5m                          € 144.4m             € 201.9m             € 109.0m                 € 18.2m                 9.0%
(1)
      Only including MRL 50%                                                                                                                       ı 31 ı
Value creation plans    |    Retail    |    Flagship: Larios

     A full                   Buying                      95% pre-let        € 19.9m Additional space
     
     refurbishment            additional space          additional space   € 28.1m Capex
     nearing                   to expand                  + 8.9% release      € 48.0m Total investment
     completion                anchors and                spread in recent    6.4% Yield on cost
                               retenant to grow           renewals
                               F&B experience

                                                                                                         ı 32 ı
Value creation plans    |    Retail    |    Flagship: Arturo Soria

     Full refresh                 Capex                       100% Occupancy        Yield on Capex
     of common                   € 5.4m                   + 3.4% Tenant sales   11.1%
      areas and
      acceses

     Make over of
     Terrace & Parking

                                                                                                     ı 33 ı
Value creation plans    |    Retail    |    Flagship: X-Madrid

                                                         Experience
      Ground breaking            Diving
      
      mall focused on            
                                 Surfing                                          citywave®
                                                                                     Madrid
      experience and             Climbing
      cutting edge               Escape room
                                                         Gourmet dining
      retailers                  Gourmet dining
                                 VIP cinemas

                                                         Cutting edge retailers
       92% Pre-let               € 5.4m ERV
       
       Main anchors              11.8%
       secured                    Yield on cost
                                                                                              ı 34 ı
Value creation plans    |    Retail    |    Flagship: Tres Aguas

              A full                                           Anchor tenants                                    The entertainment      € 10.1m
              
              refurbishment                                    are upsizing                                   offer has been         CAPEX(1)
              to consolidate                                   and upscaling                                     reinforced, adding a   € 1.5m(1)
              its dominant                                     their units                                       new leisure area and    Additional
              position in the                                                                                    expanding the play      Rents
              south of Madrid                                                                                    park                    15.1%
                                                                                                                                         Yield on cost

                                                                                                                                                         ı 35 ı
(1)
      MERLIN’s share (50%). Total investment in the asset amounts to € 20.2m, and additional rents are € 3.0m
Value creation plans    |    Retail    |    Digitalization project

Current online channels       Online channels under         Big data analytics    Digital displays
                              development

Web | Social Networks         APP | Social WIFI             Vodafone | Geoblink   Screens | Directories
Blog | CRM Data Base                                        Maps

• New communication          • Targeted                   • Off-line           • Experience
   channels with clients         communications                customer              and wow effect

• Better customer            • Interaction, catchment,    • Customer           • Off-line
   knowledge                     promotion and emotion        segmentation           communication

• Generic analytics          • More specific analytics    • Big data

                                                                                                          ı 36 ı
Value creation plans    |    Retail    |    Digitalization project: Online channels

Within its digitalization project, MERLIN has developed a native app for each mall

 Unique architecture to                   A new point of contact to               Targeted communications
 achieve economies of scale               interact with our customers             based on the different
 and unify the corporate                                                          profiles and preferences
 image

 New channel offered                      Marketing tool (employees               Feeds the market research
 to our tenants                           intranet, brand ambassadors,            and business development
                                          exclusive promotions…)

                                                                                                              ı 37 ı
Value creation plans    |    Retail    |    Digitalization project: Big data analytics

Smart WI-FI will allow for better knowledge of our customers

                                                                           Key parameters      Data segmentation

                                                  Outdoors
                                                  Provenance              • Penetration rate   • By time band
                                                  analysis:               • Visit frequency    • Socio-
                                                  monitoring of           • Average time         demographic
                                                  the main KPIs by           per visit         • Visit frequency
                                                  origin, creating
                                                                          • Demographics
                                                  different profiles
                                                                          • Market share
                                                                             by postal code

                                                  Indoors
                                                  Heatmaps:               •#  customers by    • By time band
                                                  representing the           area and floor    • Spatial (floors
                                                  concentration           • Time                 and areas)
                                                  of customers               expenditure       • Socio-
                                                  within any given           by area              demographic
                                                  time frame              • Real time flows
                                                                             data

                                                                                                                    ı 38 ı
Value creation plans    |    Retail    |    Digitalization project: Digital displays

                             State-of-the-art                       Interactive directories
 State-of-the-art            screens conceived                      that allow the users to     Directories
 screens                     to improve the                         personalize the search of
                             customer experience,                   the different retailers
                             optimizing the off-line
                             communications

                                                                                                              ı 39 ı
Value creation plans    |    Retail    |    Callao 5 refurbishment

Callao, 5 is located at the heart of callao plaza, the epicentre of Madrid’s most popular
shopping areas, the “Times Square” of the city. Mainstream brands are located all around

                                                                                    Puerta del Sol

            Fuencarral
            Average rent
            € 180 sqm/m
                                    Gran Vía
                                    Average rent                                 Preciados
                                    € 250 sqm/m                                  Average rent
                                    Footfall                                     € 280 sqm/m
                                    16,741 pax/day             Callao 5          Footfall
                                                                                 11,997 pax/day
                                                             11,629 sqm

Source: Ascana, Gesvalt, TC Group                                                                    ı 40 ı
Value creation plans    |    Retail    |    Callao 5 refurbishment

Originally built as a department store, the asset was refurbished in 1994 to host FNAC
flagship and 2,000 sqm of office space

                                                       Fine Dining          F&B Storage             Terraces         Food Court
                The plan is the conversion
                of the asset into a flagship
                resort around 3 areas:
                                                                                                                              Floor
                • FNAC flagship
                                                                                                                                  11
                   (reduced to 5 floors)
                                                                                                                                  10
                •2
                  retail shops                                                                                                    9
                 with façade to the street                                                                                         8
                •F
                  ine dining in the top                                                                                           7
                 floors with exterior                                                                                              6
                 terraces                                                                                                          5
                                                                                                                                   4
               € 19.4 m                                                                                                            3
               CAPEX                                                                                                               2
                                                                                                                                   1
               2Q 2021                                                                                                             0
               EXPECTED DELIVERY
                                                                                                                                  -1
               € 3.9 m                                                                                                            -2
               INCREMENTAL NET RENTS                                                                                              -3

               20.2
               ROI
                   % (1)
                                                         Unit 2                                       Unit 1
                                                    High Street Retail   Technical facilities   High Street Retail
(1)
      Incremental rent divided by Capex                                                                                                ı 41 ı
Value
creation
plans
Logistics
Value creation plans    |    Logistics    |    Strategy

                      EXPAND PORTFOLIO                STATE-OF-THE-ART
                                                                                            EXPAND LAST
            1         THROUGH DEVELOPMENTS
                      AND BTS(1)
                                               2      FACILITIES SUITABLE FOR
                                                      3 PL’S AND E-COMMERCE
                                                                                   3        MILE SOLUTIONS

      • Reinforce leadership position       • Unique footprint to serve 100%   • MERLIN has the largest
         in Spain                               of client needs                     footprint in Spain, being the
                                                                                    best suited partner to explore
      • Consolidate position in Madrid      • 81% of the portfolio is modern
                                                                                    and develop last mile solutions
         and Barcelona (Best II)                and suitable for e-commerce
                                                players                          • Launch of an internal pilot
      • Expand national footprint
                                                                                    program in partnership with
         (Best III)                          • 600kW pilot program to install
                                                                                    leading logistics operators
                                                photovoltaic panels on Meco’s
                                                                                    (FM Logistic, GLS). If successful,
                                                roof. Energy produced to be
                                                                                    the initiative will be deployed
                                                sold to the tenant and to the
                                                                                    to the entire portfolio
                                                grid company

(1)
      Build-to-suit                                                                                                ı 43 ı
Value creation plans    |    Logistics    |    Best II

Best II focused on the 2 main logistics corridors of Madrid

  +566K sqm                                                             € 25m
  GLA                                                                     ERV

                                                         Madrid

  € 326.6m                                                                 7.7%
  Investment                                                      Yield on Cost

                                                                                  ı 44 ı
Value creation plans    |    Logistics    |    Best II

                                                                    ED
                                                                 ER
                                                               IV
                                                            EL
                                                           D
                                                                                                                      Guadalajara                    Guadalajara
                            Madrid        Guadalajara    Guadalajara      Toledo       Madrid        Guadalajara                       Guadalajara
                                                                                                                       Cabanillas                     Cabanillas
                          Pinto II B(1)   Cabanillas F   Cabanillas III   Seseña   San Fernando II   Azuqueca III                      Azuqueca II
                                                                                                                    Park I extension                   Park II

 GLA (sqm)                  29,473          20,723          21,879        28,541      34,224           51,000          92,994           98,757        210,678

 Capex (€m)                   13.7           10.7              11.8        15.5         21.7            30.1             56.0             54.7         112.4

 Rent        (€m)              1.2            0.8              0.9         1.2           1.9             2.3              3.9             4.4           8.5

 Yield on Cost               8.5%            7.6%            7.4%         7.5%         8.9%             7.5%             6.9%             8.1%         7.5%

 Delivery                    2019            2019           2019          2019         2020            2020             2020             2021          2021

         Total investment                                  Pending Capex                        Additional Rents                            Yield on Cost
         € 326.6m                                          € 228.1m                                  € 25.0m                                     7.7%
(1)
      2nd phase of Pinto II only                                                                                                                               ı 45 ı
Value creation plans    |    Logistics    |    Best III

Launch of Best III to expand footprint to other areas of the Iberian Peninsula

  +509K sqm                                                                              € 24m
  GLA                                                            Basque Country            ERV

                                                                        Zaragoza

                                                            Madrid

                                                                           Valencia
                                  Lisbon
  € 308m                                                                                    7.9%
  Investment                                                                       Yield on Cost
                                                  Seville

                                                                                                   ı 46 ı
Value creation plans    |    Logistics    |    Best III

Launch of Best III to expand footprint to other areas of the Iberian Peninsula

                    Valencia        Zaragoza         Madrid               Sevilla        Lisbon
                                                                                                       Valencia
                    Ribarroja        Plaza II    San Fernando III        ZAL WIP          Park

GLA (sqm)           34,992           11,421          98,942              42,632         224,864        96,572

ERV (€m)               1.9            0.5              5.0                 2.0           10.7            4.1

Investment (€m)       25.5             7.1            52.3                24.0           147.6          51.6

ERV YoC              7.4%             7.2%            9.7%                8.5%           7.2%           7.9%

Delivery             2019            2020             2021             2019/2020       2020/2021     2021/2022

Total investment                     GLA                            Additional Rents               Yield on Cost
€ 308.2m                        509k sqm                             € 24.2m                         7.9%
                                                                                                                   ı 47 ı
Value creation plans    |    Logistics    |    State of the art facilities

 MERLIN enjoys the most modern portfolio in the market

                                          14 m

 30 m
          < 20 m

1st generation Logistics               State-of-the-art Logistics

• Clear height:         < 8m           • Clear height:          > 11 m       •E
                                                                                nvironmentally certified or
• Loading Docks: 1/3,000 sqm           • Loading Docks: 1/800 sqm             awarded buildings
• Truck yard depth:   < 20 m           • Truck yard depth:     > 30 m        •P
                                                                                recast concrete walls on façade

                                       • Slab without joints                 •S
                                                                                mart sensors for light switching

                                       • Skylights for natural daylight      • BMS

                                       • LED lighting                         •T
                                                                                hermoplastic waterproofing
                                                                               membrane on deck

                                                                                                                ı 48 ı
Value creation plans    |    Logistics    |    Photovoltaic project

Solar installations will improve the logistics portfolio while reducing pollution

 Tenant loyalty                                                           Energy transition                                    Improvement of assets
 MERLIN gains a unique competitive                                        Unique opportunity to lead the                       Logistics assets with solar
 advantage to retain and attract                                          energy transition                                    installations will be more
 tenants:                                                                 The possibility of signing PPA                       demanded by the market,
 • Improving electricity supply                                          within a 35km range is positively                    producing lower vacancy rates
    conditions through PPAs(1)                                            scored in the certification program                  and, consequently, higher values

 • Attaining green credentials                                                                                                Great opportunity to improve
    and environmental footprint                                                                                                the profitability, increasing the
    improvement                                                                                                                effective rent per square meter
                                                                                                                               while reducing financial costs
                                                                                                                               thanks to the criteria settled in
                                                                                                                               the ESG Indexed financing

Note: the implementation of the project is subject to administrative approvals and asset by asset economic viability studies                                       ı 49 ı
(1)
    Power Purchase Agreement
Value creation plans    |    Logistics    |    Photovoltaic project

Assuming full implementation, solar installations could bring up to € 4.5M in annual income(1)

      Total CAPEX €                                 45M
                             Ready to install                                                   Capacity                                           Income
        EXISTING

                                  ~80%                                                 ~35 MW
                         (1.2-1.3m sqm)
                                                                                                                                                 +€ 4.5M
                                                                                                                                                  annual
                                  100%                                               ~ 40 MW                                                     income
        WIP

                        (1.4-1.5m sqm)

Note: including Zal Port
(1)
    The pace of implementation is subject to the pilot program success, administrative approvals and asset by asset economic viability studies
                                                                                                                                                            ı 50 ı
Value creation plans    |    Logistics    |    Last mile solutions

The exponential e-commerce growth is magnifying freight traffic within cities

      Saturation and city pollution

             Access restraints

            Long waiting times                               Last mile centers

        Higher distribution costs

       Final consumer discomfort

                                                                                 ı 51 ı
Value creation plans    |    Logistics    |    Last mile solutions

Last mile center operation

DAYTIME HOURS                NIGHT-TIME HOURS                                        DAYTIME HOURS
-

                                                LOGISTICS                                                          ELECTRIC DELIVERY VEHICLE
                                               OPERATION IN
                                               THE PARKING

                                                                                                                      ZERO-EMISSIONS VEHICLE

                                                                                                                      ELECTRIC CARGO BICYCLE
                             23:00                                       7:30

                             Truck arrival start time         Commencement of the distribution,   Area reserved for the reclassification and load
                                                              movement of vehicles or bicycles    of the merchandise to be delivered during the
                                                                                                  time scheduled. This space might be fed through
                                                                                                  small vehicles during predefined timetables

                                                                                                                                                    ı 52 ı
Value
creation
plans
Summary:
effects on
MERLIN
topline
Value creation plans    |    Summary: effects on MERLIN topline    |    CAPEX per asset class

                     Offices                                                                                            Shopping Centers
   LANDMARK I PLAN                                                                                                     FLAGSHIP PLAN
     Upscaling refurbishments                                                                                          Converting our shopping centers
 to create “prime within the prime”                                                      Organic                      in the flagship store of online retail
                                                                                         growth

                SELECTED                                 € 519m                                           € 202m           DEVELOPMENT OF “X”
              DEVELOPMENTS                                                                                                A BRAND NEW CONCEPT
                                                                Designed                                 Internally
                                                             by signature                                funded
                                                               architects

                   Logistics                                                        Logistics include
                                                                                   forward purchase,                   High Street Retail(2)
 BEST II PLAN € 327m                                                               spec development                             TREE
                                                                                    and built to suit                 Lever on inflation growth
BEST III PLAN € 284m(1)                                                                                                         OTHER
 Development of the best footprint                                                                                       Capturing reversion
       in the Iberian market                                                       Total pending CAPEX                  Fully funded internally
                                                                                         2019-2022
                                                                                       € 803m
 (1)
      284m until 2022. Total investment for the Best III plan amounts to € 308m
     €
 (2)
     Callao 5 refurbishment is included within the flagship plan
                                                                                                                                                      ı 54 ı
Value creation plans    |    Summary: effects on MERLIN topline    |    Potential rental growth

              (€m)                                                   +32%
                                                                                             22.4(1)      661.5
                                                                                    25.0
                                                                         18.2
                                                              40.0                                                     617.3
                                                   56.2
                                      499.7
                 469.4

                                                    Not considering rental
                                                    growth nor inflation

                   GRI                  GRI     Reversionary Landmark   Flagship   Best II   Best III   Potential    Previous
                   FY17                 FY18      potential                                             GRI FY22    GRI forecast

    ERV considered for Best III in the period
(1) 

                                                                                                                                   ı 55 ı
Technology
Technology    |    Dynamic BMS and sensorisation

Technological investments will improve the service level and user experience

INFRASTRUCTURE                     SENSORISATION ELEMENTS        BIG DATA ANALYSIS
• Communication network           • Dynamic BMS                • Reading and interpretation software
• Data centers                    • IoT                        • Online management tools
• Cloud storage                   • Standard protocol
• Hardware connecting lines

           Better utilisation of the                  Predictive maintenance of the
             space and density                            building to reduce the cost
           Better comfort for                         Energy efficiency increase
             becoming more productive

                COMFORT                    PROFITABILITY                     ECOLOGY
                                                                                                          ı 57 ı
Technology    |    Proptech

Sponsoring proptech startups to enhance MERLIN’s competitive advantage

                              Acceleration      Implementation in
                              program for       MERLIN portfolio
                              startups

                                                                         Gateway between
                                                                         the startup
                                               VC funds
                                                                         ecosystem
                                               specialized in Real
                                                                         and real estate
                                               Estate proptechs
                                                                         long-established
                                                                         companies

                                                                                        ı 58 ı
Paseo de la Castellana, 257
28046 Madrid
+34 91 769 19 00
info@merlinprop.com
www.merlinproperties.com
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