MERLIN Properties Annual Report 2018 / English

ı 8 ı The Company has also gained in terms of diversification from different angles. Broken down by asset category, we continue to approach the strategic aim of the Company, that is, offices 40% and the rest of the asset category (centres, logistics and commercial premises) each representing approximately 20%. The concentration of clients has also diversified, with the 20 main clients having dropped from 26% to 24% in terms of relative weighting. Yet the most relevant change has been in geographical diversification, where the Portuguese market has experienced a leap in 2018. It is a market in which the MERLIN team boasts more than 20 years’ experience and where it has focused its endeavours following the good macro perspectives of the country and the excellent performance of the fundamentals of offices and shopping. Portugal has grown to represent 9% of the MERLIN Properties portfolio, Relative positioning has also made notable strides forward in this fiscal year. Certain data illustrate this important aspect: the offices located in the CBD or new business areas already represent 88% of this, the urban or dominant commercial centres represent 85% of the portfolio, and the logistics warehouses with the characteristics demanded by the logistic operators of “e-commerce” account for 81% of the latter. The quality that our portfolio of assets bears testament to its very beneficial consequences for the Company and its shareholders. For example, MERLIN is able to retain 80% of its tenants when their contracts reach the end of their term, which offers an idea of how satisfied they are in their spaces. Another way of looking at it is the average increase in rental income for renovations, 6.5% in offices, 3.5% in shopping centres or 9.2% in logistics. Alongside this, the demand for our spaces also grows, as a result of the adequate progress of the parameters that affect the market in which we operate and the quality of our portfolio. 2018 has closed with an occupation rate of 93.4%, which represents an increase of 80 basis points compared Dear shareholders, Today we look back on an intense year; a year in which the team of professionals that comprise MERLIN Properties bolstered the foundations of the Company and set out the blueprints for future growth. MERLIN Properties is today a stronger, more diversified company, with improved positioning and sturdiness, for the benefit of all our shareholders. The Company is at the forefront of all the asset categories in which it operates and is amongst the 10 largest REITs in Europe. In terms of offices, for example, it has the largest market offer in both Madrid and Barcelona and has climbed positions in Lisbon, where it is already one of the top 3 operators. With regard to shopping centres, it has the largest portfolio in Spain. In the logistics’ sphere, the leadership is even more remarkable, with more than 2.5 million metres under our management, more than doubling the size of its nearest competitor. Mr. Javier García-Carranza Non-Executive Chairman Letter from the Chairman