Merlin Considers How To Exit Residential Sector In 2016

1 March 2016 – Expansión

On Monday, Merlin Properties presented its results for 2015, its first full year, which closed with a net profit of €49.1 million, slightly lower than the figure it recorded in the previous year (€49.7 million). It also announced a 277% improvement in revenues to €214.5 million, following the consolidation of Testa from the second half of the year onwards.

The acquisition of Testa from Sacyr for €1,794 million involved the incorporation of a residential portfolio, comprising more than 1,519 units spread across eleven buildings. These assets are peripheral for Merlin, which focuses on the office, shopping centre and logistics platform segments.

The President of the Socimi, Ismael Clemente, explained that the objective of the company is to divest that business during 2016 and he indicated that a joint venture is the most likely option.

Clemente revealed that Merlin is working with three investors and explained that this operation, which would result in the departure of 10 people from Merlin’s workforce, would involve designing a co-management structure, as well as exchange equations or contribution calculations.

The residential business accounts for 5% of Merlin’s balance sheet, with a value of around €288 million. “Our maximum priority is to achieve the excellent execution of the operation that we are going to carry out”, said the Director, who ruled out any negative effect on his divestment plans from the political uncertainty.

Regarding the unwinding of its positions in hotel assets, which do not form part of its core business either, Clemente said that the Socimi will act in line with “pragmatic” criteria and in accordance with the performance of the portfolio.

Bond issue

Merlin also announced yesterday that it had obtained an investment grade BBB credit rating from Standard & Poor’s, one notch below the rating for the Kingdom of Spain, which will enable the group to go to the bond market and improve its financial structure.

In this sense, the company is planning a corporate bond issue of between €800 million and €1,000 million, probably in two tranches. The issue, conducted through the parent company, will probably be listed in Luxembourg to reduce its average cost of debt from the current level of 2.4%.

Merlin also announced a distribution to shareholders of, at least, €140 million, which represents a 133% increase with respect to the previous year.

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake