MERLIN Properties Annual Report 2017 / English

ı 9 ı Annual Report 2017 Monumental and Marqués de Pombal 3 in Lisbon. Moreover, as soon as we lease Torre Chamartín as a head office or exceed two- thirds occupancy in a multi-tenant scheme, we will begin construction works on the two Adequa buildings. In shopping centres, the Flagship Project, a plan to renovate our spectacular portfolio of urban centres, is committed to the convergence of online and physical sales. These are ultra-prime assets, opened when the developer could still choose the optimum site, with very central locations. They dominate the submarkets in which they operate. We will renovate them in order to provide clients with a more spacious and enriching experience, incorporating cutting-edge technologies with the aim of supporting store concepts that consumers will want to experience and that will become large showrooms for online channels and, simultaneously, points at which to collect or return goods bought online, ie: spaces where online speed converges with the personal experience. In 2017, we executed pilot projects, like the innovative sports area in Marineda and the Nickelodeon park in Thader, which are good examples of what is yet to come in 2018-2021: the comprehensive renovation of Larios in Malaga (which has just begun), the re- opening of Arturo Soria Plaza (nearly finished) and the start of works at Tres Aguas in Madrid, El Saler in Valencia, Porto Pi in Palma, and Artea in Bilbao, as the biggest renovations, not to mention the radical and successful youth concept of X-Madrid, currently under construction. This project, which we expect to be operational in spring 2019, has opened a field of experimentation with a type of client and line of brands we have never worked with, generating countless ideas for other projects. In logistics, we continue with our ambitious expansion plan, mainly through land development and turnkey construction under the framework of the Best II Project, a continuation of Best I, which has given us very good results to date and allowed us to position ourselves as industry leaders, after starting from a blank slate in the summer of 2014, without the possibility of corporate acquisitions, except for the assets acquired with Saba Logística a couple of years ago. In 2017, we closed the first phase of the previous plan with the opening of the Cabanillas I logistics park. With 202,000 sqm, it is the largest logistics development undertaken in Spain in the last decade. This project, located in the pivotal Henares corridor, had reached full occupancy before opening, with top-tier tenants like Luis Simões, XPO, Logista and DSV. In the first few months of 2018, a second wave of projects got underway: Gavilanes (let to IDL and Coca-Cola), Meco (with Leroy Merlin), Sevilla ZAL (XPO) and San Fernando I (GLS). The projects now grouped in Best II will add an additional 500,000 sqm to the portfolio, to far exceed the 2,000,000 sqm of logistics property under management in record time. This places us in a powerful leadership position with respect to our competitors. With a presence at all the major logistics hubs in the Iberian Peninsula, any tenant seeking to operate at several hubs with the latest generation of warehouses will think of MERLIN Properties first and foremost. These projects will be executed at the right time, in a favourable macro environment, and in a real estate market with strong fundamentals that is clearly on the upswing. In addition, the Company’s financial strength allows us to be ambitious and, at the same time, prepare ourselves in order that when the next cycle arrives, our asset portfolio is, by far, of the highest quality and, thus, the most valuable and resilient on the market. And what of the people who will execute these projects? Last year, I spoke about the many virtues of the MERLIN Properties team, stressing their excellence, their professional skills, and their productivity. In 2017, they demonstrated their versatility and their ability to adapt to new tasks in a new environment. It is not easy to switch from “acquisition” mode to “management” mode, to set aside Excel and contracts in favour of construction sites and tenant services. But we have a dedicated and committed team that consistently strives to make our buildings more attractive, more efficient,