Merlin To Invest €100M Renovating Testa’s Buildings

13 October 2015 – Cinco Días

The Socimi Merlin Properties is embarking on a plan to renovate and improve the certifications of the buildings it has inherited from Testa, the former subsidiary of Sacyr. The plans also include the refurbishment of the construction company’s own headquarters. The investment will amount to €100 million over the next five years.

Over the medium term, the Socimi plans to renovate some of the buildings it inherited from Testa, the company in which it now holds a 77% stake. According to sources familiar with the plan, the company’s idea is to spruce up some of the properties that have become run down due to a lack of investment, improve the aesthetics of some of them and introduce environmental and energy certifications, with an investment that will amount to around €100 million.

In June, the Socimi announced its purchase of Testa for €1,793 million. Testa is the former real estate subsidiary of Sacyr and is the owner of properties for rent.

Merlin, led by Ismael Clemente, has already get involved with the day to day running of Testa. In recent weeks, Management has been assessing the status of its existing (extensive) portfolio containing 45 office buildings, and has launched a plan to renovate the properties, with the medium-term objective of generating higher rents as a result of the improvements.

On the one hand, it will spend around €75 million on the refurbishments over a five year period. The most iconic building is the one currently leased by Sacyr, at number 83 on Paseo de la Castellana, next to the Torre BBVA. The Socimi plans to give the property a new lease of life with a new façade that will modernise the aesthetics of the building. The construction company’s lease expires in 2019, and therefore if they want to undertake the renovation work before that date, they will have to notify the tenant.

In addition, Merlin plans to refurbish the interior of various buildings in Madrid, such as the ‘Complejo Princesa’ in the well-known Plaza de los Cubos, as well as other buildings such as the Costa Brava, in the Mirasierra neighbourhood, oand the property next to Torrespaña on Calle Juan Esplandiú. Meanwhile, it will also begin construction work at shopping centres in Porto Pi in Palma de Mallorca and Larios in Málaga.

The other part of the plan involves spending more than €20 million on the refurbishment work that is required in all of the buildings in order to obtain the environmental and energy certifications that will, for example, result in future savings on electricity bills.

Other very modern buildings

Nevertheless, Testa also owns several other iconic and modern buildings that will not need any work, at least in theory, such as Torre PwC (one of the four towers at the northern end of the Paseo de la Castellana) and the headquarters of Endesa, Uría y Menéndez, L´Oreal and Indra.

In addition, Merlin is immersed in a plan to restructure its portfolio following the acquisition of Testa. It plans to hold onto the office buildings and shopping centres that it has inherited and get rid of the residential properties and hotels. In fact, it has already put a batch of 1,500 homes up for sale. Together, the two companies have assets worth more than €5,000 million. The acquisition of 100% of Testa and the definitive merger of the two companies is scheduled to be completed on 30 June 2016.

Original story: Cinco Días (by Alfonso Simón Ruiz)

Translation: Carmel Drake