Merlin Pptys Socimi Ord

Good afternoon, ladies and gentlemen. Thank you for joining Merlin's full year 25 results presentation. You can find all the materials that will be presented in today's call in our website. I will please ask you to abide by the disclaimer contained in it. Our CEO, Ismael Clemente, along with our two directors, Ines Arellano and Francisco Rivas, will walk you through the main highlights of 2025. We'll then open the line for Q&A where you have to press star five. With no further delay, I pass on the floor to Ismael.

Thank you, Teresa. Good afternoon, everyone. We are in front of a very interesting set of results, certainly the best I have seen since we have been leading this company. It's been an almost perfect year because the fantastic performance of the data center division has been accompanied by very, very solid performance also on the traditional asset classes. And all that has been reinforced by an excellent behavior of the share. So, you know, frankly speaking, what can I say? I mean, the operating momentum is super strong. We are enjoying satisfactory rental growth in all asset classes, traditional and non-traditional, because in data centers we are also achieving better rents than underwritten. We have a high occupancy, 95.6%, and continue solidly generating FFO with a plus 5.1% print in the year. In offices, we have a very remarkable like-for-like of 3.5%, but more importantly, an interesting release spread of 4.8%, which is probably the highest Reflection of what we commented in past calls that, you know, the Madrid market particularly is now under a certain like, you know, short squeeze. I mean, there is a distraction on the offer side, which is causing, of course, an effect on the pricing of the demand. The occupancy stays at all times high, 94.2, and this is particularly noteworthy in a year in which Barcelona has been a relatively softer market than it was in the past and has lost occupancy. So, you know, Madrid has been able to compensate Barcelona, which will continue for the coming years to be one of our weak spots that we will continue working because sooner or later the market will digest. the current situation of other supply and will come back to normality. In logistics, we have been positively surprised by the release spread, particularly because, as commented on a number of past calls, this is a market where we were seeing a little bit of less strength than we have been seeing in the past years. But this year has been extremely strong, particularly on the release spread. The reason why the like for like is low is simply because we have lost three points of occupancy, which is normal because we were occupied at 99% and we told you that there was only one way to go from there, which was down. And that we ended the year with a very good printing occupancy of 96.4. Shopping centers, another super strong year, surprising us on the upside with And very good for like 4.7 and still with very affordable rental levels for our clients at 11.0% in occupancy cost ratio. So very, very strong year in shopping centers. On data centers, well, basically, we have achieved a full de-risking of phase one. So phase one is now water under the bridge. I mean, we will report it as assets in operation from now on in order to try also to simplify your lives because, you know, if we continue reporting phase one, phase two, and soon phase three, it's going to be a ruby cube. So, you know, that will convert into assets in operation. with an occupancy of 100%. We have also achieved a very interesting de-risking of Phase 2 with the lease-up of our Arasur-2 asset, 48 megawatts, which is around 20% of the total capacity of Phase 2, but more importantly, it was the next Indian trying to attack the fort. I mean, it was ready for service December 2026, and as such, now it's you know, done. The next Ready for Services are end of 27, so we have now plenty of time to work on the lead in which we are already working and starting exchanging technical documentation, and then we will need to come to terms in the economic side of the business and then move into documentation, which in some cases, particularly with hyperscalers, can be a painful process. In terms of financial performance, the value uplift has been very strong. But this has been mainly boosted by data centers who have contributed close to $360 million increase to the total revaluation of the portfolio, 4.7 GAV increase in the year. The total shareholder return, 10.2, is fantastic. But more importantly, we believe it's relatively sustainable. because we know what is coming and we think unless the world goes upside down, which is another possibility, if 2026 is a relatively simply flat year in terms of performance of traditional asset classes, we believe we can achieve very similar figures at the end of December. Our financial situation remains very strong. The loan to value is low at 28.9. 100% fixed rate, and we don't have maturities until November 2026, a maturity which is already tackled. I mean, with the existing cash advance and a number of bond taps and bank lines that we are signing in the coming days, that maturity will be, you know, already tackled without affecting the CAPEX needs of the data center department. And we have been able to maintain our rating both with S&P and Moody's, which is always interesting because at the end, that cost is one of our raw materials. I mean, we need to continue keeping our competitiveness in terms of rating. In terms of value creation, 129 in non-core divestments as already disclosed to market. You were perfectly aware that we had these investments almost done, and probably the most interesting thing is that we have another close to 130 already signed and to be executed in 26 and 27, which is very interesting because basically almost half of our targets for 26 and 27 are already covered in the absence of any accidents. It's important to pay homage to the activity of our different business divisions. The year has been excellent in terms of pre-lets. In offices, we have signed more than 56,000 square meters, you know, beyond the daily trading. I mean, the ins and outs that, you know, happen every day in the portfolio. In logistics, 73 plus and head of terms, which we believe is going to become a reality of another 55, so significant progress also in logistics. And in shopping centers, to me, the most salient activity in the year has been the inauguration with an almost full pre-let of the Marinetta extension, 26,000 square meters. which, you know, has made the Marinera concept in La Coruña even more dominant than ever. I mean, it's a center which is really rock solid and is one of the jewels in our little crown. And in data centers, well, We are now at 112 megawatts IT versus 45 latest reporting. And therefore when 66 new megawatts have been let and the prospects for the risking of the rest of the phase two remain brilliant. So in terms of main financial magnitudes, the GRI print was 541.9 million plus 3.5 like for like in the year. The FFO, well, we broke our own record is better than the one of year 2019, 326.7 plus 5.1% year on year. But it is important to note that in 2019, we had 84 million of BBVA rents in our belly. So, you know, with a little bit of help from data centers, around 30 million, we have been able to overcome the sale of the BBVA portfolio, which with hindsight, I believe was an excellent decision because we delivered the company in anticipation of a high interest rate cycle. And that gave us also sufficient financial muscle to be able to develop phase one of our data center deployment program, which was absolutely necessary because, you know, Had we tapped the market to develop data centers starting from scratch, the market would have been a little bit incredulous about our capacity to do so. So we had to do it with our own money, and the ABA was instrumental for that. The 58 cents achieved are plus 7% versus the initial guidance, although we updated to 56. I think it was in 3Q, no? We updated to 56. In reality, we expected 56, but, you know, we have had little income, particularly from better margin in our data center operation, and, well, some income also from NRCs, from the installation of machinery on behalf of our clients through remote hands agreements in our data center division. The LTV stands at 28.9%, which is pretty low, but more interestingly, net debt to EBITDA stands at 9.0 times. Of course, it is growing, but it is growing as we are spending the construction of new units in our data center division. The NTA per share is 1536. And for the first time, we are very, very close in our share price to our NTA, which is, you know, incredible to see. I mean, I'm really, really enjoying, you know, enjoying to see that when I, you know, shut up, shut on my computer and I see the share price evolution, I am really humbled. The GAF, like for like, has gone up by 4.7%. But very importantly, with a net income yield of 4.6%, which is sound because, you know, these days, you know, improving NDA or improving GAF through asset revaluations is easy, but we have taken exactly the contrary way. I mean, we have completely recalculated our prospects for particularly logistic preleds and part of the logistic division, and we have decided to expand a little bit our yields in order to make sure that we repair the roof now that the sun is shining, you know, rather than, you know, doing it when the things start to get rough. TSR, as commented, leads us to propose a dividend per share of 0.44 for the year. which is slightly above the 80% threshold. But I think we have to share a little bit with our shareholders the good operating momentum of the company. In terms of EPS, we have, after careful reflection for the moment, we have taken the decision to continue to not capitalize interest expenses. We believe it is cleaner. We believe it reflects better the real, you know, operation of the company. Therefore, as a consequence of that, we are indicating for 2026 a relatively flat figure in terms of EPS and DPS. But, you know, we will, of course, endeavor to beat it if we can. It won't be easy because it is mainly attributable that the reason why it's flat is mainly attributable to the fact that all the growth in top line is absorbed by more financial expenses as we continue basically building. We continue building our inventory and as a consequence, we continue employing our debt capacity. And this is, of course, you know, raising our the bar of our financial expenses. And, you know, for the moment it is keeping in our top line growth. 2027 will be a different thing. I mean, 2027 will be a year in which we will start, you know, seeing the first, you know, hints of what the DC division will bring in the future to this company. And 28, 9, and 30, as commented on many other occasions, at least on the model. Of course, you never know, but they look like a big party. That is it. I mean, I pass the floor to Inés Arellano, who is going to comment on the different asset classes, and Fran Rivas will comment specifically on the data center division.

Thank you, Ismael. So moving to what today represents 55% of our portfolio, we've generated 292 million of rent, and that is a 3.5% increase in like-to-like, as commented by Ismael, very, very sound, with a very high release of spread, up 4.8%. It is true that if we were to take into account this one list that we mentioned last year, it would have been 0.4%, but at least it's in the positive arena. The occupancy at 94.2, all times high. Again, we'll watch very carefully how the evolution in Barcelona is ongoing, but we are confident that eventually this will be digested. It's been a very healthy leasing activity market with more than 275,000 square meters contracted. And in terms of valuation, we see a 1.2% like-for-like increase. with an implied gross yield of 4.9, not reaching five yet, which as you know, it's always been the number that we thought should be the right one for offices.