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HISPANIA ACTIVOS INMOBILIARIOS
Santander Real Estate Conference
Hotel Meliá Jardines del Teide, Tenerife
INTRODUCTION TO HISPANIA & AZORA
A LEADING SPANISH HOTEL, OFFICE AND RESIDENTIAL REIT
Hispania (Spanish REIT) Azora (REIT manager)
Hispania Activos Inmobiliarios SOCIMI, S.A. ("Hispania") is a Spanish Azora currently manages Hispania under a
REIT which was listed on Madrid Stock Exchange in 2014 as a "blind management agreement, and has granted "full
pool" – initially raising €550m for investment into the Spanish real estate exclusivity“3 to Hispania
sector
Current market capitalisation of €1.3bn1 (EV of €1.8bn1) Founded in 2003, Azora is today the largest
independent real estate asset manager in Spain with
Externally managed by Azora Gestión S.G.I.I.C. ("Azora") more than 340 employees and c.€4.0bn4 of AUM
Focused on the acquisition, repositioning and active asset enhancement of Highly experienced management team with expertise
hotel, office and residential assets in Spain
from origination and asset management to disposal
⁻ focused on off-market processes with considerable value-add potential
⁻ €1.7bn Gross Asset Value ("GAV") portfolio comprises hotels (60%), In 2004, Azora launched its first fund focused on social
offices (27%) and residential (13%) in prime locations in Spain housing for rent and student accommodation in Spain
⁻ investments target levered IRR of 15%
⁻ additional investment capacity of c.€400m2 In 2007 Azora launched the its second fund focused on
offices in Central Europe
"Fixed life" structure Top 10 shareholders
In 2010 Azora took over, at the request of the investors,
% O/S
Initial mandate for a 3-year Soros 17%
the distressed Carey Value Added fund (>1,700 hotel
investment and 3-year rooms) and successfully undertook Carey's turnaround
FMR 8%
liquidation period Canepa 6%
BW Gestao de Investimentos 4% Outside Hispania, Azora has >€2bn of AUM, including
However, management will Paulson & co 3% >12,000 residential dwellings, c.9,000 beds for student
present a strategic review to APG 3% accommodation, c.108k sqm of offices and > 1,400 hotel
shareholders by March CBRE 3% keys
2017 on either the format of Cohen & Steers 3%
the liquidation by March BMO 3% Azora is the largest real estate institution, investor and
2020, or the extension of the Azora Management 2% manager of residential assets, student housing and
life of the vehicle Total 52% vacational hotels in Spain
Source: Company information
Notes:
1 As of 24 October 2016
2 Due to the €231m Rights Issue completed in June 2016
3 Except for investments in Student Accommodation and certain legacy mandates 2
4 Including Hispania's portfolio as of October 2016
HISPANIA’S PORTFOLIO
HISPANIA HAS BUILT ITS PORTFOLIO FROM AN OPPORTUNISTIC APPROACH
(latest figures) TOTAL HOTELS OFFICES RESIDENTIAL
GAV €1,741M €1,084M4 €444M5 €213M
% GAV 100% 62% 26% 12%
Units/GLA - 10,532 keys3 153,621 sqm6 754 dwellings
Passing NOI H1 2016 €48M7 €39M7 €7M €2M
Annualised NOI 2016 €95M7 €78M7 €14M €4M
NRY on GAV2 7.1% 8.5% 5.5% 3.6%
NRY on Investment1,2 8.5% 10.1% 6.5% 4.4%
Total investment1 €1,492M €924M €392M €176M
Accumulated
+18% +20% +13% +21%
valuation result2
Source: Hispania and CBRE valuation report as of 30 June 2016
Notes:
1 Cost includes acquisition price, capitalised acquisition costs and capex implemented as of H1 2016 and including acquisition cost of Dunas, Oasis and Portinatx,
2 As of H1 2016
3 Including the expected number of guestrooms to be built in Las Agujas development
4 Including Oasis, Portinatx, Dunas at acquisition cost 3
5 Excluding Village €32M of acquisition cost
6 Excluding 33,124 sqm expect to be built in Village
7 Excluding hotels under management
LATEST CONSOLIDATED INCOME STATEMENT
H1 2016 RESULTS SHOWED A SOLID UPWARD TREND
(€m) Q1 2016 Q2 2016 H1 2016 H1 2015 ∆ (%)1 lfl (%)1
Net rental income (NOI) 23.7 24.5 48.2 6.1 +7.9x +175%
+172%
Hotels 19.4 19.6 39.0 0.8 +49.7x +12.0x
Offices 3.3 3.9 7.2 4.1 +78% +30%
Residential 0.9 1.0 2.0 1.2 +60% +45%
Recurring EBITDA2 19.7 19.7 39.3 (0.1) n.m. -
as % of gross revenues 66% 64% 65% (1)% n.m. -
Valuation results - 112.4 112.4 14.4 +7.8x +4.0x
EBIT 19.0 130.2 149.2 14.0 +10.6x -
Financial results (4.8) (5.3) (10.1) (2.0) +5.1x -
Net income 14.2 122.4 136.7 11.0 +12.5x -
Attributable to Hispania 11.2 108.9 120.1 10.7 +11.2x -
EPS (€/share)3 0.14 1.13 1.34 0.17 +8.1x -
Attributable core FFO4 10.5 10.3 20.8 (2.2) n.m. -
GAV 1,463 n.m. 1,627 710 +2.3x +16.4%
Source: Hispania
Notes: (1) H1 2016 versus H1 2015; (2) Excluding one-off expenses of €0.4 million for Q1 2016, €1.1 million for Q2 2016, €1.5 million for H1 2016 and €0.3 million for H1 2015; (3) Based on the adjusted average number
of shares of 82.5 million for Q1 2016, 96.6 million for Q2 2016, 89.5 million for H1 2016 and 64.8 million for H1 2015; (4) Defined as recurring EBITDA minus financial results minus maintenance capex and adjusted by
minorities and rental revenues straight-lining 4
STRONG RESULTS AND MOMENTUM
DELIVERING STRONG RESULTS ACROSS ALL ASSET CLASSES
HOTELS: STRONG MOMENTUM CONTINUING, WITH STABILIZED ASSETS YIELDING 10.8% ON INVESTMENT
AND SIGNIFICANT UPSIDE TO COME FROM IN-PROGRESS ASSETS AND NEW ACQUISITIONS
OFFICES: OUTPERFORMANCE AGAINST THE MARKET BASED ON OUR MANAGEMENT ACTIONS, BOTH ON
OCCUPANCY AND RENTAL GROWTH
RESIDENTIAL: CAPITAL GAINS AND RENTAL GROWTH, BOTH ABOVE THE MARKET LEADING TO MID
DOUBLE DIGITS IRRs RETURNS
COMBINED PORTFOLIO: STRONG CASH EARNINGS AND ASSET REVALUATION HAVE GENERATED €12.11
EPRA NAV PER SHARE (+10.0% vs. 2015YE ADJUSTED EPRA NAV) AND €1.34 EPS1 (+8.1x vs. H1 2015)
ACQUISITIONS: SOLID INVESTMENT PACE WITH €145 MILLION2 OF CAPITAL COMMITTED SINCE RIGHTS
ISSUE IN ACCRETIVE ACQUISITIONS, AT ATTRACTIVE REVERSIONARY RETURNS ON THE BACK OF
CAPILLARITY AND COMPLEXITY
COMPLETION OF IN-PROGRESS PROJECTS AND NEW ACQUISITIONS WILL ENSURE CONTINUOUS VALUE CREATION
Source: Hispania
Notes:
1 H1 2016 EPS based on the adjusted average weighted number of shares of the period (89.5 million shares)
2 Excluding the acquisition of the remaining 10% in Hispania Fides announced on July 27, 2016 and including €32M acquisition of Village land plot
5
PRUDENT FINANCING PROFILE
KEEPING A PRUDENT LEVERAGE PROFILE AND ROBUST BALANCE SHEET
Long-term debt maturity profile as of 30 June 2016 (€m)
WALT: 7.3 years
Gross LTV 39%
Key terms of the financing as of 30 June 2016
497
Net LTV1 12%
Average
2.7%
all-in cost2
€637M
Fixed
96%
interest
Interest
3.7x
cover3
37 38
Unencum- 17 21 27
bered 13%
assets
1 year 2 years 3 years 4 years 5 years > 5 years
Hispania intends to achieve investment grade rating by 2016 year-end
Source: Hispania
Notes:
1 Cash adjusted by the disbursement linked to the acquisition of the loan attributed to the Dunas hotel portfolio transaction
2 Excluding any impact from negative interest rate
3 Defined as EBITDA over financial expenses
6
STRATEGIC VALUE LEVERS
HISPANIA HAS A CLEAR AND FOCUSED VALUE CREATION STRATEGY
1 EXTRACT VALUE FROM COMPLEXITY AND
DISTRESS AT ACQUISITION
MAXIMIZE
2 SMART CAPEX TO REPOSITION ASSETS TO
SHAREHOLDERS
OPTIMAL QUALITY RETURN
3 IMPROVE OPERATING RESULTS THROUGH
INTENSE ASSET MANAGEMENT
Source: Hispania
7
HOTEL PORTFOLIO Hotel Gran Bahia Real, Fuerteventura
HOTEL PORTFOLIO
Keys breakdown1
2,587
KEYS
1,398
KEYS
GAV breakdown per Location2
Barcelona
Andalucia 2% Madrid
6,547 7% 5%
KEYS
Balearic
Islands
16%
Total
1,084M€
Canary
Islands
70%
Source: Hispania
Notes:
1 Including expected keys from Las Agujas
2 Including Dunas, Oasis Resort, Portinatx, at acquisition cost
9
ROBUST HOTEL MARKET
STRONG GROWTH MOMENTUM IN SPANISH HOTELS
1. Global tourism leader Spanish tourism going from strength to strength
Spain international arrivals Spain tourist expenditure
#3 largest tourism market globally (millions of people) (€ billion)
2009-15 CAGR 2015-16 YoY
#1 in 2015 Travel and Tourism Competitiveness Index 75 Growth 75
4.5% 4.8%
11.0%
Only stable year-round resort destination in Europe
13.0%
50 50
Spanish hotels operators are world-class players
2. Strong growth momentum 25 25
Growth momentum driven by:
0 0
⁻ continuing Spanish economic recovery (>3% in 2009 2010 2011 2012 2013 2014 2015 8M15 8M16
2016) International Arrivals Tourist Expenditure
Source: World Bank; INE; Turespana
⁻ continuing instability of competing destinations
Strong 2016 season expected to continue into 2017 Consistent outperformance with exceptional
⁻ high single-digit tariff increases for the 2017 season RevPAR growth momentum
67% of Hispania's hotel portfolio
⁻ no impact from Brexit experienced so far RevPAR YoY growth (%)
is located in the Canary Islands
3. Attractive investment opportunities remain 17,0%
Opportunities especially attractive for investors with
10,9%
expertise in deal execution and asset enhancement 10,4%
8,6% 8,6%
Highly fragmented industry 6,7%
5,8% 6,4%
5,0%
3,2%
Mostly owner-operators 2,7%
0,0%
Hispania is one of few and the biggest real estate investor
2013 2014 2015 2016 Q2
Canary Islands Spain Europe
Source: World Economic Forum, Spanish Economy Ministry forecast 10 Source: STR Global Press Releases; Hispania company disclosuresA UNIQUE HOTEL INVESTMENT STRATEGY
FOCUS ON SPANISH PREMIUM VACATIONAL AREAS WITH OPPORTUNISTIC
INVESTMENTS IN URBAN HOTELS WITHIN TOURISM HUBS
Rooms breakdown per Operator2
Dunas
1. Unique properties in strategic locations Hoteles
under Mgmt
11%
10%
2. Managed by and leased to the leading Vincci
1%
operators in respective markets Grupo NH
2% Total
3. Stable cash flows secured by long-term Sandos
10.532 Keys
leases and >2x rent cover1 3% Barceló
Melia 63%
4. Stable returns underpinned by minimum
3%
Atlantis
7%
guaranteed fixed rent
Hotels rental income H1 2016
5. Visible upside from variable lease Assets under
Management
components, underpinned by asset 14%
repositioning, capex and market momentum
6. Hispania is the only European REIT with
Income
significant exposure to resort hotels Fixed Rent
48M€ 50%
Variable
Source: Company information Rent
Note: 36%
1 EBITDAR / minimum guaranteed rent
2 Including Dunas Pending final execution and expected keys for Agujas (125 keys) 11STRONG PERFORMANCE CONTINUES
AS OF JUNE 2016, WE HAVE GENERATED c.€161M IN NAV REVALUATION (c.+33%
OVER THE EQUITY INVESTED), AS WELL AS STRONG LEVERED YIELDS
Lever 1: Attractive Acquisitions 94% Overview
of transactions executed off-market
Total investment June 20161 €924M
from a variety of sources
Lever 2: Repositioning Assets Total debt2 LTV: 48% €442M
several projects already finalized
Equity investment €482M
and major ones underway
Lever 3: Asset & Operations
Management Cost and revenue NOI 2016PF3 €92M
synergies will increase NOI further
Fixed component €55M
Contract design: Innovative “fixed
Variable component4 €37M
and variable lease”
NOI yield 2016PF 9.9%
Provides owner – operator
alignment Levered OpCF yield 2016PF5 14.5%
Avoids renegotiating risk in
downside scenarios
GAV June 2016PF6 €1,084M
Significant OpCF yield and Revaluation6 +17% €161M
revaluation already even if c.
€132M of GAV is yielding only 5% NAV June 2016PF +33% €642M
Source: Hispania
Notes:
1 Includes Dunas investment (€75m), Oasis (€28m) and Portinatx (€11m)
2 Includes theoretical debt at Dunas (€45m) and Oasis / Portinaxt not yet levered (total of €23m). Theoretical LTV on cost of 48% and on GAV of 40%. Current debt of €374m
3 NOI pro-forma including Dunas, full-year results for Oasis (+€1.7m) and normalisation of Guadalmina for Q1 2016 (after end of previous lease agreement) (+€0.5m)
4 Net of property costs, but pre-FFRE
5 Assumes a 3.0% all-in cost for total debt. Estimated FF&E included
6 Assumes GAV june-2016 plus Dunas, Oasis and Portinatx at acquisition price
12STRONG PERFORMANCE CONTINUES
OUR STABILIZED VACATIONAL HOTEL PORTFOLIO CONTINUES TO SHOW AN
OUTSTANDING PERFORMANCE AS OF 3Q 2016
Key operating metrics1
(as of Sept. 2016) Occupancy ADR2 RevPar total2 EBITDAR
Canary Islands
(fixed & variable) 87% +4 p.p. €139 +16% €122 +21% €43M +23%
4.239 Keys
Canary Islands
(fixed rent) 91% +7 p.p. €187 +12% €169 +21% €11M +66%
630 Keys
Balearic Islands
(fixed & variable) 88% +5 p.p. €131 +11% €115 +17% €15M +22%
1.915 Keys
Urban hotels
76% +3 p.p. €106 +7% €81 +10% €5M +52%
336 Keys
3Q 2016 vs. 3Q 2015
Source: Hispania
Notes:
1 Excluding hotels which are currently being internally operated (Guadalmina, Holiday Inn and San Miguel cove hotels), Portinatx, Oasis and Las Agujas development project
2 Including F&B and other revenues
13HOTEL PORTFOLIO YIELDS
PORTFOLIO ALREADY GENERATING A HIGHLY ATTRACTIVE RISK–RETURN YIELD
Yields overview (%)1
€711M GAV2 | 18 hotels €138M GAV2 | 6 hotels €848M GAV2 | 24 hotels 6 hotels 30 hotels
6,722 keys 966 keys 7,688 keys 1,101 keys3 8,789 keys3
11.5%
10.8%
10.5%
9.4% 9.5%
9.0%
7.2%
6.5%
Fixed and variable rent Fixed rents Total stabilised portfolio Repositioning Total portfolio
investments
NPY on investment H1 2016 NPY on GAV H1 2016
Source: Hispania
Notes: Net reversion yield on investment
1 Please see appendix for further detail on the calculation methodology
2 GAV as of H1 2016 and including the value attributed to the shopping centres when applicable
3 Assuming 125 guestrooms to be built in Las Agujas land plot
14PORTFOLIO IN-PROGRESS
MAJOR PROJECTS (PLUS DUNAS) ALREADY ON OUR BOOKS BUT NOT YIELDING
TO FULL POTENTIAL, SUPPORTS FUTURE GROWTH
Guadalmina
Investment: €24 million by H1 2016, with c. €18 million of additional capex
Timing: hotel operator to be selected in H2 2016 and refurbishment to start in Q3 c.10%
2017 with the aim to finalise by H2 2018
Holiday Inn
Investment: €34 million by H1 2016, with c. €25 million of additional capex
Timing: hotel operator to be selected in H2 2016 and repositioning to start in Q3 c.9%
2017 with the aim to finalise by H2 2018
Las Agujas
Investment: €12 million by H1 2016, with €27 million of additional capex
Timing: project to be drafted in H2 2016 with the intention to start works by H2 2017 c.11%
and to complete the development by H1 2019
Investment: €60 million loan acquisition by H1 2016 plus c. €15 million
disbursement for the acquisition of the full ownership plus an estimated capex of €14
Dunas
million c.9%
Timing: insolvency process to be resolved by H2 2016 & repositioning by 2017
Source: Hispania Stabilized expected net
Note: yield on investment
1 Estimated net yields as of the current situation of each individual investment case 15HOTEL ASSET AND OPERATIONS MANAGEMENT STRATEGY
ADDITIONAL VALUE TO BE CREATED BY IMPROVING OUR PORTFOLIO
OPERATIONS
Aggregated Hotel Operating Metrics (2016E)2 Quick Actions to Create Added Value
Actionable Fixed
hotels rent Total1 Revenue synergies:
Integrated negotiation with tour-operators
# Rooms 9,441 966 10,407
Integrated negotiation with OTAs
Room Revenue 194 35 228 Pricing strategy
% Revenues 62.8% 79.5% 64.9% Investing in online platform / direct channel
Marketing & advertising campaigns
Offer bundling
F&B Revenue 103 7 110
% Revenues 33.4% 16.2% 31.3% Change of operators
Cost synergies:
Other Revenue 12 2 14
Purchase platform
% Revenues 3.8% 4.3% 3.9%
Shared back-office services
Common operating systems
Total Revenues 308 44 352
Group contracting
Expenses (207) (27) (234) Improvement of control systems
Capex synergies:
GOP 102 17 118
Share best capex improvements across different hotels
Margin (%) 32.9% 38.0% 33.6% Monitoring / optimisation of maintenance capex of hotels
Source: Hispania
1 Excluding BAY Shopping Centers and Las Agujas landplot(125 keys expected)
2 Includes annualised 2016 numbers for current portfolio, Oasis, Portinatx and Dunas 16RECENT ACQUISITIONS
HISPANIA CONTINUES DELIVERING ON ATRACTIVE ACQUISITIONS WITH €113
MILLION OF NEW INVESTMENTS
Transaction: 3 hotels in northern Ibiza, with 484 keys located in a unique site
Strategic view: Strengthen our position in Ibiza and control the hotel supply in a
San Miguel
Up to
beautiful cove of the island
Asset repositioning: Full refurbishment to upgrade the hotels. Capex of €35 – 44 €75
million. Operator being chosen. Works expected to start in 2017 MILLION
Expected stabilised net yield on investment: 8.0% - 8.5%
Transaction: 4-star category with 372 keys located at the beachfront in the Teguise
area (Lanzarote, the Canary Islands) and acquired through BAY
Oasis Resort2
Strategic view: Complementing our offer on the island (Lanzarote Barceló) with high
synergistic potential on costs and on revenues. Possibility to create a large resort to
become a destination hotel
€24
MILLION
Operator: Barceló with a fixed & variable lease agreement and having agreed a total
estimated capex program of c. €4 million
Expected stabilised net yield on investment: c. 10.2%
Paradise Portinatx2
Transaction: Hotel with 134 keys located at the beachfront of Ibiza, ranked #1 by
TripAdvisor in its area of influence and acquired through BAY
Strategic view: Full asset repositioning to turn into a 4-star “Adults Only” category,
estimating a total capex of c.€7.5 million €14
MILLION
Operator: Barceló with a fixed & variable lease agreement
Expected stabilised net yield on investment: > 8%
Attributed
Source: Hispania
Notes: investment
1 Including the expected capex to be deployed as of the date of this presentation committed1
2 Transactions closed in July 2016
17HOTELS – OUTLOOK 2016
STRONG PERFORMANCE TO CONTINUE DURING THE 2016
Overview
75 million of international tourist arrivals expected for 2016, with a strong positive impact on the Spanish GDP (+3.8% growth for
tourist GDP vs. 2.7% for the Spanish economy)
Very strong 2016 season and expected strong outlook for 2017 based on the continued troubles of competing destinations (North
Africa and Turkey), the competitive position of USD destinations and an increasing strength of Spanish demand
Hotel operators are negotiating high single digit increases in tariffs for 2017 season, which is an additional proof of the strength of the
Spanish vacation market
Still attractive investment opportunities in the market, requiring expertise in deal execution and asset enhancement
BAY portfolio’s bookings performance for 4Q/16 1
October November December
Revenues on
books +30% +21% +37% +28% +35% +29%
Occupancy
+ 5 p.p +15 p.p + 8 p.p +19 p.p + 9 p.p +14 p.p
ADR
+3% +19% +6% +30% +4% +28%
No Brexit impact registered so far in our hotel portfolio
Source: Hispania, Exceltur
Note: Total Portfolio LfL Portfolio (Excl. Oasis & Portinatx)
1 YoY increase on data as of October 21th, 2016 and excluding Meliá Jardines del Teide. 18OFFICE PORTFOLIO Comandante Azcarraga 3 Building, Madrid
OFFICE PORTFOLIO
Sqm breakdown1
116,851
sqm
239 M€ 39,506
sqm
91 M€
GAV breakdown per Location2
26,100
sqm
Barcelona
20%
106 M€
Malaga
2%
4,288 Total
sqm
444M€
Madrid
78%
Source: Hispania
1 Including expected 33,124 sqm of Village 20
2 Excluding VillageOFFICE MARKET MOMENTUM
STRONG FUNDAMENTALS ON THE BACK OF A STEADY MARKET GROWTH
1. Increase in office take up Average Rents Madrid and Barcelona
€/sqm/month
H1 2016 has registered a yoy increase of 3.9% in
Madrid (gross absorption of c.270,000 sqm with 60% in
decentralized areas)
Vacancy has been reduced to 11.5% for Madrid, and
10.4% in Barcelona, reaching only 6.6% and 3.6% in
CBD respectively
2. Positive trend in office rents
Madrid CBD rents continue to rise (2.1% in Q2 2016),
standing 11% above the lowest figures reached in 2013.
Madrid Prime CBD reaches €27/sqm (+2 % Q2 2016),
while rents in decentralized area have reached €13/sqm Source: Aguirre Newman
(+5% in Q2 2016)
Vacancy Rate Madrid and Barcelona
Barcelona Prime CBD rents have increased 5% since
January reaching €17/sqm
(%) of Available Stock
3. Limited new Supply
There is very little new supply in the office market for the
next two years
Only c.16.000 sqm were completed in H1 2016. This lack
of new stock, is reducing the available supply and the
vacancy rate, specially in decentralized areas
On the other hand there has been an increase in
refurbishment activities, which will improve the quality of
the overall office stock
Source: Aguirre Newman
21VALUE DRIVERS
HIGH QUALITY, HIGH YIELDING, CBD&BD PORTFOLIO
1. ATTACTIVE ENTRY PRICES
Well-located assets with significant
Sqm breakdown per Tenant1
underlying quality potential
Buying into vacancy and need for Ilunion Group
refurbishment 16%
Selective new acquisitions to complement
and enhance overall value of the portfolio Foster
Wheeler
2. INTENSE ASSET MANAGEMENT 7%
Capex execution: profitability improvement Total
while securing a competitive advantage 153,621sqm Aegon
Other 6%
Restructuring of leases towards triple net 58%
ACS
Improvement of the quality of the tenant mix
6%
Cost optimisation
Publicis
3. HIGH REVERSIONARY POTENTIAL
4%
CINC
3%
Increasing occupancy
Rental growth
Further yield compression
Source: Hispania
1 Excluding 33,124 sqm expected to be built in Village 22OFFICES LEASES PROFILE
CONSOLIDATING A PORTFOLIO OF HIGH QUALITY TENANTS WHILE PRESERVING
EXPOSURE TO FURTHER RENTAL INCREASE
Lease expiration schedule1 WALT breakdown1
As % of portfolio’s total current rent
56%
23%
19% 58%
44% in the next
couple of years
19%
< 5 years Btw 5-10 years > 10 years
14%
11%
H2 2016 2017 2018 2019 and beyond
Source: Hispania
Note:
1 As of the date of the first break-option
23ASSET MANAGEMENT
PROACTIVE ASSET MANAGEMENT RESULTING IN LETTING AND RENTAL
GROWTH ABOVE THE MARKET
Proactive letting activity
Monthly rent Increasing commercial attractiveness of our portfolio through
Period Occupancy (€/sqm) intense asset management
H1 2015 64% 12.6 Rent development (€/sqm)
H1 2016 lfl 83% 13.8 14.3
+12% 13.8
+10%
Growth lfl +19 p.p. +9.5%
+2% 3
12.8 12.7 12.6
12.4
December 2015 77% 12.7
Madrid Barcelona Portfolio
H1 2016 84%1,2 13.3
Jun-15 Jun-16
Growth H1 2016 +7 p.p. +4.7%
Source: Hispania
Notes:
1 Including the new lease signed in September 2016 in PV Auditorio with Uría Menéndez
2 Including the vacant space left by the tenants of PV Auditorio 24
3 Rents LfLREPOSITIONING STRATEGY
REFURBISHMENT PLANS ON WELL ACQUIRED ASSETS COUPLED WITH BREEAM
CERTIFICATION ARE INCREASING YIELDS AND DRIVING REVALUATION
€52M of intense capex & repositioning program... Ability to extract value and maintain competitive advantage
Total capex €31.5 million split into: Torre
3,0% 7,0%
to be €18.4 million as of H1 2016 M301
Capex:
deployed 928 €/sqm
€13.1 million expected to be 4,0%
until 2016YE deployed during H2 2016 Fully
occupied
69%
occupancy
€20.7 million split into:
Capex €20.7 million for the remaining Net passing yield on Improvement Reversion yield on
commitment assets investment at expected investment
acquisition
Village project TBD
…targeting excellence in the quality of the assets Auditorio2 3.0% 5.8%
BREAAM certification in progress (# of buildings)
Capex
8% 27% 51% 86% 1,059 €/sqm
2.8% Fully
(as % of H1 2016 GAV) occupied
19
82%
12 occupancy
6
H1 2016 net passing Improvement Reversion yield on
1 yield on investment expected investment
2015 2016 2017 Total
Source: Hispania
Notes: (1) Based on the new contract already signed (full occupancy) and an expected capex to be deployed of €10.6 million; (2) Based on the contract signed in September 2016 and an expected capex to be deployed
of €5.1 million
25SELECTED VALUE ENHANCING ACQUISITIONS
LATEST ACQUISITION ENHANCES THE OVERALL PORTFOLIO’S ATTRACTIVENESS
BY ADDING TWO BUILDINGS OF THE HIGHEST QUALITY IN MADRID
Transaction: Acquisition of a plot in Madrid to develop two office buildings Inicial
Strategic view: Strengthen our office portfolio with two Class A buildings which will receive a LEED Platinum investment
Village
certificate
Asset Construction: Development of two buildings with more than 33.000 sqm and 770 parking spaces.
€32
Construction is expected to be complete by Q4 2018
MILLION
Expected stabilised net yield on investment: 6.5% - 7.0%
Source: Hispania
26HIGH REVERSIONARY POTENTIAL
PORTFOLIO IS WELL ON TRACK TO GENERATE A HIGHLY ATTRACTIVE YIELD
BENEFIT FROM RENTAL GROWTH AND YIELD COMPRESSION
Target net reversion yields (%)1, 2
Stabilised portfolio
2,4% 6,6%
5,8%
0,8%
4,2%
H1 2016 passing yield Growth from full Reversion yield on H1 Yield Reversion yield on H1
on investment occupancy at current 2016 investment compression 2016 GAV
market rents
Investment: €339M3 GAV: €384M3
Source: Hispania and CBRE appraisal as of 30 June 2016
Notes:
1 Please see appendix for further detail on the calculation methodology
2 Excluding Village
3 Stabilised assets as of H1 2016, excluding PV Auditorio and Torre M30
27RESIDENTIAL PORTFOLIO Isla del Cielo Building, Barcelona
RESIDENTIAL PORTFOLIO
Units breakdown GAV breakdown per Location
Barcelona
41%
555 Total
125 M€
UNITS
Madrid 213M€
59%
199
88 M€
UNITS
29VALUE DRIVERS
OUR STRATEGY IS WORKING AND SHOULD DELIVER DOUBLE DIGIT IRRs
1. IRREPLICABLE HIGH QUALITY PORTFOLIO
Assets acquired at attractive entry prices
Located in key urban consolidated neighbourhoods of
Madrid and Barcelona
2. EXCELLENCE IN PROPERTY MANAGEMENT
In-house property manager with 115 professionals and
cutting-edge technology platform
Commercialisation activity ongoing to achieve optimal
occupancy rates by year-end
Optimisation of rental yields
3. SMART CAPEX
Isla del Cielo and Sanchinarro buildings well on-track:
common areas and a number of dwellings upgraded to
premium
Analysing added-value strategies to implement in the
rest of the portfolio
4. CAPITAL VALUE APPRECIATION
Start the commercialisation of a certain number of
premium dwellings in Isla del Cielo to confirm the value Isla del Cielo residential building
creation from our repositioning program
Source: Hispania
30OCCUPANCY AND RENT LEVELS
REPOSITIONING AND ASSET MANAGEMENT ARE RESULTING IN HIGH
OCCUPANCY GAINS AND RENTAL INCREASES
Occupancy ratio (%) Portfolio average monthly rent evolution
Stabilised portfolio slightly affected by refurbishment programs €/sqm/month
95% 9.8
9.6
92% 9.5
9.3
87%
86% 86%
8.8
H1 2015 H1 2016 lfl 2015 YE Q1 2016 H1 2016
2015 YE Q1 2016 H1 2016
Adjusted by units not available for renting Growth lfl: +9.1% Growth in H1 2016: +5.6%
Source: Hispania
31CASE STUDIES
OUR LARGEST INVESTMENTS ILLUSTRATE THE SUCCESS OF OUR STRATEGY
ISLA DEL CIELO - €88 MILLION GAV SANCHINARRO - €74 MILLION GAV
Improvement in rents and profitability Improvement in rents and profitability
Investment Rent today Gross yield Investment Rent today Gross yield
Pre-capex €2,694 Pre-capex €2,271
c.€9 /sqm c.4%RESIDENTIAL – OUTLOOK 2016
POSITIVE MARKET TRENDS BOTH FOR THE RENTAL AND OWNERSHIP MARKETS
HISPANIA TO BENEFIT FROM INCREASING RENTAL DEMAND IN MADRID AND BARCELONA; however, overall
occupancy ratio unlikely to increase by year end
Strategy to generate stock in Isla del Cielo during H2 2016 to prepare for retail sale in 2017
Continuous “block” of a number of units in Sanchinarro for refurbishment
Majadahonda repositioning to be initiated
RENT INCREASES TO CONTINUE IN REPOSITIONED ASSETS
New premium contracts of Isla del Cielo in the range of €17.5 – 20.0 /sqm/month
New premium contracts of Sanchinarro in the range of €11.5 – 13.0 /sqm/month
GROWING RETAIL DEMAND & SCARCITY OF SUPPLY already putting pressure on prices in Madrid and Barcelona
Affordability back to early 2000 levels
Recovery in mortgage granting – +14.6% LTM growth as of Q1 2016
Recovery in number of transactions volume – +13% and +8% LTM growth as of Q1 2016 in Madrid & Barcelona, respectively
Negligible available stock in Hispania’s locations and lack of competitive product from institutional investors
Source: Hispania and INE
33STRATEGY AND OUTLOOK Hotel Barceló Teguise Beach, Lanzarote
STRATEGY & VISION
GENERATE SUPERIOR RETURNS ACROSS OUR THREE ASSET CLASSES
A GROWING PORTFOLIO OF HIGH QUALITY HOTEL ASSETS GENERATING
SUSTAINABLE HIGH YIELD AND TOTAL RETURN
GENERATION OF ADDITIONAL NOI THROUGH ASSET AND OPERATIONS
HOTEL MANAGEMENT
OPTIMIZING OFFICE PORTFOLIO WITH HIGH REVERSIONARY POTENTIAL
A RESIDENTIAL PORTFOLIO PROJECTED TO PRODUCE MID-DOUBLE DIGIT
IRRs AND BENEFITTING FROM FURTHER HOUSE PRICE APPRECIATION
SIGNIFICANT UPSIDE AND VALUE CREATION STILL TO COME
352016 OUTLOOK
HISPANIA CONFIRMS A SOLID OUTLOOK FOR 2016
CONTINUED
CONTINUED OUTPERFORMANCE
OUTPERFORMANCE OF
OF OUR OUR PORTFOLIO
HOTEL HOTEL PORTFOLIO – WITH
– WITH NO NO IMPACT
EXPECTED
FROM
IMPACT BREXIT
FROM BREXIT
ADDITIONAL INCREASE IN OFFICE OCCUPANCY AND RENTS
FURTHER PROGRESS ON RESIDENTIAL REFURBISHMENT PLANS AND START SELECTED
INDIVIDUAL UNITS SALES IN BARCELONA
FURTHER PROGRESS ON RESIDENTIAL REFURBISHMENT PLANS AND
START SELECTED INDIVIDUAL UNITS SALES IN BARCELONA
DELIVERING ON OUR PIPELINE – MORE ACCRETIVE ACQUISITIONS, MAINLY IN HOTELS
SUBMISSION TO THE BOARD A VALUE RETURN PROPOSAL BY Q4 2016
SUBMISSION TO THE BOARD A VALUE RETURN PROPOSAL BY Q4 2016
32ANNEX Cristalia Play Building, Madrid
OUR VIEW ON BREXIT
NO EXPECTED IMPACT FROM BREXIT IN THE SHORT TERM
1. British tourists have increased by 13% yoy 3. High improvement of RevPar in vacational
No visible impact from Brexit in 2016 hotels
Vacational hotels have increased its RevPar by
+11.6% yoy
2. Increase of other tourists in Spain ADR and occupancy was +6.2% yoy and +5.1%
yoy respectively
Tourists coming from Ireland and Portugal have registered
the highest increase yoy, recording +21% and +14% Canary Islands, Balearic and Andalusia have
respectively achieved the best performance in Spain
increasing its RevPar yoy up to +14.3%, +13.2%
and +12.6% respectively
Increase of number of tourists per Country yoy Split of Tourists in Spain per Country of Residency
As of September 2016 As of September 2016
Ireland 21% Ireland; 2% Portugal; 3%
Portugal 14% US; 3%
UK 13% Belgium; 3%
The
Nordic Countries 12% Netherlands;
UK; 24%
5%
The Netherlands 10% Italy; 5%
France 10%
US 7% Nordic
Italy 5% Countries; 6%
Germany Rest of the
4%
world; 19%
Belgium 2%
Russia 1% Germany; 15%
0% 5% 10% 15% 20% 25%
Series1
France; 15%
38
Source: Company information and INE figures as of August 31stEPRA YIELDS DEFINITION
EPRA net passing yield on cost: refers to annual income from the net cash flows of non-recoverable operational costs derived from the
rental of the Portfolio, with respect to the investment amount in the Portfolio. Net cash flows have been calculated by annualising the net
income obtained in the first half of 2016, following methods recommended by EPRA (excluding non-recurrent first half costs and income).
In the hotel segment, the assets under management and in development (Holiday Inn Bernabéu, Guadalmina, Hotel Maza, Las Agujas,
and San Miguel portfolio) are excluded.
EPRA net passing yield on GAV: refers to annual income from the net cash flows of non-recoverable operational costs derived from
the rental of the Portfolio, with respect to the market value of the Portfolio increased by estimated transaction costs. Net cash flows have
been calculated by annualising the net income obtained in the first half of 2016, following methods recommended by EPRA (excluding
non-recurrent first half costs and income). In the hotel segment, the assets under management and in development (Holiday Inn
Bernabéu, Guadalmina, Hotel Maza, Las Agujas, and San Miguel portfolio) are excluded.
EPRA reversion yield on cost: refers to the estimated annual net cash flow income of non-recoverable operational costs derived from
the rental of the Portfolio, using the market value of the net income of the Portfolio on the date of the calculation, in relation to the
investment amount of the Portfolio. With regard to the office and residential portfolios, net income is estimated for each asset considering
in nature and its location. The triple net contract hypothesis is used, meaning that it is assumed the operational costs will be reassigned
to the tenants. With regard to the hotel portfolio, the Group considers that the EPRA net reversion yield on cost is equivalent to the EPRA
net initial yield on cost for those hotels that are currently leased out to an operator which does not form part of the Group because there
are not comparable market references for the hotel assets of the Group. EPRA net reversion yield on cost includes the best estimate of
annual net cash flow income of the assets in development or currently managed internally by the Group, calculated over the gross
estimated investment of such assets once the development is finalised and the planned repositioning work completed.
EPRA reversion yield on GAV: refers to the estimated annual net cash flow income of non-recoverable operational costs derived from
the rental of the Portfolio, using the market value of the net income of the Portfolio on the date of the calculation, in relation to the market
value of the Portfolio increased by estimated transaction costs. With regard to the office and residential portfolios, net income is
estimated for each asset considering in nature and its location. The triple net contract hypothesis is used, meaning that it is assumed the
operational costs will be reassigned to the tenants. With regard to the hotel portfolio, the Group considers that the EPRA net reversion
yield on GAV is equivalent to the EPRA net initial yield on GAV for those hotels that are currently leased out to an operator which does
not form part of the Group because there are not comparable market references for the hotel assets of the Group. EPRA net reversion
yield on GAV includes the best estimate of annual net cash flow income of the assets in development or currently managed internally by
the Group, calculated over the gross estimated investment of such assets once the development is finalised and the planned
repositioning work completed.
39YIELDS DEFINITION
Net passing yield on cost: refers to annual net operating incomes derived from the rental of the Portfolio, with respect to the investment
amount in the Portfolio. Net operating incomes have been calculated by annualising the net income obtained in the first half of 2016
(excluding non-recurrent first half costs and income). In the hotel segment, the assets under management and in development (Holiday
Inn Bernabéu, Guadalmina, Hotel Maza, Las Agujas, and San Miguel portfolio) are excluded.
Net passing yield on GAV: refers to annual net operating incomes derived from the rental of the Portfolio, with respect to the market
value of the Portfolio. Net operating incomes have been calculated by annualising the net income obtained in the first half of 2016
(excluding non-recurrent first half costs and income). In the hotel segment, the assets under management and in development (Holiday
Inn Bernabéu, Guadalmina, Hotel Maza, Las Agujas, and San Miguel portfolio) are excluded.
Net reversion yield on cost: refers to the estimated annual net operating incomes derived from the rental of the Portfolio, using the
market value of the net income of the Portfolio on the date of the calculation, in relation to the investment amount of the Portfolio. With
regard to the office and residential portfolios, net income is estimated for each asset considering in nature and its location. The triple net
contract hypothesis is used, meaning that it is assumed the operational costs will be reassigned to the tenants. With regard to the hotel
portfolio, the Group considers that the net reversion yield on cost is equivalent to the net initial yield on cost for those hotels that are
currently leased out to an operator which does not form part of the Group because there are not comparable market references for the
hotel assets of the Group. Net reversion yield on cost includes the best estimate of annual net operating income of the assets in
development or currently managed internally by the Group, calculated over the gross estimated investment of such assets once the
development is finalised and the planned repositioning work completed.
Net reversion yield on GAV: refers to the estimated annual net operating income derived from the rental of the Portfolio, using the
market value of the net income of the Portfolio on the date of the calculation, in relation to the market value of the Portfolio. With regard
to the office and residential portfolios, net income is estimated for each asset considering in nature and its location. The triple net
contract hypothesis is used, meaning that it is assumed the operational costs will be reassigned to the tenants. With regard to the hotel
portfolio, the Group considers that the net reversion yield on GAV is equivalent to the net initial yield on GAV for those hotels that are
currently leased out to an operator which does not form part of the Group because there are not comparable market references for the
hotel assets of the Group. Net reversion yield on GAV includes the best estimate of annual net operating income of the assets in
development or currently managed internally by the Group, calculated over the gross estimated investment of such assets once the
development is finalised and the planned repositioning work completed.
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