MERLIN Properties has reported FY2019 results, with total revenues of € 530.6 million (including gross rents of €525.9 million), recurring EBITDA of €425.5 million and operating profit of €313.3 million (€0.67 per share). Net earnings of €563.3 million (€1.20 per share) is not comparable year on year due to the extraordinary gain in FY2018 related to the capitalization of Testa Residencial service contract. Excluding non-recurring items, net ordinary earnings amount to €212.5 million, which represents an increase of 3.6% vs. 2018.
Exceptional year in occupancy, having increased 264 basis points up to 92.8%. Strong performance with a 7.3% LfL rent increase, historical maximum reached by MERLIN thus far. Excellent release spread, delivering a 7.2% on average. By markets, the growth has been 6.0% in Madrid, 19.5% in Barcelona and 11.2% in Lisbon.
During 2019, the Company acquired a 14.46% stake in DCN, a strategic bet to play a major role, bringing expertise and long-term stability, to the largest real estate project in Europe and the future prime CBD of Madrid. The exposure in Lisbon has also increased, with 3 acquisitions (Art, TFM and Nestlé) and the bet on LOOM continues with the acquisition of 22@ Ferreteria and Plaza de Cataluña, 9 in Barcelona.
Excellent progress in Landmark I. During 2019, Torre Chamartin and Torre Glóries have been delivered, both 100% occupied and generating returns for shareholders above what was initially expected. For 2020, the deliveries which are expected are Diagonal 605, 95% commercialized, Castellana 85, 100% commercialized and Marqués de Pombal, also 100% commercialized.
Relevant increase in both occupancy and rents. FY 2019 occupancy arrives at 93.3%, an increase of 204 basis points. LfL rent increase and release spread of 3.1% and 4.2% respectively, demonstrates strong performance. Excellent performance of the portfolio in terms of tenant sales (+4%) and footfall (+2%), proves its quality and its complementarity with the online offer highlighting the resilience of Spanish retail.
In addition, MERLIN has announced the closing of a transaction for which it contributes 3 assets (Thader, La Fira and Nassica) to Silicius Socimi. The transaction has been on a NAV neutral basis, and in exchange MERLIN has received 34.4% of Silicius.
Outstanding year in the Flagship plan, with 4 deliveries in the period. The groundbreaking concept of X-Madrid is having great receptiveness, with 95% of the space commercialized, and more than 1.2 million visitors since opening less than 2 months ago, even though some retailers are not yet operational. Arturo Soria is still showing its strength, with the last phase of the terraces now completed. Larios, in Malaga, has completed its full refurbishment well above the initial expectations, with a 99% occupancy and a 6.6% yield on cost. Re-inaugurated in December, Tres Aguas has been the last to be delivered, having experienced an increase in occupancy of more than 900 basis points and reaching the highest sales in the last 5 years.
Positive behavior in the period, with a release spread of 7.6% and an increase in LfL rents of 3.6%, with an occupancy that stands at 97.7%.
The following new projects have been delivered and reclassified from WIP to stock: Pinto IIB, leased to Media Markt (29,473 sqm); Valencia-Ribarroja, leased to Dachser (34,992 sqm); and Sevilla Zal, leased to Amazon (8,798 sqm). Great progress in the construction of Azuqueca II, let in its entirety to Carrefour (98,757 sqm) and Toledo-Seseña, partially let to Carreras.
Significant increase in portfolio value
Increase of 5.9% in gross asset value ('GAV') of MERLIN portfolio, which as of December 31st 2019, amounts to € 12,751 million, following the appraisals performed by Savills, CBRE and JLL, versus a GAV of € 12,041 million in 2018. This reflects the excellent asset management initiatives undertaken and the value created from Landmark I, Flagship and Best II plans.
In accordance with EPRA standards, the net asset value of the portfolio amounts to €7,331 million, equivalent to € 15.60 per share, representing a 5.4% increase over 2018 EPRA NAV per share (€14.81), evidencing the significant value created to shareholders during the period.
Environmental Social and Governance
MERLIN has obtained an excellent mark in the 2019 GRESB edition, with an 82/100 score and continues progressing in the portfolio certification program, having obtained 37 new LEED/BREEAM certificates in 2019, which increases the percentage of assets certified to nearly 75% and makes the ambitious target set in 2018 of certifying 99% of the portfolio by 2022, feasible. 100% of the shopping center portfolio has been AIS certified and a program has been put in place to certify the connectivity of the buildings with WiredScore.
Outstanding value created to shareholders
The Company has reduced its loan to value ratio to 40.6%, reduced its cost of debt and lengthened the maturity of its debt, even after considering the acquisition of the DCN stake.
The value creation to shareholders in 2019 amounts to €610 million, through a combination of dividends in the calendar year (€235 million) and EPRA NAV growth (€375 million), representing an annual shareholder return rate of 8.8%.
Announcement of the complementary dividend for 2019 and guidance towards estimated shareholder distributions in 2020 (52 cents per share, in line with 2019)
MERLIN announces a complementary dividend to be paid in May amounting to 32 cents per share, which, together with the 20 cents already distributed, totals 52 cents per share of distribution to shareholders in 2019 (+4% vs 2018). The referenced complementary dividend will be paid after approval by the AGM, which is expected to take place on April 29th.
The Company guides to a shareholder distribution of at least € 244 million in 2020. This remuneration will be fully paid in cash and represents € 52 cents per share, in line with 2019.
About MERLIN Properties
MERLIN Properties SOCIMI, S.A. (MC:MRL) is one of the largest real estate company trading on the Spanish Stock Exchange, with a market capitalization of approximately 6,200 million euros, specialized in the acquisition and management of commercial property in the Iberian region. MERLIN Properties mainly invests in offices, shopping centers and logistics facilities, within the Core and Core Plus segments, forming part of the benchmark IBEX-35, Euro STOXX 600, FTSE EPRA/NAREIT Global Real Estate, GPR Global Index, GPR-250 Index, and MSCI Small Caps indices.
Please visit www.merlinproperties.com to learn more about the company.
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