Merlin Pptys Socimi Ord

Good afternoon, ladies and gentlemen. Welcome and thank you for joining Merlin's first quarter trading update conference call. As we always do on first and third quarter, our CEO, Ismael Clemente, will briefly go through the main highlights of the quarter, and then we'll open the line for Q&A. For those of you who want to ask questions, please press start, followed by number five. With no further delay, I pass the floor to Ismael. Thank you.

Thank you, Ines. Welcome to Merlin's first quarter results presentation. It's been a pretty solid quarter overall. In terms of consolidated performance, gross rent went up by 2.7%, which was okay, and particularly we improved significantly our margins, and the FFO went up by almost 17%, which is good. We have significantly shrunk the dilution caused by the capital increase, so We are running at present at minus 2.6% FFO per share, which is remarkable given the new share count. And in terms of MTA, despite not having revalued in the quarter, we are running at minus 4.8. Let's see what happens in June, but we continue probably shrinking the dilution of the capital increase in terms of MTA by 30th of June. It's been a very active quarter in terms of data centers. We bought two sites in Madrid with 115 megawatts readily available, which will allow us to develop around 78 megawatts of IT capacity. In terms of commercialization, a block of 18 megawatts IT has been led in our vast country development in Al-Azour. small but super important for us. Six megawatts of our repowering capacity that will arrive during the first half of next year in Barcelona has been pre-lit, which is important because pre-lets are relatively scarce, at least in the Spanish market. As commented on many occasions, we believe that the possibility of doing pre-lets was confined, was just for existing clients, and this is exactly what we have done. It's not so easy to do it with a new prospective client which doesn't know your ability to operate and deliver the exact product they need. With the two data centers in Barcelona and the Basque Country fully including the repowering, we will become the leader in terms of IT in operation in the Adrienne Peninsula. that will be further strengthened by the lease up of Madrid when the electricity arrives next year. So it's very, very interesting for us because at the time of the Capital Market Day in 2022, we laid a roadmap in front of all of you. And of course, we try to abide by what we say. And it's been, you know, we are delivering what we promised. This is very important for us. On the existing traditional asset base, the quarter has been very strong from an operating standpoint. Beyond the inorganic growth of WIP brought into operation in DCs and logistics, The existing portfolio has enjoyed an organic growth of 2.7% like for like. The occupancy remains super high at 96.7, which is good and it's not easy to maintain that kind of levels. And importantly, the FFO has increased at a high double digit, 16.9% compared to the three months of 2024. As commented, almost offsetting the dilution created by the capital increase. Very little asset rotations, 37.4 million of non-core sales, double-digit premium. This is a little bit of a bullshit. I mean, if you allow us to do this, because it's been like 11% or 13% is low double-digit. I mean, it's not that we have done a 50% premium, but it's okay. And we have a further 15.6 million signed that will be executed in 2025 and some other things in the oven that will end up materializing during the year. As commented, no valuation during the quarter. The NTI per share is a reflection simply of the accumulation of cash flow, so 14.47. we recommended to the board of directors and then to the general meeting and approved final dividend of 0.40 given that we have paid 0.18 on account 0.22 will be paid on May 26 as a complement of the year 2024 dividend in terms of business performance The rents have enjoyed a very interesting period, 2.9 in offices, 1.8 in logistics, which is the only segment in which we are lagging behind a little bit, the others, and shopping centers, 2.8. The release spread, don't be frightened by the minus 1.3% in offices. It corresponds to one single transaction in which we have renewed and adapted to market a contract to an existing client and we have lost a little bit of rent in the process that we have extended the contract that was renewable year by year is a contract that we inherited from a past acquisition we have now renewed till 2032 43,000 square meters plus we are negotiating now an extension that will be built turnkey of 21,000 square meters for that same client in the same location. So it's a complex transaction that will significantly increase our backlog and will further strengthen the average occupancy in the A1 corridor that you might remember the headaches and the literature it caused In the past, now it seems that the problems are a little bit behind us and the A1 corridor is performing solidly. 4.7% in logistics which is good because it will translate in like for like next year unless we lose occupancy and 3% in shopping centers which continue performing like a rocket. It's very interesting. Many of you are asking whether we want to modify our guidance for the rest of the year. We are in the first quarter. We better not do it. I mean, let's act with a little bit of prudency. The year is just starting. The world is unsafe, subject to lots of fluctuations. I mean, whatever announcement by the U.S. government can derail the economy tomorrow. So we better stay where we are. But yes, I mean, it's clear that we are running on an FFO of 0.15% per quarter. That should point to around 0.60 for the year in full. And I think we said 0.59. So we are running a little better, but anyway, it is not a big difference. And I believe it's a little bit childish to be so obsessed about the guidance or the no guidance. I mean, around 59, if we are lucky, it will be 0.60. It's okay. And that's basically all. Well, one comment, which is that offices, normally the first quarter in offices in Spain, given idiosyncratic conditions, Aspects of the market is where all the renewals are concentrated. So normally you start the year losing a little bit of occupancy because there is always some churn Despite having a renewal rate of around 82% But this this quarter has been strong. I mean a lot of activity 115,000 square meters contracted a lot of activity. We haven't lost occupancy, which is remarkable and if you pro forma the transaction that I just commented that will be with us this quarter in the half and in the year, so it will be weighing in our numbers for the next 12 months to come, so clearly it will worsen, it will make uglier our numbers for the next 12 months. But if you pro forma this single transaction, The risk spread has been 4.1%, which is remarkable, and goes hand in hand with the idea that they have expressed sometimes to all of you that, believe it or not, rents seem to be accelerating a little bit, at least in Madrid, not so much in Barcelona, but they seem to be accelerating a little bit in Madrid as a consequence of the destruction of stock that I commented. It's just at the very beginning. We are in the first innings of the game. if the destruction of a stock continues over the next years, I believe this is going to have an effect in rent as it had in Portugal a number of years ago. I mean, this is a situation that we have seen in the past. So without further preambles, I think we move into Q&A and You know, my colleague, Fran Rivas, is here with me because I'm sure there will be a number of questions regarding data centers. And Ines Adelaide is also here in case there is something, some specific questions about one number that I couldn't know by heart. And that's it. So let's go and move into Q&A.

Thank you, Ismael. So the first question comes from the line of Stephanie Dozman. Stephanie? Whenever you want.