MERLIN Properties Annual Report 2023

MERLIN Properties | 7 and the renovation of the Ruiz Picasso 11 building completed, bringing the Company's Landmark Plan to an end. The entire asset is leased to clients such as IBM, SAP, Globant and Willis Towers Watson. In logistics, MERLIN achieved organic growth (+4.6% like-for-like) thanks to full occupancy, indexation and higher rents in renewals (+5.2%). Rents for the year amounted to € 80.3 million and occupancy reached an all-time high (99.0%). As for the progress of the Best II & III plans, 478,000 sqm have been developed since the launch of both plans, with an average return on development cost of 7.8%. In 2023, Cabanillas Park II B, of 47,342 sqm, was completed and leased in its entirety to Pepco. In addition, MERLIN has an aggregate land reserve of approximately 557,000 sqm, which will help to keep pace with the growth of this market segment in the coming years. Likewise, in shopping centres, an asset category that has been raising concerns in the investment community for years due to the increasing penetration of digital sales, MERLIN's portfolio of shopping centres has reported positive figures in 2023. Footfall at the centres has exceeded expectations, achieving 5% growth. This asset class closed 2023 with gross rents of € 125.8 million, comparable rents up 7.7% compared to 2022 and occupancy of 96.2% (up 122 basis points compared to 2022). The highlight of the year was the successful launch of our first three Data Centers in the last quarter of 2023, a category of assets that represents the future of the company. The first phase of the data centre development plan includes an installed capacity of 60 MW, a total investment of approximately € 565 million and an expected net return on investment of more than 10%. Of the total investment, € 258 million has already been disbursed and € 307 million remains to be invested, of which € 144 million will be incurred in 2024. The Madrid- Getafe, Barcelona PLZF and Bilbao-Arasur data centres are fully operational and delivered with the best technical specifications in the industry today (1.15 PUE and 0.0 WUE). They have an initial installed capacity of 9 MW and capacity to install a further 51 MW in 2024 and 2025. In addition, the Lisboa-VFX data centre has just been licensed. Given the increased demand from generative AI, the Company is accelerating the acquisition of critical equipment and repowering the facilities that allow it. The significant deleveraging achieved in 2022, following the sale of the branch portfolio to BBVA, has been highly valued by the financial market and especially by rating agencies, in this context of high interest rates. MERLIN closed 2023 with a low debt level of 35.0% and has refinanced all debt maturing in the near future, so the Company does not face new debt maturities until November 2026. MERLIN's credit quality has been recently assessed by Standard & Poors, which, in its annual review carried out in the first quarter of 2024, has raised the Company's rating one notch to BBB+. Regarding the valuation of the asset portfolio, MERLIN Properties' valuation was € 11,270 million, which represents a decrease of 3.4% on a comparable basis, mainly due to the increase in yields of 42 basis points on average experienced in asset valuations as a result of the aforementioned interest rate hikes. Regarding the dividend, an interim dividend of € 20 cents per share was agreed, which together with the dividend to be submitted for approval at the General Meeting, would bring the total distribution for 2023 to € 44 cents per share. In 2023 MERLIN continued its progress in environmental sustainability. The green clause has been created and implemented in all the Company's new contracts. Maximum embedded carbon footprint limits have been established for new developments or comprehensive refurbishments. A total of 14.9 MW of PV power has been installed since the launch of the so-called Sun project and the carbon footprint of the asset portfolio has been reduced by 6.1% to a total of 2,422 tonnes in the year. This good environmental performance has been endorsed by MERLIN Properties' inclusion in the Dow Jones Sustainability Index, the first Spanish real estate company to achieve this.