ANNUAL REPORT 2017
ANNUAL REPORT 2017 MERLIN PROPERTIES, THE LEADING SOCIMI IN THE SPANISH REAL ESTATE MARKET Letter from the Chairman 6 Letter from the CEO 8
O1. Organization and structure 12
O2. Business performance 20
O3. Acquisitions, refurbishments and developments 30
O4. Portfolio valuation 42
O5. Financial statements 46
O6. EPRA metrics 54
O7. Events post-closing 58
O8. Stock Exchange evolution 60
09. Dividend policy 64
10. Main risks and uncertainties 66
11. Treasury shares 68
12. Outlook / R+D information / other 70
13. Corporate responsibility 72
14. Staff 84
APPENDIX
EPRA metrics calculation 93
Alternative measures of performance 96
List of assets 97
Asset location mapss 104 LETTER FROM THE CHAIRMAN
Dear shareholders,
2017 marked the first full year of consolidation and returns for the outstanding asset base that MERLIN Properties compiled throughout 2014, 2015 and 2016. Of particular importance were the Testa acquisitions in 2015 and the integration of Metrovacesa’s commercial assets in the last quarter of 2016.
The results reported this year support the strategy implemented by the Company. In both the generation of cash flow and portfolio value growth, the Company has experienced notable development, increasing the overall return for our Mr. Javier García-Carranza Non-Executive Chairman shareholders to a rate of 21.6%.
These results, which I would describe as outstanding, are the upshot of a series of contributing factors: the healthy momentum of the Spanish real estate sector, the leading positioning of MERLIN Properties, the active management of our asset portfolio, the quality of the team that leads this company, and lastly, the incorporation of the market’s best practices into the company’s corporate governance policy.
Indeed, positive job creation data coupled with a growth in spending and “The results reported this industrial activity have propelled the year support the strategy good performance of the three sectors in which MERLIN operates. In 2017, implemented by the nearly 900,000 sqm of office space was Company.” contracted, a figure unseen since 2007. In shopping centres, a record EUR 3.9 billion in investment volume was reached. In logistics, the emergence of operators associated with online retail is leading the sector to never-before-seen figures in contract volume and income.
ı 6 ı Annual Report 2017
MERLIN Properties is the primary example But, without a doubt, the of this positive trend in the market, given its leadership position in all of the sectors support of our shareholders in which it operates. When the market does has been crucial in achieving well, MERLIN does even better: in 2017, we increased both office occupancy and our goals in 2017. renewals (+3.4% on average); in shopping centres, occupancy grew to 89.4% and This company is committed to its release spread rose an average of 4.7%; and, shareholders and to delivering sustainable in logistics, almost full employment was results over time. To achieve this, the achieved and rents on renewals increased Company has adopted the market’s best 13.4% on average. practices in corporate governance as part of its DNA. And the Company continues These data are the result of an active to make progress: it has reduced the size portfolio management policy. After two of the Board, increasing the influence intense years of investment activity, 2017 of independent directors, and in 2017, it was the turning point for the Company, approved a new compensation plan that having embarked on a very ambitious includes the best recommendations on renovation plan to extract all the value the subject and substantially improves the from our assets. A total of eight renovated Company’s alignment with its shareholders. assets were delivered over the course of the year, including the renovation of Avenida We have frankly good expectations for the Europa 1A, the new Renault headquarters, coming years and we expect to achieve the the successful opening of the sports area ambitious goals we set for ourselves with at the Marineda shopping centre, and the quality of the MERLIN team, the support the inauguration of Cabanillas I logistics of the shareholders, and the commitment park, the largest logistics development and dedication of the Board of Directors. undertaken in Spain since 2007, 100% I want to thank all of them for their excellent leased upon opening. And this is only the work this year. beginning: the Company’s plan covers major renovations through 2022.
These achievements would not have been possible without the people who make up the team at this Company. MERLIN has an excellent team of professionals, recognised as such by the market, who are truly committed to the project that this Company represents, which is evident in the low levels of employee turnover. It is a team that works with enthusiasm, entrepreneurial spirit, and responsibility, and it is the team with the highest productivity levels in Europe.
ı 7 ı LETTER FROM THE CEO
value. We are simultaneously undaunted and motivated by this challenge: holding assets is the complicated part, developing all of their potential is merely a matter of designing action plans and executing them in a timely manner. And fulfilling those plans is our specialty.
In this letter, I want to convey our enthusiasm and share with you some information about our plans for offices, shopping centres, and logistics sites that will be carried out in the coming years. The majority of refurbishments will take place prior to 2020 and will be divided into three internal projects that involve investments of more than EUR 250 million to renovate office buildings, EUR 120 million for shopping centres, and nearly EUR Mr. Ismael Clemente CEO 250 million to develop more square metres of logistics capacity.
Dear shareholders, The Landmark I Project is a plan designed to optimise the return of an initial selection of The intense investment activity in which offices that—situated in the prime locations MERLIN Properties engaged in from its of each submarket—offer immediate inception until the end of 2016, culminating potential for rental increases and value with the integration of Metrovacesa, was the appreciation after investing in restoring them result of a strategic vision: we were on the to peak condition. In 2017, we witnessed the brink of an uptrend in the real estate cycle success of this strategy with the delivery and a window of opportunity opened to of partial renovations, like Puerta de las purchase high quality assets and companies Naciones (100% let to Roche and Ferrovial), at very attractive prices. As you all know, we Eucalipto (66% let), Juan Esplandiu (98% let, took full advantage of it. That quality and with Cellnex as the primary tenant), Avenida those prices will not be seen again until a Europa (100% let to Renault and Vass) and new cycle begins. Balmes (100% let to Eugin) in Barcelona. This year’s deliveries will include Torre Glòries Today, thanks to that vision, many of those (which is progressing well, with 30% of the special assets that only appear on the market office space already let, plus the domed from time to time are part of our portfolio, observatory, which promises to become a and generated formidable returns: in 2017, main attraction in Barcelona, generating shareholder returns were outstanding, at income as soon as it opens, scheduled 21.6%, on the growth of net asset value per for summer 2019), and Torre Chamartín share plus the dividend. This year we will (about which we will have news soon). distribute EUR 216 million, 46 cents per share, From 2018-2021, the Company will focus on which is a 15% increase from 2016. executing this plan, with major renovations of landmark buildings, like Castellana 83-85, MERLIN Properties is now entering a new and Castellana 93, Alfonso XI, Plaza de Pablo exciting phase: investing in the optimisation Ruiz Picasso, Alcalá 38-40, and Princesa 5-7 of our excellent asset base to extract its in Madrid, Diagonal 605 in Barcelona, and
ı 8 ı Annual Report 2017
Monumental and Marqués de Pombal 3 in of 2014, without the possibility of corporate Lisbon. Moreover, as soon as we lease Torre acquisitions, except for the assets acquired Chamartín as a head office or exceed two- with Saba Logística a couple of years thirds occupancy in a multi-tenant scheme, ago. In 2017, we closed the first phase of we will begin construction works on the two the previous plan with the opening of the Adequa buildings. Cabanillas I logistics park. With 202,000 sqm, it is the largest logistics development In shopping centres, the Flagship Project, a undertaken in Spain in the last decade. plan to renovate our spectacular portfolio This project, located in the pivotal Henares of urban centres, is committed to the corridor, had reached full occupancy convergence of online and physical sales. before opening, with top-tier tenants like These are ultra-prime assets, opened Luis Simões, XPO, Logista and DSV. In when the developer could still choose the the first few months of 2018, a second optimum site, with very central locations. wave of projects got underway: Gavilanes They dominate the submarkets in which (let to IDL and Coca-Cola), Meco (with they operate. We will renovate them in order Leroy Merlin), Sevilla ZAL (XPO) and San to provide clients with a more spacious Fernando I (GLS). The projects now grouped and enriching experience, incorporating in Best II will add an additional 500,000 cutting-edge technologies with the aim of sqm to the portfolio, to far exceed the supporting store concepts that consumers 2,000,000 sqm of logistics property under will want to experience and that will become management in record time. This places large showrooms for online channels and, us in a powerful leadership position with simultaneously, points at which to collect respect to our competitors. With a presence or return goods bought online, ie: spaces at all the major logistics hubs in the Iberian where online speed converges with the Peninsula, any tenant seeking to operate at personal experience. In 2017, we executed several hubs with the latest generation of pilot projects, like the innovative sports warehouses will think of MERLIN Properties area in Marineda and the Nickelodeon first and foremost. park in Thader, which are good examples of what is yet to come in 2018-2021: the These projects will be executed at the right comprehensive renovation of Larios in time, in a favourable macro environment, Malaga (which has just begun), the re- and in a real estate market with strong opening of Arturo Soria Plaza (nearly fundamentals that is clearly on the upswing. finished) and the start of works at Tres In addition, the Company’s financial strength Aguas in Madrid, El Saler in Valencia, Porto allows us to be ambitious and, at the same Pi in Palma, and Artea in Bilbao, as the time, prepare ourselves in order that when biggest renovations, not to mention the the next cycle arrives, our asset portfolio is, radical and successful youth concept of by far, of the highest quality and, thus, the X-Madrid, currently under construction. most valuable and resilient on the market. This project, which we expect to be operational in spring 2019, has opened a And what of the people who will execute field of experimentation with a type of client these projects? Last year, I spoke about and line of brands we have never worked the many virtues of the MERLIN Properties with, generating countless ideas for other team, stressing their excellence, their projects. professional skills, and their productivity. In 2017, they demonstrated their versatility and In logistics, we continue with our ambitious their ability to adapt to new tasks in a new expansion plan, mainly through land environment. It is not easy to switch from development and turnkey construction “acquisition” mode to “management” mode, under the framework of the Best II Project, to set aside Excel and contracts in favour a continuation of Best I, which has given us of construction sites and tenant services. very good results to date and allowed us to But we have a dedicated and committed position ourselves as industry leaders, after team that consistently strives to make our starting from a blank slate in the summer buildings more attractive, more efficient,
ı 9 ı more avant-garde, and better suited to the We also have superior needs of clients. But we don’t rest on our laurels, we always ask more of ourselves, it’s quality buildings that, after part of this Company’s DNA. So we innovate, the execution of the various make plans and adjust them according to market circumstances, and thanks to this improvement projects team, we execute them in a timely manner. underway, will reach never- Finally, it is important to say a few words before-seen levels of about the current strength of the MERLIN Properties project that we embarked excellence. upon (with you aboard) in 2014 and how well prepared the Company is to face the We operate in three asset categories, exogenous eventualities that threaten diversifying risks and providing us with Spain’s excellent macroeconomic situation, more flexibility than any of our competitors turbulence in financial markets, or changes in to navigate the cycles and, crucially, we the real estate cycle. are the leaders in each of those categories. This facilitates our position at the forefront After years of working with surgical precision, and enhances our ability to predict trends, our balance sheet looks very good, with the anticipate changes, and take advantage of bulk of the work concluded during a boom market opportunities. in rates and only pending a couple of small adjustments that we expect to wrap up I want to conclude by saying that none this year, the goal of which is to lengthen of these achievements would be possible maturities without affecting average costs. without the work ethic and conduct reflected All financial ratios, without exception, have in four key ideas that serve as the foundation improved relative to 2016, most notably, of our daily efforts—honesty, transparency, the progressive reduction in leveraging (we precision, and continuous growth and closed 2017 at 43.6%) and protection against learning—values of which we are extremely interest rate fluctuations, with more than proud and that I know are shared by you, our 99% coverage and an average rate of 2.23%, shareholders. including the cost of derivatives, for the next six years. We work tirelessly to improve the rating that, in the long term, helps offset the expected increase in base rates with lower spreads.
Our income statement continues to be one of the most efficient in the world, despite having absorbed margin impairments from Metrovacesa’s vacancy rate, now much improved. We are, by far, the company that generates the most cash flow per share in the industry and, to date, we cover our interest costs by nearly 4x with rental income. Our general costs, as you know, are subject to a series of limits (this year reduced to the greater of 5.75% of rent or 0.575% of NAV). Payroll and incentives, as you also know, are dependent upon those limits and, therefore, contingent on the continuous fulfilment of our internationally admired efficiency goals.
ı 10 ı Annual Report 2017
AT A GLANCE In 2017 MERLIN Properties achieved excellent results in cash flow generation and portfolio value pushing shareholder return to a very high level TOTAL SHAREHOLDER RETURN (TSR)
Highest TSR achieved in the company’s history 0. 46 0.40 € 0.46 per share (+14% YoY)
Dividends of the period 21.6% 0.19 17.2%
21.6% 4.9% TSR rate (5.9%) 0.00
2014 2015 2016 2017 NAV PER SHARE TSR DPS Strong growth in assets revaluation € 13.25 (+18.0% YoY) 13.25
EPRA NAV per share increase 11.23 € 959.0m 10.49 Assets revaluation(1) 9.85 2014 2015 2016 2017
FFO PER SHARE / EPS NAV per share Excellent year in cash flow generation meeting upgraded guidance and offsetting 2.34 loss of € 0.06 of 2016 sales 1.59 0.62 (2) 0.60 € 0.62 (+2.0% YoY) 0.60
FFO ps 0.25
€ 2.34 (+47.1%) 0.39 0.22 2014 2015 2016 2017 EPS FFO ps EPS FINANCIAL DEBT Proactive management of the debt side resulting in lower leverage, extended maturities 3.1% 49.8% and lower exposure to interest rate fluctuations 45.5% 43.6% 38.4% 43.6% 2.2% 2.3% 2.2% Loan to Value 2.23% Average cost of debt 2014 2015 2016 2017 Loan to Value Average cost of debt
(1) € 897.4m asset revaluation of investment property in P&L + off-balance sheet revaluations (2) 2016 FFO rebased to deduct recurring taxes
ı 11 ı 01
ORGANIZATION AND STRUCTURE
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ORGANIZATION AND STRUCTURE
Strategy
MERLIN Properties Socimi, S.A. (“MERLIN”, selective rotation of high quality commercial “MERLIN Properties” or the “Company”) is a real estate assets in the “Core” and “Core company devoted to delivering sustainable plus” segments. return to shareholders through the acquisition, active management and
Office Shopping Centers 40% 20% Breadth of prime space Urban or Dominant Madrid, Barcelona and Lisbon National scale
Core & Core Plus Spain & Portugal
Best Investment governance grade practices capital structure
One of the Dividend world’s most policy: cost efficient 80% of AFFO REIT’s
Logistics High Street Retail 20% 20% National footprint High triple net cash flow “One-stop shop” solution for 3PL Inflation multiplier
ı 13 ı 2. Positioning
#1 #2 #1 #1 Office Shopping Logistics High Street Centers retail • Flexibility to offer • Mainly urban footprint • “One-stop-shop” • Excellent conditions multitenant or in high GDP/ capita solution for logistics of BBVA lease headquarter buildings areas in Spain operators wishing to agreement triple net • Capacity to adapt • Critical mass with operate across Spain lease with 1.5x HICP to the needs of the retail brands • Big footprint to annual uplift tenant match the rapid • Optimization of development of 3PL retail space in office activity buildings
Existing Existing
139 ASSETS 17 ASSETS 40 ASSETS 928 ASSETS 1,267K SQM 488K SQM 961K SQM 460K SQM € 5,219M GAV € 1,753M GAV € 648M GAV € 2,348M GAV € 217M GRI € 93M GRI € 41M GRI € 104M GRI (1)
WIP 12 ASSETS 566K SQM € 307M GAV (3) Full Consolidation € 25M GRI(3)
(2) Tres Aguas 50% Zal Port 32% 1 ASSET 44 ASSETS 67K SQM 468K SQM € 9M GRI € 29M GRI(4) Equity method
(1) Not including other, land under development and non-core land (2) Data for Minority Stakes is reported for 100% of the subsidiary (3) Total expected investment and gross rent (4) Gross annual rent as of 31/12/17, deducting ground lease expenses
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Composition
The internal management organization • Chief Executive Officer: reporting directly structure can be summarized as follows: to the Board of Directors and forming part of it. • Board of Directors: consisting of twelve directors, advised by both the Audit and • Investment Committee: reporting to the Control Committee and the Appointments CEO and consisting of the executive team, and Remuneration Committee. with a right of veto by the Chief Investment Officer.
Javier García-Carranza Non-Executive Chairman
Francisca Ortega Ismael Clemente Propietary Director CEO & Executive Vice-Chairman
Pilar Cavero Miguel Ollero Independent Director Executive Director
Juan María Aguirre 12 María Luisa Jordá Independent Director Independent Director members Chairman A&C Committee
John Gómez Hall Ana García Fau Independent Director Independent Director
Donald Johnston Alfredo Fernández Independent Director Independent Director Chairman A&R Committee Fernando Ortiz Independent Director
Appointments and Remuneration Committee Mónica Martín de Vidales Ildefonso Polo del Mármol Audit and Control Committee Secretary Vice-Secretary Independent Directors
Capital structure key data (€ thousand) Blackrock 4.0% Invesco Number of ordinary shares 469,770,750 Principal Financial Group Number of weighted shares 469,770,750 Standard Life Total equity 5,723,783 Banco Santander 22.3% Blackrock GAV 11,253,954 BBVA Net Debt 4,904,254 Net Debt / GAV 43.6% Banco Santander Free Float 73.7% Data as of 27 February 2018, according to the Free Float communications made to the CNMV
ı 15 ı BOARD OF DIRECTORS
ı 16 ı Annual Report 2017
1. Non-Executive Chairman Javier García Carranza 2. CEO Executive Vice-Chairman Ismael Clemente 3. Executive Director Miguel Ollero 4. Independent Director Chairman A&R Committee Donald Johnston 5. Independent Director Chairman A&C Committee María Luisa Jordá 6. Independent Director Juan María Aguirre 7. Independent Director John Gómez-Hall 8. Independent Director Fernando Ortiz 9. Proprietary Director Francisca Ortega 10. Proprietary Director Dña Pilar Cavero 11. Secretary Mónica Martín de Vidales 12. Vice-Secretary Ildefonso Polo 1 3. CIO David Brush
6 13 12 7 9 5 11 8
4 2 1 3 10
ı 17 ı MANAGEMENT TEAM
ı 18 ı Annual Report 2017
1. CEO Ismael Clemente 2. COO Miguel Ollero 3. CIO David Brush 4. Director Luis Lazaro 5. Director Inés Arellano 6. Director Miguel Oñate 7. Director Manuel García Casas 8. Director Javier Zarrabeitia 9. Director Francisco Rivas 10. Financial Director Fernando Lacadena 11. Director Fernando Ramírez 12. Director Jesús Vicente
6 8 9 10 12
7 11
4 3 1 2 5
ı 19 ı 02
BUSINESS PERFORMANCE
ı 20 ı Annual Report 2017
GAV per asset class(1) Gross rents per asset class
6.9% 2.9%
7.4% 49.3% Hoteles 8.8% 46.3% Hoteles Residencial en alquiler Residencial en alquiler
Logístico Otros 15.6% 19.8% Otros Logístico
Centros comerciales Centros comerciales
High Street Retail High Street Retail 20.9% 22.2% O cinas O cinas
Offices High Street Retail Shopping centers Logistics Other
Gross yield per asset class
6.6%
5.3% 4.6% Average 4.1% 4.4% 4.2% MERLIN
Offices Shopping Logistics High Street Other centers Retail
Occupancy and wault (years) per asset class
99.4% 98.5% 92.6% Average 76.7% 88.2% 89.4% MERLIN 19.3
6.7 Average MERLIN 3.1 3.7 2.7 1.4
Offices Shopping Logistics High Street Other centers Retail
(1) GAV of land under development included in its respective category (offices and logistics)
ı 21 ı RENTS
Gross rents in the period amount to € 469,405 thousand with respect to € 351,023 thousand in 2016.
Gross rents breakdown
FY17 FY16 YoY (%)
Office 217,473 138,418 57%
Shopping centers 92,820 52,566 77%
Logistics 41,283 23,265 77%
High street retail 104,119 99,864 4%
Other 13,709 36,910(1) (63%) Total 469,405 351,023 34%
(1) Includes hotels, rented residential (already sold or deconsolidated) and other miscellaneous assets
Average passing rent (€/sqm/month)
18.9 18.8 16.0
3.9
Offices Shopping High Street retail Logistics centers
ı 22 ı Annual Report 2017
Gross rents have increased by 2.7% on a like-for-like basis. Per asset category the like-for-like evolution is shown below:
Like-for-like increase 8.4% 7.2%
3.6% 2.9% 2.7%
0.9% Total
Office Shopping Logistics High street Other centers retail
Bridge of FY17 gross rents from FY16 gross rents, for MERLIN and by asset category
MERLIN Offices (€m) (€m) LfL +2.7% +112.7 469.4
351.0 +7.0 (1.3) LfL(1) +129.6 217.5 +2.9%
85.9 +2.8 (0.9)
FY 2016 Like-for-Like 4 old Balance FY 2017 FY 2016 Like-for-Like 2 old Balance FY 2017 growth leases acquisitions growth leases(1) acquisitions FY16 and disposals FY16 and disposals
Shopping centers Logistics (€m) (€m) +63.5 92.8 +25,8 41.3
LfL(1) LfL(1) +3.6% +8.4%
27.9 +1.4 14.6 +1.3 (0.4)
FY 2016 Like-for-Like Balance FY 2017 FY 2016 Like-for-Like 2 old Balance FY 2017 growth acquisitions growth leases(2) acquisitions and disposals FY 2016 and disposals
(1) Vestas and Endesa-Sevilla (2) UPS and Logista
ı 23 ı OCCUPANCY
Stock G.L.A. of MERLIN as of 31 December resulting in a net increase of the stock during 2017 amounts to 3,293,916 sqm. Stock as of 31 the period of 255,575 sqm. Occupancy rate as December 2016 amounted to 3,038,341 sqm, of 31 December 2017 is 92.6%.
Change YoY 31/12/17 31/12/16 Bps Offices Total G.L.A. (sqm) 1,267,344 1,246,465 G.L.A. occupied (sqm) 1,118,106 1,096,139 Occupancy rate (%)(1) 88.2% 87.9% +28 Shopping centers Total G.L.A. (sqm) 488,304 455,176 G.L.A. occupied (sqm) 379,398 370.329 Occupancy rate (%)(2) 89.4% 88.6% +78 Logistics Total G.L.A. (sqm) 960,825 755,071 G.L.A. occupied (sqm) 946,448 720,002 Occupancy rate (%) 98.5% 95.4% +315 High Street retail Total G.L.A. (sqm) 459,981 460,524 G.L.A. occupied (sqm) 457,264 460,524 Occupancy rate (%) 99.4% 100.0% (59) Other Total G.L.A. (sqm) 117,462 121,104 G.L.A. occupied (sqm) 90,099 92,646 Occupancy rate (%) 76.7% 76.5% +20 MERLIN Total G.L.A. (sqm) 3,293,916 3,038,341 G.L.A. occupied (sqm) 2,991,316 2,739,641 Occupancy rate (%)(1) 92.6% 91.3% +132
(1) Excluding assets being or to be developed (Torre Chamartin, Torre Glòries, Adequa 4 and 7) (2) Excluding X-Madrid and vacant units recently acquired to be refurbished
ı 24 ı Annual Report 2017
TENANTS
MERLIN enjoys a high-quality tenant base, an additional 19.6% from BBVA) while top broadly diversified. Top 10 tenants represent 20 tenants represent a 26.2% of gross a 19.4% of the gross annualized rents (plus annualized rents (excluding BBVA).
ı 25 ı Tenant Years as tenant
BBVA 9 LEASING ACTIVITY Endesa 14.5
Inditex 27 Since the beginning of 2017, or since the acquisition date for the assets acquired during the Técnicas Reunidas 12 year, until 31 December 2017, MERLIN has signed lease agreements amounting to 849,999 sqm, out PWC 7.5 of which 266,786 sqm corresponds to new leases and 583,212 sqm to renewals. Caprabo 25.5 The total of contracts expired in the period Indra 15.5 amounts to 725,704 sqm, of which 583,212 have been renovated or released, therefore the Hotusa 16.5 retention ratio in the period amounts to 80.4%.
Comunidad 16 The breakdown per asset category is as follows: de Madrid
XPO Logistics 8
1 71 1 0 0 110 11 020 2 0 2 10 71 70
22 0 1 07
10 012
Offices Shopping centers Logistics
Rene al n ut et
ı 26 ı Annual Report 2017
Offices
Total take-up amounts to 456,921 sqm out therefore the net take up is positive by 6,571 of which 110,583 sqm correspond to new sqm. Main contracts signed in 2017 are the contracts and 346,338 sqm to renewals. following: Exits amounted to 104,012 sqm, and
Asset Tenant G.L.A. (sqm)
Josefa Valcarcel 45 L’Oreal 19,893
Avenida Europa 1A Renault 12,606
PE Puerta de las Naciones Roche 11,444
Partenon 12-14 Publicis 9,502
Avda de Bruselas 26 Codere 8,895
Avenida Europa 1B Vass 8,439
Eucalipto 25 Mondelez 7,368
Balmes 236-238 Eugin 6,187
Adequa 1 Audi 5,978
Atica 2 Paradigma 5,644
Santiago de Compostela 94 Atento 5,559
Citypark Cornellá Fujitsu 5,447
Partenon 12-14 Amex 4,749
Cristalia Aktua 4,315
The release spread achieved in the contracts renewed or relet in the period amount to 3.4%, mainly driven by the excellent performance of our core markets, Madrid, Barcelona and Lisbon.
Release # contracts spread
Madrid 3.3% 169
Barcelona 4.5% 64
Lisbon 5.1% 4
Total (1) 3.4% 237
(1) Excluding other
ı 27 ı Shopping centers
Total take-up amounts to 108,411 sqm out of which 26,108 sqm correspond to new contracts and 82,303 sqm renewals. Exits amounted to 22,405 sqm, and therefore the net take-up is positive by 3,703 sqm. Main new contracts signed are the following:
Asset Tenant G.L.A. (sqm)
Thader Nickelodeon 5,096
Marineda Conforama 4,143
La Fira H&M 3,110
Artea H&M 1,878
Porto Pi I-fitness 1,877
La Fira C&A 1,624
Artea Sfera 1,256
Marineda Zara 906
The release spread achieved in the contracts renewed or relet in the period (166 contracts) amounts to 4.7%. Top performers in the year have been Marineda, Thader and Arturo Soria.
ı 28 ı Annual Report 2017
Logistics
Total take-up amounts to 284,667 sqm out amounted 16,075 sqm, therefore net take-up of which 130,095 sqm correspond to new amounts to 114,020 sqm. Main new contracts contracts and 154,571 sqm to renewals. Exits signed are the following:
Asset Tenant G.L.A. (sqm)
Guadalajara - Cabanillas Park I DSV 49,793
Madrid-Pinto IIA IDL 29,544
Guadalajara-Azuqueca I Dachser 27,995
Barcelona-Sant Esteve Zamorano 16,812
Madrid-Pinto I Saint Gobain 11,099
Madrid-Coslada Complex Ayuntamiento de Madrid 4,959
Sevilla Zal XPO 4,065
PLZF Molenbergnatie 3,721
Release # contracts spread The release spread achieved in the contracts Madrid 13.1% 8 renewed or relet in the period amount to 13.4%, driven by the excellent performance Barcelona 22.0% 4 of Madrid and Barcelona. Other - 1
Total 13.4% 13
Lease maturity profile
The chart of lease contracts maturity years. The gross rents that have a break (next break) shows a balanced profile. option amount to 15% in 2018, 19% in 2019 and In aggregated terms, in the following three 13% in 2020.
201 % 28% 2 % 15% % %
201 2 % 2 % 2 % % 19%
%
2020 % 8% 2% 2 % 13% %
2021 8% % 7%
% %
2022 % % % % % 46%
Offices Shopping centers Logistics High Street retail Other
ı 29 ı Oficinas Centros comerciales Logístico High Street Retail Otros Total 03
ACQUISITIONS, REFURBISHMENTS AND DEVELOPMENTS
ı 30 ı Annual Report 2017
ACQUISITIONS, REFURBISHMENTS AND DEVELOPMENTS
2017 has been an intense year in extracting value from the portfolio of assets. The activity has been focused in the growth of the logistics footprint propelled by the WIP program in place and the implementation of the ambitious refurbishment program launched at the beginning of the year.
Office Retail Logistics € million
Torre Glories Porto Pi retail units Stake in Zal Port(1) Acquisitions Central Office El Saler retail unit Stake in PLZF 325.4 Marqués de Pombal 3 Larios retail unit Stake in Sevilla-ZAL
Madrid-Meco II Madrid-Pinto Guadalajara-Azuqueca Development Torre Chamartin Guadalajara-Cabanillas Park I(3) 107.4 & WIP Torre Glòries Guadalajara-Cabanillas Park II Madrid Getafe Gavilanes Sevilla-ZAL Madrid-San Fernando I
Marineda Juan Esplandiu El Saler Avda. Europa 1A Arturo Soria Eucalipto 33 Refurbishment Larios 42.8 Puerta de las Naciones Porto Pi Monumental X-Madrid Adequa 1 Thader
Like-for-like portfolio 21.2 (Defensive Capex)(2)
Total 496.7
(1) Reported as equity method (2) € 18.3m are capitalized in balance sheet and € 2.9m are expensed in P&L (3) Modules B, C, D, E and F
ı 31 ı ACQUISITIONS
OFFICE
Acquisition of Torre Glòries
On 12 January, MERLIN completed the acquisition of Torre Glòries. Torre Glòries is one of the most iconic buildings in Barcelona, located in the prime area of Avenida Diagonal junction with Plaza de Les Glòries, in the heart of the Barcelona techoriented business district known as 22@.
The building was originally designed by prestigious arquitects Jean Nouvel and Fermín Vázquez and opened in 2005. It comprises a gross area of 37,614 sqm, in ground level plus 34 above ground floors, plus an auditorium with over 350 pax seating capacity. It also benefits from 300 parking spaces located in four below ground levels. The total constructed area amounts to 51,485 sqm.
22@ business district is the most dynamic area in the Barcelona office market and is now consolidated as the reference business costs), representing a capital value of € 3,775 area hosting tech oriented and innovative per sqm. MERLIN will invest approximately companies such as Cisco, Ebay, Yahoo, € 15 million for multi-tenancy reconversion Deutsche Telekom, Sage, Sap, Capgemini works to own one of the most attractive and Indra. office buildings in Barcelona. MERLIN targets annual recurring revenues of € 10.3 million, The acquisition price amounts to € 142 representing an ERV yield of ca. 6.5% after million (plus € 4.1 million of transaction completion of works.
Torre Glòries
Acquisition Price of the asset(1) (€ thousand) 142,000
Asset debt outstanding as of the date of purchase (€ thousand) -
Equity disbursement (€ thousand) 142,000
% Debt to acquisition Price of the asset -
Estimated Capex (€ thousand) 15,000
ERV (€ thousand) 10,346
ERV Yield(2) 6.5% Total G.L.A. (sqm) 37,614
(1) Excluding transaction costs (2) Calculated as ERV divided by acquisition price plus estimated Capex
ı 32 ı Annual Report 2017
Acquisition of Central Office
On 17 April, MERLIN Properties completed the acquisition of Central Office Building leading to an expansion of its footprint in the Lisbon office market and, more specifically, in the Expo area.
The asset, located in Dom Joao II 45, the main avenue in Parque das Nações in Lisbon, was originally designed by prestigious architect Federico Valsassina and opened in 2005. The 13 storey building comprises 10,310 sqm of lettable area and is 100% let to best-in-class companies.
The acquisition price amounts to € 29 million representing € 2,850 per sqm and a 6.8% gross yield.
Central Office Acquisition price of the asset(1) (€ thousand) 29,385 Asset debt outstanding as of the date of purchase (€ thousand) - Equity disbursement (€ thousand) 29,385 % Debt to acquisition Price of the asset -
Annualized gross rent 2017 (€ thousand) 1,996 Annualized net rent 2017 (€ thousand) 1,883 Gross yield 6.8% EPRA Topped-up Yield(2) 6.4% Total G.L.A. (sqm) 10,310
(1) Excluding transaction costs (2) Calculated as the gross annualized rent minus annualized property expenses not rechargeable to tenants, divided by the acquisition price of the asset
ı 33 ı Acquisition of Marqués de Pombal 3
On 25 September, MERLIN Properties completed the acquisition of Marqués de Pombal 3. The asset is located in the best spot within Lisbon Prime CBD area, in Praça Marques de Pombal, the junction between Avenida da Liberdade and Fontes Pereira de Melo. The 10-storey building comprises 12,460 sqm of lettable area, 9,435 sqm for office and 3,025 sqm of retail.
The building, currently running at 63% occupancy, includes tenants such as McKinsey, NOVO BANCO, Banco Best or MDS Portugal. The asset offers significant growth potential through an active asset management to be focused on enhancing the retail area into upper scale, and continue bringing to the office component the best specifications in the market as contracts expire. The acquisition price amounts to € 60.5 million representing a gross yield on current occupancy of 4.0% and an ERV yield of 6.5%.
Marqués de Pombal, 3 Acquisition price of the asset(1) (€ thousand) 60,491 Asset debt outstanding as of the date of purchase (€ thousand) - Equity disbursement (€ thousand) 60,491 % Debt to acquisition Price of the asset -
ERV (€ thousand) 3,900 ERV Yield(2) 6.5% Total G.L.A. (sqm) 12,460
(1) Excluding transaction costs (2) Calculated as ERV divided by acquisition price plus estimated Capex
ı 34 ı Annual Report 2017
SHOPPING CENTERS
Acquisition of retail units in shopping centers
MERLIN Properties has been active in pursuing opportunities to acquire retail units in its portfolio of shopping centers in order to consolidate the ownership position within the asset as well as gaining flexibility and broadening the scope of the respective refurbishment plans for those assets. Main units acquired have been the Eroski supermarket in Larios (Málaga) and Porto Pi (Mallorca) cinemas. The breakdown is as follows:
Shopping center G.L.A. (sqm) Price (€ m)
Larios 16,928 16.1 Porto Pi 5,095 13.8 El Saler 3,175 12.2 Total 25,198 42.1
LOGISTICS
Acquisition of additional stakes in logistics
MERLIN has increased its stake in its three participated companies ZAL Port, Parc Logistc de la Zona Franca (PLZF) and Sevilla-ZAL.
Stake increase Resulting stake Price (€ m)
ZAL Port 16.5% 48.5% 39.1 PLZF 14.4% 90% 11.8 Sevilla ZAL 10% 100% 2.8
ı 35 ı REFURBISHMENTS
2017 has been a very active year in refurbishments activity. The projects delivered in the period are described below.
OFFICE
Avenida Europa 1A
Former headquarters of Vodafone, who left the building in 2014, a full Capex program was conceived to reconvert the asset into multitenancy, once a 50% pre-let level was surpassed. Building 1B was developed on the back of a pre-let to VASS (IT supplier of El G.L.A. 12,605 Corte Ingles) and Doberman. Bulding 1A was 100% pre-let to Renault in November 2016 Capex 2017 (€ thousand) 6,500 and construction was subsequently initiated. ERV (€ thousand) 1,898 Renault lease started in September 2017. Occupancy 100%
Tenants Renault
Puerta de las Naciones Eucalipto 33
Full refurbishment of all common areas, Former headquarters of Roche, who left interiors and installations to upgrade the building in January 2017, a full Capex Ferrovial headquarters, already tenant in program was conceived to reconvert the the building. The upgrade was negotiated asset into multitenancy. The scope of with the tenant together with the renewal works encompasses lobby “merlinization”, of the lease agreement in place. Works were new ceilings and lighting and new VRV executed with the tenant in the building installations. and therefore implemented on a floor-by- floor basis.
G.L.A. 10,619 G.L.A. 7,185
Capex 2017 (€ thousand) 6,437 Capex 2017 (€ thousand) 2,347
ERV (€ thousand) 1,674 ERV (€ thousand) 1,465
Occupancy 100% Occupancy - Under Tenants Ferrovial Tenants negotiation
ı 36 ı Annual Report 2017
Juan Esplandiu 11-13
After the departure of Madrid Salud, MERLIN G.L.A. 28,008 implemented a phased Capex program for upgrading the asset. During the first phase, Capex 2017 (€ thousand) 2,522 MERLIN upgraded all technical installations ERV (€ thousand) 4,284 and accomplished a built to suit project for the Cellnex HQ In Madrid (4,417 sqm). Occupancy 85% Second phase has included the lobbies and Tenants Cellnex common areas refurbishment and façade improvement. Total investment in 2017 has been €2.5m.
The assets currently under refurbishment are the following:
GLA % (sqm) Scope Budget executed Pre-let
Balmes 6,187 Full refurb € 1.8m 9% 100% On-going
Full refurb Initial Monumental 7,185 (incl.. SC) € 19.1m 4% phase
ı 37 ı SHOPPING CENTERS
Marineda Thader
Prior to the acquisition by MERLIN, Marineda First Nickleodeon themed park in Europe, had an area addressed to ”luxury brands” operated by Parques Reunidos, boasting that failed due to the lack of demand within occupancy. Works started in January 2017 customers as well as for misconception of the and the inauguration of the space was held traffic, which resulted in virtually total vacancy on December 1st. The complex features in the area. After the acquisition MERLIN amusement park-like attractions and designed a plan to bring this area back to life: educational areas targeting family oriented (i) retenanting plan to convert the space into a clientele on weekends and school visits on sports related area, and (ii) re-designing plan working days. to improve visibility, vertical connections and interior design. Total investment amounts to € 2.5m, out of which € 1.8m of Capex and € 0.7m of FOC. The area is now running at 91% occupancy, with an ERV of € 0.5m.
G.L.A. (sqm) 3,402 GLA 5,096
Capex (€ thousand) 2,467 Capex (€ thousand) 8,900
ERV (€ thousand) 453 ERV (€ thousand) 600
Occupancy 91% Occupancy 100%
Rock & Gym, Tenants Urban Jungle, Tenants Nickleodeon Coolligan, Oteros
ı 38 ı Annual Report 2017
The assets currently under refurbishment are as follows:
Budget % % Asset G.L.A. Scope (€ m) executed Delivery Occupancy
Improvement of entrances and façade, Phase I Arturo Soria 6,959 interiors refurb 4.7 81% 98.3% 2Q18 (lighting, floors, signage)
Larios 45,076 Full refurb 21.2 4% 4Q18 97.3%
X-Madrid 47,424 Full revamp 31.8 8% 2Q19 70%(1)
Extension El Saler 47,013 (2,700 sqm), 15.2 8% 2Q19 89.3% façade and access
Porto Pi 58,779 Full refurb 16.0 4% 1Q20 96.7%
(1) Pre-let
ı 39 ı DEVELOPMENTS / WORK IN PROGRESS (WIP)
OFFICE
Torre Chamartin
Construction of an office building located Works are progressing at a very good pace, in the intersection between A-1 and M-30 complying with the calendar to finish the highways of Madrid. The project includes the asset by end of 1Q 2018. best specifications for the building in a design of the architect Miguel Oriol. The building will have a LEED Platinum certification.
Torre Chamartín G.L.A. (sqm) 16,639 Acquisition price of land(1) (€ thousand) 30,986 Estimated Capex 31,261 Total cost (€ thousand) 62,247
Capex incurred in 2017 19,684 % executed 91.0% Delivery date 1Q 2018
ERV (€ thousand) 4,079 ERV Yield(2) 6.6%
(1) Excluding transaction costs (2) Calculated as ERV divided by acquisition price plus estimated Capex
ı 40 ı Annual Report 2017
LOGISTICS
MERLIN continues expanding its logistics footprint trough the developments / WIP program in logistics. As of 31 December 2017, main assets under development / WIP are the following:
GLA (sqm) ERV (€m) Investment (€m) ERV YoC
Madrid-Meco II 59,891 2.6 29.5 8.9%
Madrid-Pinto II B 29,473 1.1 10.9 9.7%
Madrid-San Fernando I 11,165 0.7 9.9 7.5%
Madrid-San Fernando II 34,224 1.8 20.3 8.7%
Madrid-Getafe (Gavilanes) 39,576 2.3 32.1 7.0%
Madrid-Azuqueca II 98,000 4.3 47.6 9.0%
Madrid-Azuqueca III 51,000 2.2 29.6 7.5%
Guadalajara-Cabanillas Park I F 15,000 0.6 7.7 7.7%
Guadalajara-Cabanillas Park II 210,678 8.3 109.6 7.6%
Sevilla Zal WIP I 5,400 0.2 2.7 7.9%
Zaragoza-Plaza Logistics 11,262 0.5 7.1 7.2%
TotaL WIP 565,669 24.6 306.9 8.0%
ı 41 ı 04
PORTFOLIO VALUATION
ı 42 ı Annual Report 2017
PORTFOLIO VALUATION
MERLIN portfolio has been appraised by CBRE and Savills, for a total GAV of € 11,254m. GAV breakdown is the following:
Sqm € million €/sqm AG Gross yield
Offices 1,267,344 5,219 4,118 4.1%
Shopping centers 488,304 1,753 3,589 5.3%
Logistics 960,825 648 674 6.6%
High Street retail 459,981 2,348 5,104 4.4%
Land under development 661,592 455 688
Other 481,476 411 853 4.2%
Total 4,319,522 10,883 2,508 4.6%
Equity method stakes 421
Total 11,254
ı 43 ı A broader analysis of the asset portfolio by valuation in the different categories is shown below:
Offices (by GAV)
By geography By location By product Otros Lisbon Barcelona Madrid
• Madrid 81.4% • Prime + CBD 38.5% • Multi tenant 65.7% • Barcelona 12.8% • NBA 49.7% • Single tenant 34.3% • Lisbon 4.7% • Periphery 11.8% • Other Spain 1.1%
Shopping centers (by GAV)
By geography By type By size Other Spain Lisbon Murcia Andalusia Valencia Madrid Galicia • Madrid 18.2% • Andalusia 8.3% • Urban 62.5% • Large 44.9% Catalonia 29.6% • Catalonia 17.8% • Murcia 5.3% • Dominant 17.6% • Medium 17.6% Lisbon 0.8% • Extra-large 17.6% • Galicia • Secondary 19.9% • Small 7.9% • Valencia 13.1% • Other 18.9% •
Logistics (by GAV)
By geography By reach By tenant type Other Spain Basque country Seville Barcelona Madrid
• Madrid 59.3% • National 47.2% • 3PL multi-client 52.9% • Catalonia 22.0% • Regional 26.5% • 3PL mono-client 18.2% • Sevilla 7.6% • Ports 22.6% • End user 28.9% • Basque Country 5.2% • Production related 3.7% • Other 5.9%
ı 44 ı Annual Report 2017
GAV Evolution
GAV has increased by € 1,430m, raising from The like-for-like(1) increase of GAV from a GAV of € 9,824m as of 31 December 2016 31 December 2016 is +10.5%. to € 11,254m.
17.5% 13.2% 10.5%
7.3% Total 6.4%
0.8%
Office Shopping Logistics High street Other(2) centers retail
Yield Compression
Yields have compressed by 46 bps since December 2016
59 34 34 46 bps Total 29 27
Office Shopping Logistics High street Others centers retail
GAV Bridge
12 000 0 11 2 0 10 000
000
171 000 2 2
2 000
2 000
A A u t on po al ape Re aluat on A e 1 2017 2017 2017 2017 e 17
(1) GAV of WIP projects included under offices and logistics fot LfL purposes (2) Including non-core land
ı 45 ı 05
FINANCIAL STATEMENTS
ı 46 ı Annual Report 2017
CONSOLIDATED INCOME STATEMENT
(€ thousand) 31/12/17 31/12/16 Gross rents 469,405 351,023 Office 217,473 138,418 Shopping centres 92,820 52,566 Logistics 41,283 23,265 High street retail 104,119 99,864 Other 13,709 36,910 Other income 14,932 11,774 Total revenues 484,337 362,797 Incentives (16,754) (7,539) Collection loss (1,851) (272) Total operating expenses (121,901) (94,634) Property expenses not recharged to tenants (35,564) (19,744) Personnel expenses (27,780) (23,149) Recurring general expenses (9,767) (8,506) Non-recurring general expenses (4,951) (27,610) LT Incentive Plan non-cash provision (43,839) (15,625)
EBITDA 343,831 260,352 Depreciation (10,379) (4,778) Gain/ (losses) on disposal of assets 236 8,484 Provision surpluses (3,791) 32 Absorption of the revaluation of investment property (9,839) (154,428) Change in fair value of investment property 897,401 453,149 Negative difference on business combination (1,775) 37,892
EBIT 1,215,684 600,703 Net interest expense (108,374) (70,914) Debt amotization costs (13,700) (18,987) Gain / (losses) on disposal of financial instruments 1,050 74,646 Change in fair value of financial instruments 2,577 5,357 Share in earnings of equity method investees 16,233 1,817
PROFIT BEFORE TAX 1,113,470 592,622 Income taxes (12,941) (9,848) PROFIT (LOSS) FOR THE PERIOD 1,100,529 582,774 Minorities (110) (129) PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE 1,100,419 582,645
ı 47 ı Notes to the consolidated income statement
Gross rents (€ 469,405 thousand) in 2016 (€15,739 thousand), and (ii) a total less portfolio operating expenses not provision of € 28,100 thousand for the 2017- rechargeable to tenants (€ 35,564 thousand) 2019 incentive plan. This amount as per the equals to net rents before incentives and Spanish GAAP is booked under personnel collection loss of € 433,841 thousand. After expenses too. deducting incentives and collection loss (€ 18,605 thousand) the resulting amount is iv. € 4,951 thousand of non-recurring € 415,236 thousand of net rents. operating expenses. Non-recurring expenses correspond mainly to expenses Other operating income includes mainly for the bond issuance executed in May and asset management services performed for October. third parties for € 8,196 thousand (Testa Residencial and Aedas Homes) and Tree The sum of the personnel expenses inflation derivative (€ 2,049 thousand). (excluding the amount accrued for the LTIP) and the recurring operating expenses of The total amount of operating expenses the Company are within the threshold of of the Company in the period is € 86,337 overheads of the Company, prevailing this thousand, with the following breakdown: period the 0.6% of the EPRA NAV of the Company. i. € 27,780 thousand correspond to personnel expenses. The reconciliation between gross rents of the period and FFO is as follows: ii. € 9,767 of recurring general expenses.
iii. € 43,839 thousand corresponding to the long-term incentive plan (LTIP) accrued: (i) 25% of the 2016 incentive awarded
469.4 433.8 14.9 415.2 (35.6) 392.6 (18.6) (27.8) (9.8) 289.2 (103.5)
Gross rents Opex recurring Recurring FFO collection loss collection loss Recurring EBITDA Personnel expenses Other operating income Propex non rechargeable Incentives and collection loss Net rents after incentives and Net rents before incentives and
Net financial results & recurring taxes
ı 48 ı Annual Report 2017
CONSOLIDATED BALANCE SHEET
(€ thousand)
ASSETS 31/12/17 EQUITY AND LIABILITIES 31/12/17 NON CURRENT 11,390,461 EQUITY 5,723,783 ASSETS
Intangible assets 242,750 Subscribed capital 469,771
Property plant and equipment 3,879 Share premium 3,970,842
Investment property 10,352,415 Reserves 330,232 Investments accounted for using the 371,408 Treasury stock (24,881) equity method Non-current financial assets 275,882 Other equity holder contributions 540
Deferred tax assets 144,127 Interim dividend (93,457)
Profit for the period 1,100,419
Valuation adjustments (35,806)
Minorities 6,124
NON CURRENT LIABILITIES 6,006,991
Long term debt 5,342,190
Long term provisions 72,383
Deferred tax liabilities 592,418
CURRENT ASSETS 614,579 CURRENT LIABILITIES 274,267
Trade and other receivables 80,530 Short term debt 197,005 Short term investments in group 66,340 Short term provisions 867 companies and associates Short term financial assets 7,114 Trade and other payables 67,246
Cash and cash equivalents 454,036 Accruals and deferreals 9,149
Accruals and deferrals 6,559 TOTAL EQUITY TOTAL ASSETS 12,005,040 12,005,040 AND LIABILITIES
ı 49 ı Notes to the consolidated balance sheet
Fair value of the portfolio corresponds to the appraisal value delivered by CBRE and Savills as of 31 December 2017. It is important to note that in accordance with accounting regulations the increase of value in concessions, equity method and non- current assets for disposal are not reflected in the financial statements. The referred appraisal value is reflected in the following accounting Items:
€ million Leaseholds (included in intangible assets) 242.2 Investment property 10,352.4 Derivatives (in non-current financial assets) 207.3 Equity method 371.4 Non-current assets 0.9 Total balance sheet items 11,174.2 Increase of value in concessions 30.1 Increase of value in equity method 49.4 Increase of value in non-current assets 0.3 Total valuation 11,254.0
FINANCIAL DEBT
During the period, MERLIN has executed the issuance of two unsecured bonds for an aggregate amount of € 900,000 thousand, with the following characteristics:
MRL III MRL IV Issuance date 26 May 2017 18 September 2017 Size (€ thousand) 600,000 300,000 Coupon 1.750% 2.375% Expiration date 26 May 2025 18 September 2029 Spread on Euribor ms + 125 bps ms + 150.8 bps Covenants LTV ≤ 60% ≤ 60% ICR ≥ 2.5x ≥ 2.5x Unencumbered ratio ≥ 125% ≥ 125%
ı 50 ı Annual Report 2017
The balance of long term debt and short other financial liabilities, corresponding term debt includes Company’s outstanding to guarantees and legal deposits received. financial debt, mark-to-market of interest- The breakdown of gross financial debt is as rate and inflation hedging contracts and follows:
Financial debt breakdown
€ Thousand Long term Short term Total
Financial debt 5,274,984 137,949 5,412,933
Loan arrangement costs (55,166) - (55,166)
Debt interest expenses - 37,515 37,515
Mark-to-market of interest-rate hedging contracts 34,178 2,734 36,912
Other financial liabilities (i.e. legal deposits) 88,194 18,807 107,001 Total debt 5,342,190 197,005 5,539,195
MERLIN’s net financial debt as of 31 December is € 4,904,254 thousand. This represents a Loan To Value of 43.6%, which is an important reduction of 194 bps since 31/12/2016 (45.5%). The breakdown of MERLIN’s debt is the following:
(€ million) 3,250 124 5,413 509 4,904
874
1,166
Secured Unsecured Unsecured Leasings Total Gross Cash Total net bank loans loans bonds Debt debt
% Gross 21.5% 16.1% 60.0% 2.3% 100.0% financial debt
Spot average 2.7% 2.0% 2.1% 3.1% 2.2% cost (%)
% interest rate 99.4% 96.7% 100.0% 67.6% 98.6% hedged
ı 51 ı MERLIN’S debt has an average maturity period of 6.1 years. The chart with debt maturity is the following:
1,110 10
856 869 838 1 1 719 758 1 1
0 0 1 100 700 00 138 12 41 85 1 27 2 201 201 2020 2021 2022 202 202 202 202
n e ure loan n e ure on e ure an loan ea n
MERLIN’s debt as of 31 December has a spot average cost of 2.23%. Nominal debt with interest rate hedged amounts to 98.6%. Key debt ratios are shown below:
(€ thousand) 31/12/2017 31/12/2016 Gross financial debt 5,412,933 5,193,247 Cash 508,679 (1) 722,122 (1) Net financial debt 4,904,254 4,471,124 GAV 11,253,954 9,823,619 LTV 43.6% 45.5% Average cost 2.23% 2.26% Floating interest rate 1.4% 11.3% Average maturity (years) 6.1 6.2 Liquidity (2) 928,679 949,043 Non-mortgage debt 78.5% 75.6%
(1) Including cash and net proceeds from the sale of hotels (€ 50.8m) (2) Including available treasury plus proceeds from the sale of hotels and unused credit facilities.
ı 52 ı Annual Report 2017
SHAREHOLDERS RETURN
The Shareholder Return for a given year is divided by the EPRA NAV of the Company equivalent to the sum of (a) the change in as of 31 December of the immediately the EPRA NAV per share of the Company preceding year (the “Shareholder Return during such year; and (b) the total dividends Rate”). In accordance with these definitions, per share (or any other form of remuneration the Shareholder Return in 2017 amounts or distribution to the Shareholders) that are to € 2.42 per share (or € 1,137,918 thousand paid in such year (the “Shareholder Return”). of value created in absolute terms) and the The Shareholder Return Rate is defined as Shareholder Return Rate amounts to 21.6%. the Shareholder Return for a given year
Per share (€) € thousand EPRA NAV 31/12/2016 11.23 5,274,730 NAV growth in 2017 2.02 950,011 EPRA NAV 31/12/2017 13.25 6,224,741 DPS 0.40 187,907 NAV growth + DPS (Shareholder Return) 2.42 1,137,918 Shareholder Return Rate 21.6%
ı 53 ı 06
EPRA METRICS
ı 54 ı Annual Report 2017
EPRA METRICS
Performance Measure Definition 31/12/2017
€ thousand € per share
EPRA Earnings Recurring earnings from core operational 289,085 0.62 (€ thousand) activities EPRA Net Asset Value (EPRA NAV) is calculated based on the consolidated shareholders’ equity of the Group adjusted to include properties and other EPRA NAV investment interests at fair value and 6,224,741 13.25 (€ thousand) to exclude certain items not expected to crystallise in a long-term investment property business model, as per EPRA’s recommendations EPRA NAV adjusted to include the fair EPRA NNNAV value of financial instruments, debt and 5,797,438 12.34 (€ thousand) deferred taxes Annualized rental income based on the cash passing rents at the balance sheet date, less non-recoverable property EPRA Net Initial Yield 4.1% operating expenses, divided by the market value of the property, increased with acquisition costs Adjustment to the EPRA Net Initial Yield in respect of the expiration of rent- EPRA “topped-up” NIY free periods (or other unexpired lease 4.2% incentives such as discounted rent periods and step rents) Estimated Market Rental Value (ERV) EPRA vacancy rate of vacant space divided by ERV of the 7.4% whole portfolio Running costs of the Company divided EPRA costs 20.6% by recurring rents EPRA costs (excluding Recurring running costs of the Company 19.5% non-recurring costs) divided by recurring rents
MERLIN Properties has been awarded by EPRA with the gold award of best practices in financial reporting. It is the highest recognition for an outstanding compliance with the best practices
ı 55 ı The evolution of EPRA metrics from 31 December 2014 has been the following:
EPRA Yields
5.93%
5.86% 5.01% 4.61% 4.96% 4.22% 4.51% 4.09%
31/12/14 31/12/15 31/12/16 31/12/17
EPRA topped-up yield EPRA net initial yield
EPRA NAV/share 13.25
11.23 10.49
9.85
31/12/14 31/12/15 31/12/16 31/12/17
EPRA vacancy/costs 19.5% 16.9%
14.3% 12.0% 9.8% 7.4% 5.4% 3.4%
31/12/14 31/12/15 31/12/16 31/12/17
EPRA vacancy EPRA costs
ı 56 ı Annual Report 2017
ı 57 ı 07
EVENTS POST-CLOSING
ı 58 ı Annual Report 2017
EVENTS POST-CLOSING
• On January 19 2018, the service level agreement with Testa Residencial was cancelled ahead of the IPO of Testa. In exchange, MERLIN Properties will increase its stake in Testa Residencial to 16.95%
• On 13 February 2018, MERLIN fully repaid € 122.6m of property leasings
ı 59 ı 08
STOCK EXCHANGE EVOLUTION
ı 60 ı Annual Report 2017
STOCK EXCHANGE EVOLUTION
MERLIN shares closed on 31 December 2017 The share has outperformed the sectorial at € 11.30, an increase of 9.4% versus EPRA Europe reference index (+9.3%), 31 December 2016 closing price (€ 10.33). IBEX-35 (+7.4%) and Euro Stoxx 600 (+7.7%).
MERLIN share price performance vs IBEX 35 / EPRA Index / Euro Stoxx 600
Re a e to 100
12
120
11 +9.4% +9.3%
110 +7.7% +7.4%
10
100
an 17 e 17 ar 17 Apr 17 a 17 un 17 ul 17 Au 17 ep 17 t 17 o 17 e 17
R RA n e lo al uro to 00 e
2 .
28.1 26.9 Average daily trading value (€ m)
Average daily trading volume during 24.0 the period has been € 28.1 million, which represent a 0.6% of the average market capitalization of 2017.
2015 2016 2017
ı 61 ı As of the date of this report, MERLIN is covered by a wide variety of 24 equity research houses. Consensus target price is € 12.75.
Target prices and analyst recommendations
Broker Report date Recommendation Target price
22-02-18 Buy 13.10
19-02-18 Buy 13.70
01-02-18 Buy 13.50
31-01-18 Buy 13.51
25-01-18 Buy 13.50
11-01-18 Buy 12.70
14-12-17 Buy 12.30
01-11-17 Neutral 11.70
30-10-17 Buy 12.50
25-10-17 Buy 12.45
25-10-17 Buy 12.85
24-10-17 Buy 12.40
25-09-17 Neutral 11.80
11-09-17 Sell 11.50
07-09-17 Buy 14.00
06-09-17 Buy 13.00
29-08-17 Buy 14.50
25-08-17 Neutral 12.25
16-08-17 Neutral 12.55
13-07-17 Neutral 12.00
11-07-17 Buy 13.30
26-06-17 Buy 12.79
09-04-17 Buy 12.00
19-09-16 Buy 12.10
Market consensus 12.75
ı 62 ı Annual Report 2017
ı 63 ı 09
DIVIDEND POLICY
ı 64 ı Annual Report 2017
DIVIDEND POLICY
The Company maintains a dividend policy the rest of the obtained profits. If the dividend that takes into account sustainable levels distribution agreement is not adopted within of distributions, and shows the Company’s the legal timeframe, the Company will lose its forecast in relation to obtaining recurring REIT status during the financial year to which profits. The Company does not intend to create the dividends refer. reserves that cannot be distributed to the shareholders, other than those required by law. In accordance with the Prospectus, MERLIN Properties targets to deliver a dividend yield of According to the Spanish regime for REIT’s, between 4% and 6% over the initial IPO price. the Company will be obligated to adopt The Company’s dividend policy is established agreements to distribute the profits obtained as the distribution of a minimum of the 80% in this financial year in the form of dividends to cash flow from operations less the payment shareholders, after complying with any relevant of recurring expenses of maintaining assets. requirement of the Spanish Corporation Law. The distributions to MERLIN’s shareholders The Company will be obliged to agree its during 2017 are shown in the chart. The Board distribution within six months of the close of of Directors of MERLIN Properties agreed on each financial period, in the following manner: 9 October 2017, to distribute a dividend on (i) at least 50% of the profits derived from account of 2017 results for a gross amount the transfer of real properties, shares, or of € 0.20 per share paid on October 25 2017. shareholdings in qualified affiliates, provided The management team of MERLIN Properties that the remaining profits are reinvested in will propose a complimentary dividend on other real estate assets within a maximum account of 2017 results, being subject to period of three years from the date of the 2018 General Shareholders Meeting. The transmission or, if not, 100% of the profits complimentary dividend would be a gross must be distributed as dividends at the end amount of 0.26 euros per share, expected to of this three year period; (ii) 100% of the be distributed in May 2018, for a total of 0.46 profits obtained by receiving dividends paid euros per share versus 0.40 euros in 2016. by qualified subsidiaries; (iii) at least 80% of
Type Date Concept € per share
Interim 2015 28-oct-15 Dividend 0.0775 Final 2015 27-abr-16 Dividend 0.005692 Share premium Final 2015 27-abr-16 0.102608 distribution Total 2015 0.19
Interim 2016 25-oct-16 Dividend 0.185 Share premium Interim 2016 25-oct-16 0.02 distribution Final 2016 18-may-17 Dividend 0.10071014 Share premium Final 2016 18-may-17 0.09928767 distribution Total 2016 0.40
Interim 2017 25-oct-17 Dividend 0.20 Pending AGM Final 2017 0.26 Approval Total 2017 0.4 0.46
ı 65 ı 10
MAIN RISKS AND UNCERTAINTIES
ı 66 ı Annual Report 2017
MAIN RISKS AND UNCERTAINTIES
The policies of financial risk management • Interest rate risk: in order to minimize the within the commercial real estate sector deal Company’s exposure to this risk, financial mainly with the analysis of investment projects, hedges, such as interest rate swaps, have the management of the building’s occupancy been executed. Total interest rate hedged and the situation of the financial markets: amount to 98.6% of total debt.
• Credit risk: credit risk relating to the • Exchange rate risk: the Company’s policy is Company’s ordinary business is not to contract debt only in the same currency significant because the contracts signed as that of the cash flows of each business. with the tenants require payment in advance Therefore, the Company is currently not of most sums. These contracts also require exposed to exchange rate risk. Within this the tenant to provide legal and additional type of risk, it is noted the fluctuation of financial guarantees or deposits to cover the exchange rate in the conversion of possible nonpayment of the rent. This risk the financial statements of the foreign is also mitigated by the diversification of companies whose functional currency is the type of product in which the Company other than euro. invests and consequently the typology of clients. • Market risk: MERLIN Properties is exposed to market risk from potential downward • Liquidity risk: The Company, in order to movement in rental rates when current manage liquidity risk and to meet the contracts terminate. This risk could needs of funds, uses an annual budget and negatively affect the cash flow and monthly forecast of the liquid assets. This valuation of the assets of the Company. monthly forecast is detailed and updated on However, the market risk is mitigated by a daily basis. The main liquidity risk is due policies of attracting and selecting new high to the potential negative working capital quality clients and negotiating compulsory resulting from short term debt. The factors lease terms that maximize the length of the mitigating liquidity risk include the following: lease term. For this reason, on 31 December (i) cash generated in the ordinary course of 2017, the occupancy rate of the Company’s business is very stable; and (ii) the company’s assets is 92.6%, with a weighted average liabilities are largely long-dated and the high unexpired lease term of 6.7 years (weighted quality of the assets provides ample ability by gross rents). to obtain new sources of funding. When formulating consolidated annual accounts, the Company had already covered all of its funding requirements, enabling it to meet its commitments with providers, employees and the Public Sector, according to the cash flow for FY2017. Furthermore, given the type of industry in which the Company operates, the investments, the financing for such investments, the stable EBITDA generated and the high occupancy rate of properties is more likely to produce surplus cash. The company’s policy is to invest this cash in short-term investments and liquid deposits with highly rated institutions. The acquisition of options or futures on stocks, or any other high-risk activities as a means of investing its cash surplus are not considered by the Company.
ı 67 ı 11
TREASURY SHARES
ı 68 ı Annual Report 2017
TREASURY SHARES
As of 31/12/2016 the Company owned 10,230 treasury shares. During 2017, with the intention of covering the shares that need to be distributed in the future to the beneficiaries of the 2016 long term incentive plan, the Company bought on 18 May 2017 an amount of 3.3 million shares, from Banco Popular. In accordance with the delivery conditions of the shares awarded in 2016 long term incentive plan, 990,000 shares have been delivered to the beneficiaries on October and December. The breakdown of the treasury shares changes during the year is as follows:
(Shares) Acquisitions Disposals Total
31/12/2016 Balance 10,230
May 2017 3,300,000 - 3,300,000
October 2017 - (825,000) (825,000)
December 2017 - (165,000) (165,000)
31/12/2017 Balance 2,320,230
ı 69 ı 12
OUTLOOK / R+D INFORMATION / OTHER
ı 70 ı Annual Report 2017
OUTLOOK / R+D INFORMATION / OTHER
In 2018, MERLIN expects to continue with high occupancy rates and the maintenance of strong cash flow due to the long remaining lease period (6.7 years from 31 December 2017, weighted by each tenant rents).
The Company also expects to continue with the acquisition of assets that fit within its investment strategy. To this end, it holds a cash position of 454 million euros. In this regard, in 2017, in accordance to our best estimates, average payment period to suppliers was 38.7 days.
The Company has not developed any research and development activities during 2017.
ı 71 ı 13
CORPORATE RESPONSIBILITY Annual Report 2017
MAIN INDICATORS OF THE YEAR
EVOLUTION 2017(1) 2016-2017(1)
Energy consumption in GJ 347,561 (113,279) +144% (+4%)
GHG emissions(tCO2eq) 26,131 (8,625) +175% (+19.5%)
Water consumption (m3) 607,344 (139,698) +148% (-5%)
Environmental investment (€) 2,275,559 +124%
% of the portfolio (in GAV terms, +18.8 excluding High Street Retail) under LEED 44.9% Percentage points(2) or BREEAM certification
Sustainable building certification plan
Building certification under the leading sustainable construction standards endorses the assets’ building quality and guarantees that their design and operation include features and systems that allow maximum environmental efficiency. As regards certification standards, MERLIN has chosen LEED and BREEAM, the most appropriate alternative being selected based on the characteristics of the building or its tenants.
In this regard, the Company has approved a plan to achieve 98.5% (in GAV terms, excluding high street retail) certification of its buildings from 2016 to 2019. Certified buildings currently account for 45% (in GAV terms, excluding high street retail) of the total portfolio. MERLIN has also registered the rest of its buildings for the certification process. Under its Certification Plan 2016- 2019, MERLIN Properties will invest over €6 million in the certification of 98.5% of its portfolio under BREEAM or LEED standards.
(1) In brackets, value expressed in like-for-like terms (2) 2016 figure excluding Metrovacesa was 38%. With Metrovacesa, it is 26.1%.
ı 73 ı MERLIN’s asset Certification Plan 2016-2019 (% GAV)
99% 100% 97%
51 35 57
62 42 49
Offices Shopping Logistics centers
Certified In process
Consumption management
Energy (electricity and fuel) and water The Company also controls energy and consumption are two of the main water consumption in other assets without environmental aspects linked to building management control. These assets are operation. MERLIN continuously monitors not considered part of the company’s and assesses energy and water consumed own environmental performance and in managed assets under operation, defining therefore not included in this chapter, since and implementing measures to assure MERLIN does not have any control on their keeping both at efficient levels. performance or margin to introduce any improvement measures.
ı 74 ı Annual Report 2017
Assets in which MERLIN has information on the environmental performance
OFFICES
Area(1) (sqm) Area(1) (sqm) Adequa 1 27,399 PE Atica XIX 15,411 Adequa 2 5,013 PE Churruca 16,979 Adequa 3 15,937 PE Cerro Gamos 35,498 Adequa 5 13,790 PE Euronova 32,665 Adequa 6 13,789 PE Las Tablas 27,073 Al-Andalus 5,972 PE Minipark Alcobendas 1 9,195 Alfonso XI 9,945 PE Minipark Alcobendas 2 3,347 Aquamarina 10,856 PE Puerta de las Naciones 39,150 Arturo Soria 128 3,206 PE Sanchinarro 17,191 Atica 1(2) 7,080 PE Vía Norte 37,224 Atica 2(2) 5,644 Pedro de Valdivia, 10(4) 6,721 Atica 3(2) 5,746 Plantio 6 G 1,780 Atica 4(2) 4,936 Plantio 8 F 1,723 Atica 5 9,526 Plantio 10 E 1,749 Atica 6 3,790 Plantio 12 D 1,816 Avda de Aragon 334 3,890 Princesa 3(3) 17,810 Avenida de Bruselas, 24 9,164 Princesa 5(3) 5,788 Avenida de Burgos 210(4) 6,176 Santiago de Compostela 94 13,130 Avda de Europa 1B 12,605 Sollube 31,576 Callao 5(5) 1,987 Torre Castellana 259(4) 21,390 Castellana, 83-85(4) 15,254 Trianon 18,400 Castellana 93 11,650 Ventura Rodríguez 7(3) 10,071 Castellana 280 16,918 Citypark Cornella 12,916 Cristalia 11,712 Diagonal 458 4,174 Costa Brava, 2-4(4) 16,000 Diagonal 514(4) 9,664 Elipse 7,515 Diagonal 605(4) 14,795 Eucalipto 25 7,368 E-Forum 5,190 Eucalipto 33 7,185 Muntadas I(4) 24,380 Fuente de la Mora 4,482 Muntadas II 3,783 Juan Esplandiú, 11-13(4) 28,008 WTC6(4) 14,461 Partenón, 12-14(4) 19,609 WTC8(4) 14,542 Partenón, 16-18(4) 18,343 PE Poble Nou 22@ 31,337 PE Alvento 32,928 Sant Cugat I(4) 15,378 PE Alvia 23,567 Sant Cugat II(4) 10,008
Area (sqm) No. assets Portfolio included in environmental performance 923,305 68 Total office portfolio 1,267,344 139
(1) Gross leasable area (2) Atica 1, 2, 3 and 4 have been removed from the like-for-like portfolio because the tenant of one of the blocks left in 2017. (3) Princesa 3, 5 and Ventura Rodríguez 7 have been removed from the like-for-like portfolio due to a change in the reporting scope between 2016, 2017 and 2015 (4) Like-for-Like assets (5) Office sqm in the predominantly High Street Retail asset
ı 75 ı SHOPPING CENTERS
Area (sqm) Area (sqm)
Marineda(1) 100,207 El Saler 26,262 Arturo Soria 5,974 Artea 24,323 Centro Oeste(1) 10,876 Thader 48,646 Larios(1) 40,805 Vilamarina 32,224 Porto Pi(1) 32,119 La Vital 20,868 Arenas 31,918 La Fira 29,013 Bonaire 17,559
Area (sqm) No. assets Portfolio included in environmental 420,794 13 performance
Total shopping center portfolio 555,313 18
LOGISTIC ASSETS
Area (m2)
Madrid-Coslada Complex(1) 36,234 Valencia-Almussafes(1) 26,612
Area (m2) No. assets Portfolio included in environmental 62,846 2 performance
Total logistic assets portfolio 960,825 17
Energy consumption in MERLIN’s portfolio
Energy consumption in the portfolio depends MERLIN, as the owner of the buildings, has an mainly on the asset’s characteristics and energy classification for 71% of its portfolio occupancy rate. (by number of assets excluding High Street Retail). This provides an indication of the energy characteristics of buildings and serves as a basis for developing an improvement strategy.
(1) Like-for-Like assets
ı 76 ı Annual Report 2017
Energy classification of MERLIN’s assets (% of total assets)(1)
ASSETS: ASSETS: ASSETS: 104/135 4/17 17/23
F 0% F 0% E 0% F 3% E 13% F 6%
D 26% D 50% E 47%
C 36% D 12%
C 50% C 29% B 22%
A 4% A 0% B 0% A 0% B 6%
Offices Shopping Logistic Centers assets
After conducting several energy audits in new buildings following the integration of its buildings, MERLIN is working on the Metrovacesa portfolio. implementation of an Energy Management System and its ISO 50001 certification. The growth in energy consumption of the This process was launched in 2017 with the like-for-like office portfolio has been more certification of four assets: Aquamarina, moderate, at around 4%, mainly linked to the Avenida de Partenón 16-18, Torre Castellana rise in fuel consumption. 259 and Vía Norte business park, accounting an area of 88,073 m2 (10% GAV). In the case of the shopping centers, energy consumption is mainly related to electricity The Company plans to continue this consumption (92%), with a small proportion certification process in the coming years, of natural gas in some of the assets included including Avenida de Partenón 12-14 offices, in the portfolio in 2017. Alvento business park and Arturo Soria shopping center, what will increase the area Energy performance in shopping centers, under certification to 163,707 m2. in absolute terms, is similar to offices, also due to the integration of new assets in Regarding energy consumption in the the portfolio, pushing consumption up to portfolio, it currently amounts to 347,561 GJ 133,540 GJ (+160% on 2016). In like-for-like together with offices (61% of the portfolio), terms, there was also a rise (3%) in energy shopping centers (38%) and logistic assets consumption in this portfolio with respect (1%). to 2016.
Energy consumption in the office portfolio Regarding logistic assets, energy consists of electricity (76%), natural gas consumption is only linked to electricity (23%) and a small proportion of gas-oil consumption. It has raised to 647 GJ in (1%). In 2017, energy consumption in offices 2017. This consumption represents both totalled 213,374 GJ in absolute terms, in absolute and like-for-like terms, an 11% 134% up on 2016, due to the inclusion of increase respecting 2016.
(1) Tree and Caprabo (high street retail) assets have been excluded from the calculation
ı 77 ı Energy consumption in MERLIN’s assets(1)
Absolute energy consumption (GJ) and Like-for-like energy consumption (GJ) and absolute energy intensity(2) (GJ/m2) like-for-like energy intensity (GJ/m2)
0.300 0.328 0.310 0.320 0.309 0.286
0.267 0.258 0.265 0.245 0.244 0.249
0.008 0.009 0.010 0.008 0.009 0.010
347,561 111,913 108,760 113,279 647 492 583 647
133,540 45,786 47,554 48,867
135,600 142,358 492 583 46,654 50,750 213,374 65,635 60,623 63,765
88,454 91,025
2015 2016 2017 2015 2016 2017
Energy consumption in offices Energy intensity in offices Energy consumption in shopping centers Energy intensity in shopping centers Energy consumption in logistic assets Energy intensity in logistic assets
Absolute electricity consumption Like-for-like electricity consumption by asset category (GJ) by asset category (GJ)
280,079 97,252 95,940 96,963
647 492 583 647
122,525 45,786 47,554 48,867
109,518 118,856 492 583 46,654 50,750 156,907 50,974 47,803 47,449
62,372 67,523
2015 2016 2017 2015 2016 2017
Energy consumption in offices Energy consumption in logistic assets
Energy consumption in shopping centers
(1) Energy consumption includes those assets under MERLIN management (listed in the tables at the beginning of the chapter). The scope of this consumption can include common areas and/or shared services with tenants (like, for example, the cooling system) depending on the asset. (2) Energy intensity has been calculated using the total area of the assets considered.
ı 78 ı Annual Report 2017
Absolute fuel consumption Like-for-like fuel consumption by asset by asset category (GJ) category (GJ) 67,482 16,316
11,015 14,662 12,820
16,316 56,487 14,662 26,081 23,502 12,820
26,081 23,502
2015 2016 2017 2015 2016 2017
Fuel consumption in offices Fuel consumption in shopping centers
Generation of photovoltaic electricity Electricity consumption at MERLIN in MERLIN’s assets Properties’ headquarters
MERLIN has two photovoltaic plants in two Since March 2017, all employees in Madrid are of its assets: Vía Norte business park and reunited in a single headquarters, occupying Coslada logistic asset. Both plants together two floors of an office building, as a tenant. generated 1,910 GJ of renewable electricity in These floors together have an area of 1,855 m2. 2017. This electricity was not self-consumed Electricity consumption on these floors as from but is fed back to the grid. March 2017 amounts to 575 GJ, what means a power intensity of 0.31 GJ/m2.
ı 79 ı Water consumption in MERLIN’s portfolio
In 2017, water consumption in MERLIN’s In like-for-like terms, water consumption fell portfolio was 607,344 m3. This consumption by 17% in the shopping center portfolio and is divided into the office portfolio (68%) around 9% in the logistic portfolio. On the shopping centers (31%) and logistic assets contrary, water consumption rose by 5% in (1%). Both in the office and shopping center the office portfolio. portfolio, absolute water consumption has increased with respect to 2016, mainly due to the addition of new assets.
Water consumption in MERLIN’s assets(1)
Absolute consumption by asset category (m3) Like-for-like consumption by asset category (m3) and absolute water intensity(2) (m3/m2) and like-for-like water intensity (m3/m2)
0.387 0.558 0.366 0.477 0.404 0.289 0.498 0.456 0.347 0.452
0.135 0.132 0.120 0.135 0.132 0.120 607,344 4,330
146,477 139,698 188,965 4,784 4,330
53,279 90,612 63,893 244,731 4,875 4,784 139,157 106,118 414,049 4,875 82,089 85,737 77,800
134,282 133,829
2015 2016 2017 2015 2016 2017
Water consumption in offices Water intensity in offices Water consumption in shopping centers Water intensity in shopping centers Water consumption in logistic assets Water intensity in logistic assets
(1) Water consumption includes those assets under MERLIN management (listed in the tables at the beginning of the chapter). The scope of this consumption can include common areas and/or tenant areas depending on the asset. (2) Water intensity has been calculated using the total area of the assets considered.
ı 80 ı Annual Report 2017
Greenhouse gas emissions
Greenhouse gas (GHG) emissions associated In the like-for-like portfolio, GHG emissions
with MERLIN’s buildings derive from the totalled 8,625 t CO2eq, which is 19.5% up energy (power and fuel) consumed. on 2016. Emissions rose above energy consumption due to the rise in the electricity In 2017, these emissions were the result of mix emission factor in Spain in 2017(1) . gas-oil and natural gas consumption (Scope 1 emissions) and electricity consumption (Scope 2 emissions), amounting to 26,131
t CO2eq. This represents an increase of 175% on the previous year. As with energy consumption, it is attributable to the growth in the number of portfolio assets.
Greenhouse gas (GHG) emissions from MERLIN’s assets(2)
Absolute GHG emissions by asset category Like-for-like GHG emissions by asset category
(t CO2eq) and absolute emission intensity (t CO2eq) and like-for-like emission intensity 2 2 (t CO2eq/m ) (t CO2eq/m )
0.025 0.21 0.023 0.025 0.019 0.022
0.020 0.020 0.021 0.018 0.017 0.018
0.001 0.001 0.001 0.001 0.001 0.001 26,131 8,698 8,625 51 40 51 7,217 39 10,318 3,688 3,869
3,197 10,480 9,495 40 39
3,758 3,412 15,762 4,970 4,705 3,981 6,682 6,044
2015 2016 2017 2015 2016 2017 GHG emissions in offices GHG emissions intensity in offices GHG emissions in shopping centers GHG emissions intensity in shopping centers GHG emissions in logistic assets GHG emissions intensity in logistic assets
(1) The electricity mix emission factor is the value that expresses CO2 emissions associated to the generation of electricity and is thus an indicator of the energy sources used to produce electricity. The lower the factor, the higher the contribution from low-carbon energy sources. (2) The emission factor recommended by the Ministry of Agriculture and Fisheries, Food and Environment for gas-oil and natural gas were used to calculate Scope 1 GHG emissions. The emission factor recommended by Red Eléctrica de España for the electricity mix has been used for the calculations of Scope 2 GHG emissions
ı 81 ı Absolute GHG Scope 1 emissions Like-for-like GHG Scope 1 emissions
by asset category (t CO2eq) by asset category (t CO2eq) 3,958
618
949 1,657 1,505 864 767 3,340
1,657 1,505 864 767 949
2015 2016 2017 2015 2016 2017 GHG Scope 1 emissions in offices GHG Scope 1 emissions in shopping centers
Absolute GHG Scope 2 emissions Like-for-like GHG Scope 2 emissions
by asset category (t CO2eq) by asset category (t CO2eq)
22,173 51 7,834 7,676 40 51 6,449 39 9,700 3,688 3,869
3,197 8,822 40 7,990 39 3,758 3,412 12,422 4,106 3,756 3,213 5,024 4,539
2015 2016 2017 2015 2016 2017
GHG Scope 2 emissions in offices GHG Scope 2 emissions in logistic assets GHG Scope 2 emissions in shopping centers
ı 82 ı Annual Report 2017
In addition to its efforts made to reduce its Waste management own energy consumption and greenhouse gas emissions directly linked to its activity, MERLIN currently controls hazardous MERLIN has launched other initiatives to and non-hazardous waste generation and partially offset those emissions that cannot management in 17 of its assets. They are be reduced. all included in the ISO 14001 corporate Environmental Management System. For LEED and BREEAM certification purposes, MERLIN cooperates in In these assets, 266,743 kg of waste was forest recovery and in the fight against generated in 2017, 99% of which was non- desertification through the association hazardous. REFORESTA, while mitigating emissions from its assets. In 2017, the Company invested All the waste generated was valorized in 2017. €9,021 in reforesting the National Park in Sierra de Guadarrama, Tres Cantos and La Pedriza.
MERLIN also purchases renewable energy Waste generation and management certificates (REC) to offset emissions in MERLIN’s buildings derived from power consumption in its buildings. This ensures that the electricity consumed in its assets is offset by 4% disposal generating the same quantity of renewable energy. In 2017, 120,935 GJ of renewable power was purchased.
GHG emissions associated with electricity consumption at MERLIN Properties’ headquarters 96% 100% Valorization Valorization As a result of power consumption in its office building, MERLIN has generated Scope 2 266,743 226,392 GHG emissions of 45.53 t CO2eq, what means 2 an intensity of 0.025 t CO2eq/m .
224,259 264,607
2,133 2,136
2016 2017
Generation of non-hazardous waste Generation of hazardous waste (kg)
ı 83 ı 14
STAFF
ı 84 ı Annual Report 2017
MAIN INDICATORS OF THE YEAR
2017 EVOLUTION 2016-2017
Number of employees 162 -18%
-5.9 % women in the workforce 43% Percentage points
Employees with indefinite contracts 100% =
• Relocation of the workforce into the new corporate headquarters in Madrid and Barcelona. • Creation of the leasing office, leasing shopping centers and CAPEX investment departments.
2017 MILESTONES • Launch of the employee satisfaction survey. • Resumption of the unified Training Plan. • Off-site meeting of the entire Asset Management team following integration. • Launch of the CSR Plan.
• Improvement of the employees’ life insurance policy. • Development of the employee intranet, which will encompass all the tools, procedures and corporate documentation, and will allow access to discounts and FUTURE CHALLENGES social benefits. • Continuation of in-house training to transfer knowledge among employees. • Revision of the Welcome Guide for all new joiners.
ı 85 ı Distinctive aspects of MERLIN’s human capital
Human capital is a key, distinctive factor at Despite their varied backgrounds, all the MERLIN. All the group’s employees have workers share the Company’s philosophy considerable experience, skills, qualifications and are perfectly aligned to achieve its and training to carry out their functions and objectives. have a recognised high capacity for work and commitment, as well as honesty in the performance of their duties.
Excellence 20 MERLIN’s good reputation allows it to average years select the market’s best academic pro files, of experience who join a top-class team of professionals with broad industry experience employing a meritocracy.
69.5M€ Efficiency MERLIN remains faithful to its philosophy of GAV/employee growth without losing efficiency, i.e. keeping up the productivity that characterises its human capital.
4.3% Commitment to the organisation MERLIN’s professionals are firmly voluntary turnover rate committed to the Company’s corporate objectives and aligned with its values. MERLIN has a non-hierarchical matrix organisation to encourage a culture of individual responsibility and favour efficient communication within the team.
74% Independence The Company has a team of proactive, of employees have responsible professionals who are received training(1) provided with the necessary training and independence to make decisions.
(1) Only parent company
ı 86 ı Annual Report 2017
MERLIN’s human capital is currently comprising 7% of employees, and other composed of 162 professionals divided into employees, the remaining 93%), in line with only two categories (management team, the Company’s horizontal structure strategy.
Workforce composition
2017 2016 2015
Men Women Men Women Men Women
Management team 11 1 11 1 11 1
Other professionals 82 68 91 95 54 53
TOTAL 162 198 119
<30 years 4 5 4 4 2 2
30-50 years 66 52 68 77 50 42
>50 years 23 12 30 15 13 10
TOTAL 162 198 119
Current profile of MERLIN Properties employees(1)
• I represent 43% of the workforce • I represent 57% of the workforce • I represent 53% of recruits in 2017 • I represent 47% of recruits in 2017 • I am between 30 and 50 years old • I am between 30 and 50 years old (75% of women) (71% of men) • I have an indefinite contract • I have an indefinite contract • I received 9 hours of training in 2017(2) • I received 8 hours of training in 2017(2)
(1) At 31 December 2017 (2) Only parent company
ı 87 ı Diversity and equal opportunities Universidad Carlos III, Universidad Pontificia de Comillas and Universidad As reflected in the Company’s Code de Navarra. of Conduct, MERLIN promotes equal opportunity and non-discrimination in In the framework of these agreements, all phases of the working relationship MERLIN has been supported by two interns with employees, regarding access to in 2017, one of whom has become part of employment, training, promotion and the workforce. working conditions. For talent retention purposes, MERLIN’s The Company also promotes the integration human resources analyses ways to motivate of people with functional diversity. In and reward its professionals for their 2017, MERLIN hired three people with involvement and commitment. Four key an intellectual disability as part of its mechanisms are now used for this purpose: collaboration with the Prodis Foundation. remuneration, professional development, These professionals are guided by an communication and flexible remuneration internal tutor who, together with all their and social benefits. colleagues, provides them with support during their daily work.
Following these hirings, there are currently five employees with a disability, all under Profile of MERLIN’s hirings in 2017 indefinite part-time contracts. They are fully integrated and carry out functions that are necessary and valued in the Company. 8% 0 a o 10% Talent attraction and retention 0 a o
When hiring employees, MERLIN guarantees equal opportunity and transparency, selecting new professionals based on their skills, knowledge and alignment with 82% corporate values and objectives. 0 0 a o
In 2017, the Company hired 40 professionals, 14 of whom are the result of the integration of MERLIN and Centros Comerciales Metropolitanos, the management company of the shopping malls from Metrovacesa’s 47% 53% merge. Additionally, 5 external employees o re u ere from Marineda’s management team have joined the workforce together with 5 external employees in charge of the management of Las Arenas mall, after MERLIN became the sole owner.
In order to attract new talent, the Company signs collaboration agreements with top educational institutions to both favour the integration of new job seekers and identify the highest academic achievers. MERLIN currently has agreements with the following institutions: Universidad Autónoma de Madrid,
ı 88 ı Annual Report 2017
Talent retention. Main mechanisms
Remuneration Remuneration is a key tool to attract and retain the best talent. The Company’s remuneration system includes three distinctive 41 Employees may features: currently opt to • Low (base) salary slope between categories. • Better salary than the market average. join the Company’s • Prioritisation of performance over any other variable when Long-Term determining remuneration. Continuous monitoring of the Incentive Plan employees’ evolution. The following developments in employee remuneration took place in 2017: • Extension of the variable remuneration policy to the entire company for 2017 and the coming years. • Extension of the Long-Term Incentive Plan from 12 to 41 employees under the new 2017-2019 Plan.
Professional The proactiveness of MERLIN’s professionals is the key to their development advancement. The Company’s horizontal structure and youth allows its 1,170 hours training professionals to define the pace and direction of development based on their capabilities and aspirations. During their time at to employees the Company, all professionals have the opportunity to move between different positions and take on new responsibilities. MERLIN also offers employees post-specific training to boost their development process. This consists of three tools: • Language training plan: available for all employees based at headquarters and aligned with the Company’s current needs. Employees may currently study English and Portuguese. • Guided training: arises from specific needs detected in work teams and tailored to specific professionals. • Shared knowledge: SAP internal training courses are regularly held, the Company’s own personnel teaching their colleagues. Training hours totalled 1,170 in 2017. All new joiners receive training in Occupational Risk Prevention as soon as they join the Company.
ı 89 ı Communication One of the main reasons for MERLIN’s desire to keep its current structure is related to the effectiveness of its communication 89% participation with the employees. in the satisfaction survey In 2017, MERLIN took steps to enhance and systematize this communication: 6.61 average score • All the employees were moved to a single building in Madrid and another in Barcelona, all on the same floor to received in the favour communication. satisfaction survey In each department, positions are distributed so that personnel from different organisational cultures (Testa, 68 employees attended Merlin, Metrovacesa) are intermingled, thus stimulating the first meeting held integration. following integration • The Company launched its first satisfaction survey (only at parent company), which was completed by 89% of the workforce, in order to identify the Company’s alignment with its professionals and gather insight into the labour climate following integration. • In March, an off-site was held to define the strategy, basic principles, ways of working and overall vision of the company, as well as to share knowledge of MERLIN’s asset portfolio. Sixty-eight employees took part, including executives, portfolio asset managers and department heads. This is to be an annual event. MERLIN also continues to work on improving its existing communication tools, such as the Welcome Guide for all new joiners and additional communication tools such as the employee intranet.
Flexible MERLIN provides employees with social benefits and alternative remuneration and compensation arrangements. In 2017, the contract terms of all employees were brought social benefits into line following the integration of Testa and Metrovacesa workforces. Currently all employees have access to all the 100% employees flexible remuneration arrangements available (meal vouchers, with access to social travel passes, nursery vouchers and training). benefits and full medical Medical insurance has also been improved and extended to all employees and their families, entirely at the Company’s expense. insurance
ı 90 ı Annual Report 2017
Employee involvement with the community
MERLIN knows that its professionals value In 2017, different programmes were being part of an organisation aware of the implemented to strengthen the involvement problems and needs of the communities with society by the Company and its where its activities are developed and employees. uses available tools and resources to help improve it.
Approval of The 2017 Annual General Meeting approved MERLIN’s Corporate Social Responsibility Plan as a framework through which the MERLIN’s Company undertakes to earmark a percentage of revenue Corporate Social (0.1% of GRI) for social projects and programmes. Responsibility plan In 2017, the Company donated over €185,000 to 12 foundations. In addition to corporate contributions, under the CSR Plan, 38 foundations MERLIN will match twice the contributions to social projects or benefited programmes made by employees, executives or directors. These contributions may be either financial or volunteer time; 10% employees involved MERLIN calculates the value of the hours devoted to social work and makes a donation of twice that amount. >€ 220k in donations The programme was welcomed by the employees in the first year. 10% of the employees were involved, raising over €17,000 in donations which the Company matched twice. Donations by employees under the CSR matching plan were made to 26 foundations.
Voluntary training Twenty MERLIN professionals, including the CEO, have voluntarily delievered training as part of the university degree from MERLIN “Intensificación en Planificación y Gestión Inmobiliaria” of the professionals Quantity Surveyor’s School in Universidad Politécnica de Madrid, donating the associated course fees to academic grants 135 training hours for the course’s best students.
ı 91 ı APPENDIX
ı 92 ı Annual Report 2017
EPRA METRICS
EPRA Earnings
(€ thousand) Consolidated net profit in accordance with IFRS 1,100,419 Adjustments to calculate EPRA earnings (860,043) (i) changes in value of investment properties (883,231) (ii) gain/(losses) on disposal of assets (236) (iii) absorption of revaluation on investment properties 9,839 (iv) non recurring taxes 10,572 (v) share in equity method investees (8,835) (vi) negative difference in business combination 1,775 (vii) changes in fair value of financial instruments and cancellation costs 11,123 (viii) impairment of fiscal credit - (ix) gain/(losses) on disposal of financial instruments (1,050) Minority interests in respect of previous adjustments (86) EPRA net earnings pre-specific adjustments 240,290 EPRA net earnings per share pre-specific adjustments (weighted) 0.51 EPRA net earnings per share pre-specific adjustments 0.51
Company specific adjustments: 48,790 (i) LTIP provision 43,839 (ii) non recurring general expenses 4,951 Minority interests in respect of previous adjustments 5 EPRA net earnings post-specific adjustments 289,085 EPRA net earnngs per share post-specific adjustments (weighted) 0.62 EPRA net earnngs per share post-specific adjustments 0.62
EPRA NAV
(€ thousand) Equity in balance sheet 5,717,658 Derivatives Mark-to-Market 34,178 Deferred Taxes Mark-to-market 448,291 Deferred tax assets (144,127) Deferred tax liabilities 592,418 Cost of debt (55,166) Revaluations not recorded in the financial statements 79,780 Adjustment in concessions 30,054 Adjustments in tangible assets 320 Adjustments in equity method 49,406 EPRA NAV 6,224,741 Shares 469,770,750 EPRA NAV / share 13.25
ı 93 ı EPRA Yields
Shopping High Street Land under (€ thousand) Offices Logistics Other TOTAL centers Retail development
Gross asset value 5,219,490 1,752,715 647,562 2,347,536 410,776 455,061 10,833,141 Exclude: Land for development - (455,061) (455,061) Non-core land (105,784) (105,784)
Commercial property portfolio GAV 5,219,490 1,752,715 647,562 2,347,536 304,992 - 10,272,295
Gross rents annualized 214,967 91,798 42,984 103,929 12,891 - 466,569 Exclude:
Propex not recharged to tenants (17,204) (13,464) (1,381) (1,807) (968) - (34,824)
"Topped-up" net rents annualized 197,762 78,333 41,603 102,039 11,923 - 431,744 Exclude: Incentives (8,271) (2,179) (1,999) (71.2) (200) - (13,032) Net rents annaulized 189,492 76,154 39,604 101,746 11,715 - 418,712 EPRA "topped-up" yield 3.79% 4.56% 6.42% 4.35% 3.91% 4.22% EPRA net initial yield 3.63% 4.43% 6.12% 4.33% 3.84% 4.09%
ı 94 ı Annual Report 2017
Shopping High Street Land under (€ thousand) Offices Logistics Other TOTAL centers Retail development
Gross asset value 5,219,490 1,752,715 647,562 2,347,536 410,776 455,061 10,833,141 Exclude: Land for development - (455,061) (455,061) Non-core land (105,784) (105,784)
Commercial property portfolio GAV 5,219,490 1,752,715 647,562 2,347,536 304,992 - 10,272,295
Gross rents annualized 214,967 91,798 42,984 103,929 12,891 - 466,569 Exclude:
Propex not recharged to tenants (17,204) (13,464) (1,381) (1,807) (968) - (34,824)
"Topped-up" net rents annualized 197,762 78,333 41,603 102,039 11,923 - 431,744 Exclude: Incentives (8,271) (2,179) (1,999) (71.2) (200) - (13,032) Net rents annaulized 189,492 76,154 39,604 101,746 11,715 - 418,712 EPRA "topped-up" yield 3.79% 4.56% 6.42% 4.35% 3.91% 4.22% EPRA net initial yield 3.63% 4.43% 6.12% 4.33% 3.84% 4.09%
EPRA cost ratio
(€ thousand) 31/12/17
Propex not recharged to tenants (35,564) Incentives (16,754) Collection loss (1,851) Personnel expenses (71,619) General expenses recurring (9,767) General expenses non-recurring (4,951) LTIP provision 43,839 Exclude Investment property depreciation - Ground rent costs - Service charge recovered through rents but not invoiced separetely - Expenses related to 3rd party asset management services - EPRA Cost Ratio (inclding direct vacancy cost) (96,667) Gross rents 469,405 Less: service fee if part of gross rents - Add: income of joint ventures - Gross rental income 469,405 EPRA Cost Ratio (including non-recurring general expenses) 20.6% EPRA Cost Ratio (excluding non-recurring general expenses) 19.5%
ı 95 ı ALTERNATIVE MEASURES OF PERFORMANCE
In accordance with the recommendations EPRA Vacancy Rate issued by the European Securities and Estimated Market Rental Value (ERV) of Markets Authority (ESMA), the alternative vacant space divided by ERV of the whole measures of performance are described as portfolio. follows. FFO Glossary Recurring result of the Company calculated Average debt maturity (years) as EBITDA less debt interest expenses of the It represents the average debt duration of period. the Company until maturity. GAV Average Passing Rent Value of the commercial portfolio in It represents the rent for sqm/month to accordance with the latest external valuation which an asset or category of assets is available as of 31 December 2017 plus rented as of 31 December. advanced payments for turn-key projects and developments. EBITDA Earnings before net revaluations, Gross annualized rents amortizations, provisions, interest and taxes. Passing rent as of 31 December multiplied by 12. EPRA costs Recurring running costs of the Company Gross yield divided by recurring rents. It represents the gross yield of an asset or category of assets. It is calculated by EPRA Earnings (€ thousand) dividing the annualized gross rent between Recurring earnings from core operational the latest available GAV. activities. Recurring EBITDA EPRA NAV (€ thousand) EBITDA less non-recurring general expenses EPRA Net Asset Value (EPRA NAV) is of the Company. calculated based on the consolidated shareholders’ equity of the Group adjusted Recurring FFO to include properties and other investment FFO less non-recurring general expenses of interests at fair value and to exclude the Company. certain items not expected to crystallise in Release Spread a longterm investment property business Difference between the new rent signed model, as per EPRA’s recommendations. and the old prevailing rent on renewals EPRA NNNAV (€ thousand) (same space, same tenant) or relets (same EPRA NAV adjusted to include the fair value space, different tenant) during the period of of financial instruments, debt and deferred analysis taxes. Rents Like-for-Like EPRA Net Initial Yield Difference between the rents received in the Annualised rental income based on the cash period of analysis and the rents received on passing rents at the balance sheet date, the similar period one year before for the less nonrecoverable property operating same perimeter of assets expenses, divided by the market value of the WAULT property, increased with acquisition costs. Weighted average unexpired lease term, EPRA “topped-up” NIY calculated as the number of years of Adjustment to the EPRA Net Initial Yield in unexpired lease term, as from 31 December respect of the expiration of rentfree periods 2017, until the lease contract expiration, (or other unexpired lease incentives such as weighted by the gross rent of each discounted rent periods and step rents). individual lease contract.
ı 96 ı Annual Report 2017
LIST OF ASSETS
G.L.A Asset Location # sqm AG Torre Castellana 259 Madrid 21,390 1 Castellana 280 Madrid 16,918 2 Castellana 278 Madrid 14,468 3 Castellana 93 Madrid 11,650 4 Castellana 83 Madrid 15,254 5 Plaza Pablo Ruíz Picasso Madrid 31,576 6 Alcala 40 Madrid 9,315 7 Principe de Vergara 187 Madrid 10,732 8 Alfonso XI Madrid 9,945 9 Pedro de Valdivia 10 Madrid 6,721 10 Beatriz de Bobadilla 14 Madrid 16,979 11 Princesa 3 Madrid 17,810 12 Princesa 5 Madrid 5,788 13 Ventura Rodriguez 7 Madrid 10,071 14 Juan Esplandiu 11-13 Madrid 28,008 15 Eucalipto 33 Madrid 7,185 16 Eucalipto 25 Madrid 7,368 17 Santiago de Compostela 94 Madrid 13,130 18 Parking Princesa* Madrid - 19
Total Madrid Prime + CBD 254,308
Ulises 16-18 Madrid 9,576 20 Josefa Valcarcel 48 Madrid 19,893 21 Alvento Madrid 32,928 22 Cristalia Madrid 11,712 23 Trianon Madrid 18,400 24 Ribera del Loira 36-50 Madrid 39,150 25 Ribera del Loira 60 Madrid 54,960 26 Partenon 12-14 Madrid 19,609 27 Partenon 16-18 Madrid 18,343 28 Arturo Soria 128 Madrid 3,206 29
Total Madrid NBA A2 227,778
*Below ground surface has not been taken into account for G.L.A. purposes.
ı 97 ı G.L.A Asset Location # sqm AG
Torre Chamartin* Madrid 16,639 30 Arturo Soria 343 Madrid 6,615 31 Manoteras 18 Madrid 7,515 32 Fuente de la Mora Madrid 4,482 33 Aquamarina Madrid 10,856 34 Via Norte Madrid 37,224 35 María de Portugal 9-13 Madrid 17,191 36 Las Tablas Madrid 27,073 37 Avenida de Burgos 210 Madrid 6,176 38 Manuel Pombo Angulo 20 Madrid 3,623 39 Miniparc Alcobendas I Madrid 9,195 40 Miniparc Alcobendas II Madrid 3,347 40 Avenida de Bruselas 24 Madrid 9,164 41 Avenida de Bruselas 26 Madrid 8,895 42 Avenida de Bruselas 33 Madrid 33,718 43 Avenida de Europa 1A Madrid 12,605 44 Avenida de Europa 1B Madrid 12,606 44 Maria de Portugal T2 Madrid 17,139 45 Adequa 1 Madrid 27,399 46 Adequa 2 Madrid 5,013 46 Adequa 3 Madrid 15,937 46 Adequa 5 Madrid 13,790 46 Adequa 6 Madrid 13,789 46 Adequa 4* Madrid 14,926 46 Adequa 7* Madrid 26,744 46
Total Madrid NBA A1 361,661
Francisco Delgado 9A Madrid 5,496 47 Francisco Delgado 9B Madrid 5,400 47 Costa Brava 2-4 Madrid 16,000 48 Avenida de Aragon 334 Madrid 3,890 49 Atica 1 Madrid 7,080 50 Atica 2 Madrid 5,644 50 Atica 3 Madrid 5,746 50 Atica 4 Madrid 4,936 50 Atica 5 Madrid 9,526 50 Atica 6 Madrid 3,790 50 Atica XIX Madrid 15,411 51 Cerro Gamos 1 Madrid 35,498 52 El Plantío 6 G Madrid 1,780 53 El Plantío 8 F Madrid 1,723 53
*Project under development
ı 98 ı Annual Report 2017
G.L.A Asset Location # sqm AG
El Plantío 10 E Madrid 1,749 53 El Plantío 12 D Madrid 1,816 53 Copenhague 4-8 Madrid 5,972 54 Alvia Madrid 23,567 55 Euronova Madrid 32,665 56
Total Madrid Periphery 187,689
Diagonal 605 Catalonia 14,795 1 Diagonal 514 Catalonia 9,664 2 Diagonal 458 Catalonia 4,174 3 Balmes 236-238 Catalonia 6,187 4 Vilanova 12-14 Catalonia 16,494 5 Gran Vía Cortes Catalanas 385 Catalonia 5,190 6
Total Barcelona Prime + CBD 56,504
Citypark Cornella Catalonia 12,916 7 WTC6 Catalonia 14,461 8 WTC8 Catalonia 14,542 9 Av. Parc Logistic 10-12 (PLZFA) Catalonia 11,411 10 Av. Parc Logistic 10-12 (PLZFB) Catalonia 10,652 11
Total NBA WTC 63,982
Diagonal 211 (Torre Glòries)* Catalonia 37,614 12 Diagonal 199 Catalonia 5,934 13 Llull 283 (Poble Nou 22@) Catalonia 31,337 14
Total NBA 22@ 74,884
Muntadas I Catalonia 24,380 15 Muntadas II Catalonia 3,783 16 Sant Cugat I Catalonia 15,379 17 Sant Cugat II Catalonia 10,008 18
Total Periphery 56,778
Monumental Lisbon 16,892 1 Marques de Pombal 3 Lisbon 12,460 2
Total Lisbon Prime + CBD 29,352
*Project under development
ı 99 ı G.L.A Asset Location # sqm AG
Lisboa Expo Lisbon 6,740 3 Torre Lisboa Lisbon 13,715 4 Central Office Lisbon 10,310 5
Total Lisbon NBA 30,765
Lerida - Mangraners Catalonia 3,228 Zaragoza - Aznar Molina Zaragoza 4,488 Sevilla - Borbolla Andalusia 13,037 Granada - Escudo del Carmen Andalusia 2,041
TOTAL OFFICES 1,363,267
Marineda Galicia 100,207 1 Arturo Soria Madrid 5,974 2 Centro Oeste Madrid 10,876 3 Tres Aguas Madrid 67,009 4 Leroy Merlin Getafe Madrid 10,007 5 X-Madrid Madrid 47,424 6 Larios Andalusia 40,805 7 Porto Pi Mallorca 32,119 8 Artea Basque Country 24,323 9 Arenas Catalonia 31,918 10 Vilamarina Catalonia 32,224 11 La Fira Catalonia 29,013 12 El Saler Valencian C. 26,262 13 La Vital Valencian C. 20,868 14 Bonaire Valencian C. 17,559 15 Medianas Bonaire Valencian C. 4,584 16 Thader Murcia 48,646 17 Monumental SC Lisbon 5,495 18
TOTAL SHOPPING CENTERS 555,313
Madrid-Coslada Madrid 28,491 1 Madrid-Coslada Complex Madrid 36,234 2 Madrid-Getafe Madrid 16,242 3 Madrid-Getafe (Los Olivos) Madrid 11,488 4 Madrid-Meco I Madrid 35,285 5 Madrid-Pinto I Madrid 11,099 6 Madrid-Pinto II A Madrid 29,544 6 Madrid-Pinto II B Madrid 29,473 6
ı 100 ı Annual Report 2017
G.L.A Asset Location # sqm AG
Madrid-Getafe (Gavilanes) Madrid 39,576 7 Madrid-Meco II Madrid 59,891 8 Madrid-San Fernando I Madrid 11,165 9 Madrid-San Fernando II Madrid 34,224 10 Guadalajara-Alovera Castilla la Mancha 38,763 11 Guadalajara-Azuqueca I Castilla la Mancha 27,995 12 Guadalajara-Azuqueca II Castilla la Mancha 98,000 13 Guadalajara-Azuqueca III Castilla la Mancha 51,000 14 Guadalajara-Cabanillas I Castilla la Mancha 70,134 15 Guadalajara-Cabanillas Park I A Castilla la Mancha 38,054 16 Guadalajara-Cabanillas Park I B Castilla la Mancha 17,917 16 Guadalajara-Cabanillas Park I C Castilla la Mancha 48,952 16 Guadalajara-Cabanillas Park I D Castilla la Mancha 47,892 16 Guadalajara-Cabanillas Park I E Castilla la Mancha 49,793 16 Guadalajara-Cabanillas Park I F Castilla la Mancha 15,000 16 Guadalajara-Cabanillas Park II Castilla la Mancha 210,678 17 Barcelona-ZAL Port Catalonia 527,954 18 Barcelona-Granada Penedes Catalonia 16,758 19 Barcelona-Lliça del Vall Catalonia 14,911 20 Barcelona-Sant Esteve Catalonia 16,811 21 Barcelona- Castellbisbal Catalonia 21,508 22 Barcelona-PLZF Catalonia 132,554 23 Zaragoza-Pedrola Zaragoza 21,579 24 Zaragoza-Plaza Zaragoza 20,764 25 Zaragoza Plaza - logistics Zaragoza 11,262 26 Valencia-Almussafes Valencian C. 26,613 27 Vitoria-Jundiz Basque Country 72,717 28 Sevilla Zal Andalusia 108,728 29 Sevilla ZAL WIP Andalusia 5,400 30 SPL Lisbon - 31
TOTAL LOGISTICS 2,054,448
Tree 365,916 Caprabo Catalonia 64,252 Plaza de los Cubos Madrid 13,479 Callao 5 Madrid 11,629 Torre Madrid locales Madrid 4,393 Locales Plaza Castilla Madrid 311
TOTAL HIGH STREET RETAIL 459,980
ı 101 ı G.L.A Asset Location sqm AG
Eurostars Torre Castellana 259 Madrid 31,800 General Ampudia 12* Madrid - Yunque Madrid 1,780 San Francisco de Sales Madrid 171 Amper Madrid 22,510 Torre Madrid residencial Madrid 120 Novotel Diagonal 199 Catalonia 15,332 Jovellanos 91 Catalonia 4,519 Rambla Salvador Sama 45-47-49 Catalonia 1,140 Sant Boi de Llucanes Catalonia 8,422 CIM Valles Catalonia 25,724 Hotel Marineda Galicia 5,898 Parking Palau* Valencian C. - Bizcargi 1 1D Basque Country 46 Arapiles 8 Madrid 1,700 Valdebebas - office land Madrid 25,955 Zaragoza - residencial land Zaragoza 47,971 Navalcarnero Madrid 288,389
TOTAL OTHER 481,476
*Belons ground surface has not been taken into account for G.L.A. purposes
ı 102 ı Annual Report 2017
ı 103 ı ASSET LOCATION MAPS
Offices Madrid
ı 104 ı Annual Report 2017
Offices Barcelona
ı 105 ı Offices Lisbon
ı 106 ı Annual Report 2017
Logistics Madrid
ı 107 ı Logistics Barcelona
ı 108 ı Annual Report 2017
Shopping centers
ı 109 ı Edition MERLIN Properties Design and layout Addicta Diseño Corporativo
Paseo de la Castellana, 257 28046 Madrid +34 91 769 19 00 [email protected] www.merlinproperties.com