MERLIN Properties Annual Report 2019 / English

Mr. Ismael Clemente CEO Letter from the CEO Given the circumstances, I will dedicate the first part of this letter to a perhaps more succinct than usual assessment of FY 2019, before reporting the impact that the health and economic situation has had on our business thus far in 2020. In 2019, MERLIN Properties achieved a record cash flow per share of €0.67, representing an increase of 9.2% relative to the previous year. The Company also obtained its highest net asset value to date: €15.6 per share. We closed the fiscal year, moreover, with the lowest leverage ratio since our IPO—40.6%—enabling us to face the challenges ahead with strength and solidity. From an operational perspective, it is worth noting the total occupancy rate at year-end of 94.8% for the Company as a whole, coupled with a boost in like-for-like rental growth of 4.5%. These are indicators of the quality of our asset portfolio, unequivocal signs that we offer our clients a consummate real estate product. If we delve into asset categories, we see that these indications are repeated for offices, shopping centres, logistics parks, and net leases: 1.- In offices, 2019 was a year of outstanding leasing activity, demonstrated by an uptick of 264 basis points in occupancy and an increase in like-for-like rents of 7.3%. 2.- In shopping centres, there was also a significant hike in occupancy: 204 basis points and a 3.1% increase in like- for-like rents. Our tenants reported per-sqm sales growth of more than 4% at our shopping centres, evidencing that, despite the popularity of online retail, the shopping centre format remains relevant, especially at high quality centres in prime locations, whether urban or dominant, as is the case with 95% of our portfolio. 3.- Logistics continues its positive trend, closing the year with 98% occupancy and rents increasing at a LfL rate of 3.6%. Dear Shareholders, In FY 2019, year for which we now report our accounts to you, we achieved excellent results in all of the asset categories in which the Company operates. It was a year of significant trading achievements in terms of occupancy, rents, margins and operating efficiency, of record financial figures, and of considerable value extraction from our portfolio of assets, as demonstrated by the offices, shopping centres, and logistics parks projects delivered under our well-known, multi-year plans: Landmark, Flagship, and Best II & III. For all intents and purposes, 2019 was a stellar year, in fact the best year in the Company’s short history. Nevertheless, it is difficult to discuss achievements with the memory of the hardships we have faced since the emergence of the SARS CoV-2 pandemic still recent. Its cost in human lives, particularly high among the generation that handed down the standard of living we enjoy today, dampens any message of triumph. Moreover, there is the looming prospect of a severe economic crisis resulting from the slowdown in activity, which we will all have to face together, hopefully well-led by the nation’s government.