MERLIN Properties Annual Report 2024

MERLIN Properties | 5 Globant or Willis Towers Watson, bringing the Company’s Plan Landmark to an end. In logistics, the year was once again outstanding for MERLIN, with a strong organic growth (+2.8% like-for-like) thanks to full occupancy (99.4%), indexation and higher rents in renewals (+1.4%). Rents for the year amounted to € 83.7 million and occupancy reached an all-time high (99.4%). As for the progress of the Best II & III plans, 525,000 sqm have been developed since the launch of both plans, with an average return on development cost of 7.8%. In 2024, a long-term lease agreement was signed with a Portuguese tenant to develop the remaining landbank (135,000 sqm) in Lisbon logistics park, which will be delivered gradually until 2027. In addition, MERLIN has an aggregate landbank of approximately 584,000 sqm, which will help to keep pace with the growth of this market segment, which is one of the key pillars of growth in the coming years. It should be noted that the year has been even more positive for shopping centers, an asset category that has been suffering for years the negative sentiment of the investment community and even public opinion due to the increasing penetration of digital sales. In fact, the reality is quite different, and after recovering from the effects of the pandemic, MERLIN’s shopping center portfolio has achieved excellent figures for 2024. Footfall (+2.5%) and tenant sales at our centers (+5.5%) have increased compared to 2023. This asset class closed 2024 with gross rents of € 126.8 million, Lfl rents up 2.7% compared to 2023 and occupancy of 96.5% (up 21 basis points compared to 2023). It is worth noting that OCRs are at an all-time low (11.2%). The highlight of the year was the consolidation of the Company’s main long-term growth driver, the data centers division. The first phase of the data centers development plan includes and installed capacity of 64 MW, a total investment of approximately € 608 million and a net return on investment of over 10%. Of the total investment, € 381 million has been already disbursed and € 227 million remains, of which € 152 million will be disbursed in 2025. The Madrid-Getafe, Barcelona-PLZF and Bilbao-Arasur data centers are fully operational and delivered with the best industry technical standards (1.15 PUE and 0.0 WUE). They have an initial installed capacity of 26 MW and capacity to install other 38 MW in 2025 and 2026. Given the increase in demand coming from generative IA, the Company has decided to accelerate the acquisition of critical equipment and to manage the increase in power of the facilities that allow it, such as Barcelona-PLZF or Madrid-Getafe. In addition, the Barcelona data center was fully let during the last quarter of 2024. It should be highlighted that this year, in July, a capital increase for a total amount of € 921 million was carried out to finance the second phase (203 MW) of the data center development plan. Works on the second building at Bilbao-Arasur and Lisbon-VFX have already begun and are progressing well. The significant deleveraging achieved in 2022, following the sale of the branch portfolio to BBVA, continues to be highly valued by the market and especially by the rating agencies, and even more so in the context of high interest rates. MERLIN has closed 2024 with a low debt level of 28.3% and has refinanced all debt maturing in the near future, so the Company will not face new debt maturities until November 2026. MERLIN’s credit quality has recently been assessed by Moody’s, which, in its annual review, has upgraded the Company’s rating one notch to Baa1. Regarding the valuation of the asset portfolio, the comparable valuation of MERLIN Properties was € 11.54 billion, and the value created in the data centers (€ 60.3 million) offset the devaluation of the rest of the portfolio.