Ismael Clemente: “We Will Probably Sell Testa, Or List It”

7 July 2016 – El Economista

After spending a few hours in the company of Ismael Clemente, CEO of Merlin Properties, it is easy to understand how the Socimi that debuted on the stock exchange on 29 June 2014, has managed to become the largest real estate company in Spain in just two years. Clemente’s charisma is clear. His closeness and humility are engaging, not least because they differentiate him from the typical profile of senior managers. All of that, together with his knowledge about the sector, his professionalism and the team that surrounds him, have combined together perfectly to enable Merlin to become what it is today.

A few weeks ago, the company announced an agreement with Metrovacesa, which will see the merger of the two companies to create a giant in terms of assets, with almost €10,000 million. That announcement came just a few days after Merlin had completed the process to purchase Testa, for which it paid €1,800 million.

After those two major transactions, what is the company’s strategy now?

We are going to continue the tone we have adopted over the last year and a half. We will be very active in the logistics segment and relatively quiet elsewhere. Right now, we are not finding much value from participating in individual asset auctions, particularly when the values are small. But, we are still attentive to groups of assets whose size puts off possible competitors and where we can obtain good prices due to complexity or restructuring.

We have also been participating in the process to buy Torre Cepsa, but we are not competitive enough. Really, over the last year, we have been quiet in the market, but all the while, we have been keeping an eye on operations such as the one involving Metrovacesa, in order to create value for our shareholders. If we come across another opportunity, we may go for it, but if you look at the market, there are limited opportunities. It would be a miracle if a new portfolio were to appear that isn’t already on our radar.

What plans do you have for your subsidiary Testa Residencial?

We want to convert it into a company that has its own life and that operates independently in the market, with its own independent management team and its own independent shareholder base. Several paths would enable us to achieve this objective. On the one hand, it could be done by an indirect listing. We have the option of taking our stake in Testa Residencial, which amounts to 34%, and passing it onto Merlin’s shareholders as a kind of dividend.

In this way, the stake would be pulverized immediately. That is one option, but the standard route would be an independent IPO. We are also evaluating the option of a sale or merger transaction with one of the housing operators. The large German housing operators are not currently operating in Spain, but a company of this size would likely spark their interest. (…)

Of the 4,700 homes currently in Testa Residencial’s portfolio, between 700 and 900 are susceptible to sale.

Before this operation was announced, Merlin’s objectives included selling off the residential and hotel arms of its business.

Have those intentions changed?

Residential is still a non-strategic segment for us and the stake that we hold in Testa Residencial will not be on our balance sheet in ten years time. Hotels are not strategic for us either and we will look for an exit from them over the long term. (…)

Does Merlin plan to get rid of any other assets?

(…). Right now it is hard to quantify, but we expect to sell between €50 million and €100 million of our assets. (…).

Original story: El Economista (by Alba Brualla)

Translation: Carmel Drake

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