Merlin Earned €1.1bn in 2017 & Will Pay A Complementary Dividend

28 February 2018 – Expansión

The Socimi in which Santander and BBVA hold stakes doubled its earnings last year to €1.1 billion, compared with €582.6 million the previous year.

The Socimi Merlin Properties closed 2017 with revenues of €484.3 million, up by 34% compared to the previous year. Of that figure, €469.4 million stemmed from gross rental income.

Operating profits grew by 49% to €1.215 billion, whilst recurring EBITDA reached €396.6 million, up by 29% compared to 2016.

At the end of the year, the company owned a portfolio worth €11.254 billion, up by 15% compared to the previous year and 10% larger in terms of comparable surface area. Of that figure, €5.219 billion corresponds to its office portfolio, the value of which grew by 4.1% like for like.

At the end of the year, Merlin had gross financial debt amounting to €5.413 billion, placing its level of indebtedness (LTV) at 43.6%, compared with 45.5% a year ago. The CEO of Merlin, Ismael Clemente, said that he was satisfied with that reduction and assured that his firm would continue working to reduce the liability (…).

For this year, the company has set itself the objective of repositioning its assets, such as the case of Torre Gloriès (Barcelona), whose marketing is forecast to begin during the first half of the year. In the case of new acquisitions, the directors of Merlin indicated that they are going to be “very selective” in their purchases, with the focus placed primarily on Portugal and logistics assets.

Complementary dividend

The real estate investment company has announced an increase in its complementary dividend, payable in May, of 26 cents per share, which will be added to the 20 cents already allocated to the account. In total, shareholder remuneration for this year is going to grow by 15% to reach 46 cents, compared with the 40 cents disbursed in the previous year.

Merlin revealed that for the year ahead, corresponding to the accounts for 2018, it is going to distribute a minimum of €235 million amongst its shareholders, a disbursement that it will pay in full in cash, which will correspond to more than €0.50 per share. This remuneration will be distributed partly as a dividend and partly as a refund of the share premium.

Executive salaries

The real estate company in which Santander and BBVA hold stakes also published the salaries of its main executives. In this way, it was revealed that the CEO, Ismael Clemente, was paid €2.557 million last year, compared to €2.155 million in 2016. Of that figure, €1 million corresponds to his salary, whilst €1.55 million corresponds to his bonus.

Meanwhile, Miguel Ollero, also CEO of Merlin Properties, was paid €2.5 million in 2017, compared to €2.1 million the previous year; meanwhile, the directors Rodrigo Echenique, Francisco Javier García-Carranza and Agustín Vidal did not receive any remuneration whatsoever for their roles on the Socimi’s Board of Directors.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake

Fitch: House Prices Are Going to Rise At A Faster Rate Than Salaries

20 February 2017 – El Economista

On Thursday, the ratings agency Fitch warned that access to housing in Spain is going to gradually worsen as a result of the difficulties facing the labour market.

In its report about the outlook for the real estate and mortgage market in 2017, the ratings agency forecasts that house prices in Spain are going to rise at a faster rate than salaries, which means that the accessibility of housing is going to deteriorate.

“Fitch expects the accessibility of housing to gradually worsen given that any recovery in salaries will be lower than the increase in house prices, taking into account the challenges facing the labour market”, said the agency, which added that access to the real estate market will be “especially difficult” for first-time buyers.

Fitch expects the positive trend observed in house prices, which rose by 4% during the third quarter of 2016, to continue thanks to “robust economic growth”, the maturity of the mortgage market and foreign demand, which currently accounts for 13% of transactions.

Nevertheless, it says that the two-speed market will continue, given that the “bulk” of the recovery will focus on homes whose quality and location place them above average.

Slow down due to floor clauses

On the other hand, Fitch thinks that the legal uncertainties surrounding the floor clauses and the reform of the mortgage market will slow down the growth experienced since 2014 for the granting of loans to buy homes.

“The rate of growth in loans will slow down from the levels seen in 2015 and during the first half of 2016, given that Spain’s banks will adopt a more cautious approach in the face of the legal uncertainties that are affecting the mortgage market”, said the agency.

Nevertheless, it considers that the rise in house prices and the favourable loan environment, thanks to low interest rates, are still offsetting the repayment of loans in progress.

Finally, Fitch thinks that Spain’s banks will continue to reduce their exposure to toxic assets by divesting their non-strategic businesses, such as their non-performing loans and foreclosed properties.

Original story: El Economista

Translation: Carmel Drake

Ministry Of Dev’t: New Home Permits Soared By 17% In 2016

4 January 2017 – Expansión

Moreover, loans to build new homes have grown by 37%, despite the tightening of controls by the banks.

A decade later, the cranes are back on the skyline of Spain’s major cities once again. The economic improvement and return of credit to the property sector boosted the construction of new homes by 17% in 2016, according to the construction permit statistics published by the Ministry of Development.

The growth was driven by a 37% increase in the financing granted to construction companies and property developers, which received €1,025 million between January and October, according to the General College of Notaries. The banks have now digested the majority of the toxic assets left over from the bubble and are opening the credit tap to the construction sector once again, albeit including more restrictions and controls to avoid repeating the errors of the past.

On the one hand, in most cases, financial institutions are demanding that 80% of developments are pre-sold before the construction of any new buildings can begin. Moreover, the banks are requiring project monitoring to audit the execution of the work and, in the same sense, a more detailed control of the clients that choose to buy properties.

With the money loaned by the banks, property developers and cooperatives have started to design buildings aimed at capturing the demand for new homes that exists in the market. “Clients believe that the worst of the crisis is over and that prices are not going to decrease any further. Moreover, financing conditions for buyers are unique given the low level of Euribor”, explains Daniel Cuevo, Chairman of the Association of Property Developers in Madrid (Asprima).

But the doors to the new real estate market have not been opened to everyone. Most of the new homes sold are “reposition” properties, in other words, they are properties that replace homes that have become too old or too small for their occupants. Young people are finding it the hardest to form their own homes, due to the high rate of youth unemployment, the level of wages and the instability in the market. (…).

In total, during the first ten months of 2016, 16,043 permits were requested to build new homes. The sector expects to reach the 20,000 permit threshold by the end of the year, a figure that exceeds the number of permits requested in 2015 by 17%, but which is still well below the 113,000 permits requested in 2006, a record year, at the height of the real estate bubble. (…).

On the other hand, the new homes that are being built post-crisis are not the same as those that were built during the boom years. Now, property developers are designing buildings with three-bedroom homes that cost the same as a two-bedroom home back in 2006. Urbanisations, which become so fashionable at the beginning of the century, are also back in demand. “People want homes with padel courts and a swimming pool, plus they now also want specific spaces to celebrate parties for children and adults”, explains the President of Asprima. In total, the Ministry of Development granted 1,175 permits to build urbanisations in Spain during the ten months to October 2016.

The increase in property construction has been accompanied by more transactions involving land. The number of land purchases by companies recorded an average growth rate of 23% during the nine months to September 2016, across the country as a whole. In certain regions, such as Madrid, the increase during the first three quarters of the year amounted to 135%. (…).

The improvement in new build construction work also extended to renovations. Thousands of households took advantage of the economic recovery to undertake home improvements and even to extend their properties. Thus, during the first 10 months of 2016, 21,801 requests were filed to renovate or restore homes, up by 2.1% compared to a year earlier. Meanwhile, demand for permits to extend homes soared by 39%, to 1,634. (…).

Original story: Expansión (by Victor Martínez)

Translation: Carmel Drake

The Number Of People Out Of Work Fell By 13,528 In February

4 March 2015 – El Mundo

The construction and industrial sectors were the main drivers behind job creation, once again.

The labour market offered a breath of fresh air yesterday, after starting the year on a bad note. The number of people out of work decreased by 13,538 in February, the largest drop in this month for 14 years; and the number of people registered with Social Security increased by 96,909, the best figure in this month since 2007, according to the Ministry for Employment. The construction and industrial sectors were the main drivers behind job creation.

Traditionally, February tends to be a strange month for employment, with highs and lows, and since 2008, when we began to feel the first effects of the crisis, unemployment has always increased in this month, except for last year when the figures decreased by 1,949 people. This year, the number of unemployed people decreased by 13,538 in February. Despite this decrease, the number of people out of work in Spain is still worryingly high, with more than 4,512,123 people registered with the Public Employment Services (formerly Inem). This figure is even higher than the one Mariano Rajoy inherited when he arrived at La Moncloa for the first time.

By sector, unemployment increased in the agriculture sector only in February (by 467 people), whilst it decreased in construction (10,091), industry (6,535) and the service sector (233).

In light of this data, the Government is optimistic and confident that it will achieve its objective of creating three million new jobs by 2019. Currently, the total number of people in paid work amounts to 16,672,222.

The increase of almost 100,000 new taxpayers in February partly offset the significant decrease in the number of jobs in January, when the number of taxpayers decreased by 200,000, following the end of the Christmas season.

By sector, construction – one of the hardest hit by the crisis – was where the most jobs were created (26,968), together with industry (15,097). Meanwhile, the service sector registered 61,842 more taxpayers, thanks to boosts from education (16,203) and hospitality (14,012).

However, the resurgence in the construction sector concerns the opposition party and the trade unions. The PSOE’s (Shadow) Secretary of State for Employment, Luz Rodríguez, says “the return to property could mean that we exit the crisis through the same door that we entered it”.

In terms of the number of contracts, 1,226,950 contracts were registered in February, up 12.5% compared with the same month last year. Nevertheless, the majority (more than 90%) were still temporary. Only 120,181 contracts were permanent, equivalent to 9.8% of the total number. Nevertheless, the Ministry for Employment highlighted that these figures are 23% higher than in January last year.

In terms of the number of hours worked, 71,754 of the permanent contracts were for full-time positions (16,804 more than in the previous year, an increase of 30.58%) and 48,527 were part-time (5,673 more than in February 2014, an increase of 13.24%).

However, these figures are not good enough for the trade unions UGT and CCOO, which report that the jobs that are being created are “precarious” and “low quality” and that the wages are “clearly insufficient”. Moreover, they point out that the inequalities between men and women are increasing and that young people are being left behind. Thus, whilst the unemployment rate decreased for men in February (with 19,587 fewer unemployed men than in January), they increased for women (with 6,319 more unemployed women), taking the total number of unemployed men and women to 2,117,980 and 2,394,173, respectively.

Furthermore, the number of unemployed young people under the aged of 25 increased by 2,569, and the number of foreign unemployed people increased by 3,030. In the opinion of the USO trade union, these figures show that “the recovery in terms of unemployment is not on the right track”.

By autonomous region, Madrid was the community where unemployment increased the most in the month of February, by 2,411 people to be exact; followed by Andalucía, with 2,121 more unemployed people and Castilla-La Mancha with 139. Meanwhile, unemployment decreased in 14 autonomous communities.

In terms of the coverage rate, i.e. the percentage of unemployed people that receive benefits or allowances, it continued to decrease in an alarming way.

During the month of January – the latest month for which data is available – it amounted to 56.49%, i.e. five points lower than in the same month in 2013. This means that almost one in every two unemployed people registered with the former Inem, does not receive any kind of financial aid. Moreover, total spending on benefits amounted to €1,962 million in January, which represented a 17.7% decrease compared with the same month last year.

Original story: El Mundo (by Isabel Munera)

Translation: Carmel Drake