Merlin To Sell Testa’s Hotel & Residential Portfolios

7 July 2015 – Cinco Días

Merlin wants to focus on its core business, specifically offices and shopping centres, and so it will divest all other kinds of assets from its portfolio. That was the announcement made yesterday by Ismael Clemente, the Chairman of the Socimi Merlin Properties, at an event in Barcelona.

Clemente revealed that Merlin will sell off Testa’s residential and hotel portfolios, which represent around 15% of the company’s total assets. However, it will retain Torre PwC, which houses the Hotel Eurostars Madrid Tower, since that is an iconic mixed-use building, which is also home to the offices of the consultancy firm PwC.

At a lunch meeting in the Círculo Ecuestre in Barcelona, about the challenges facing the real estate sector, Clemente said that following the Testa transaction – which has been structured in phases to compete before June 2016 – Merlin will continue to focus on offices, logistics assets and shopping centres.

Last year, Testa’s annual report valued its hotels at €430 million and its residential assets for rent at €276 million, from a total asset portfolio of €3,180 million.

Merlin Properties’ acquisition of Testa will create the largest Socimi and one of the largest real estate companies in Spain. The new company will have assets amounting to €5,500 million, which will generate gross rental income of around €290 million per year. The total consideration for the transaction will amount to €1,793 million, which will be disbursed in three phases until mid-2016.

AC, Tryp and NH

Sources at the company say that they have not yet decided any of the details about the divestment plan for the assets, which include, amongst others, the AC Forum, the Eurostars Grand Marina, the Tryp in Barcelona and the NH Sanvy, as well as the Eurostars Gran Madrid in Spain’s capital. However, they did confirm that Torre PwC will remain in the hands of the new company following the acquisition of Testa, because it would not make any sense to sell almost half of the building that houses the Eurostars Hotel.

In the residential business, the company will divest developments available for rent, both social housing, as well as “free” homes, primarily in the municipal districts of the Community of Madrid.

Moreover, the CEO from Extremadura considers that the acquisition of Testa will place Merlin firmly on the map, as one of the leading real estate companies in Spain, barely a year after it was founded as a Socimi.

He also predicted that the Socimi sector in Spain will grow from its current situation, of four listed companies, with a combined market capitalisation of €8,000 million, and will undergo a five-fold increase, with mergers between companies driving this growth, like has happened in the UK (22 companies with a market capitalisation of €69,069 million), France (33 with a market capitalisation of €75,041 million) and the USA (231 with a market capitalisation of €825,493 million).

Original story: Cinco Días

Translation: Carmel Drake