MERLIN Properties SOCIMI, S.A. (MRPRF) Q4 2024 Earnings Call Transcript

2025-02-28 15:12:01 ET

MERLIN Properties SOCIMI, S.A. (MRPRF)

Q4 2024 Results Conference Call

February 28, 2025 09:00 AM ET

Company Participants

Ines Arellano - Director, Investor Relations

Francisco Rivas - Director

Ismael Clemente - Chief Executive Officer

Conference Call Participants

Florent Laroche - ODDO

Marc Mozzi - Bank of America

Thomas Rothaeusler - Deutsche Bank

Fernando Abril - Alantra

Celine Huynh - Barclays

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for joining MERLIN Properties 2024 Results Presentation. You can find all the materials that will be covered in today's call available on our website. I will please ask you to abide by the disclaimer contained in it. Our CEO is Ismael Clemente, and our two directors Ines Arellano and Francisco Rivas, will walk you through the main highlights of 2024. We'll then after open the line for Q&A, where you have to press star tie.

With no further delay, I pass the floor to Ismael.

Ismael Clemente

Thank you, Teresa. Good afternoon, and welcome to Merlin Financial Year 2021 Results Presentation. As commented by Teresa, the call today will be joined by my colleagues Ines Arellano and Francisco Rivas in order to avoid monologue exposition from my side. Our CFO, Miguel Ollero, cannot joined today. He recently underwent surgery and it's still at the hospital. So, it will be Franc, Ines and myself taking the call today and the questions afterwards.

Regarding the operating performance of the Company, the operating momentum during 2024 was exceptionally strong with a very good rental growth combined with record occupancy, which for the overall portfolio now reaches 6.7% is very, very successful. The offices continue to perform very, very well with a positive like-for-like of 3.9% and a release spread of 2.3%, which is affected by some little weakness in -- particularly in Barcelona because otherwise, it will be even stronger. The majority is performing very well.

We have reached full occupancy in the real sense of the term in logistics with 99.4% and historical record to with a positive organic growth of 2.8% like-for-like and a good performance in terms of pre-let of existing development pipeline. Shopping centers delivered an incredible year with a very good like-for-like of 2.7%, but more importantly, with strong sales and footfall reflected in a very affordable level of occupancy cost ratio of 11.2%, which, again, is our historical minimum. So, our tenants are really doing very well.

And what we hear from them regarding '25 is positive, too. I mean, they have started the year with a very positive tone. The ads and sales campaign in January have gone very well. And there -- they are all operating under the assumption that the year is going to be very positive as compared to 2024.

In terms of financial performance, the Company generated a very solid FFO. Clearly, there was also some boost by the capital increase carried out in midyear because that increased our financial balances at banks and that interest income, of course, helped the performance of our FFO.

But a very significant part of it is purely operational. The valuations remain broadly stable. I mean we continue depreciating a little bit, logistics, shopping centers and offices in order to be as close as possible to what we believe are renewable passing yields in order to stabilize the valuation of those assets. But that devaluation has been offset by a solid gain in the appraisal of data centers.

Our financial situation following the capital increase, of course, is super strong with a 28% LTV, everything at fixed rate. and no additional maturities until November 26. We are repaying with existing cash with the bond maturing in May, which is yielding 1.75. So, of course, and this will become a recurrent I guess, theme over the next years. We are facing a steady increase in our financing cost, and that will continue through 2025 and '26 and I guess we'll reach stabilization towards the end of '26, '27.

Both Moody's and S&P have upgraded our company. The interesting thing about that upgrade in debt rating is not only financial standing, it's also a testimony of our ability to continue generating or to grow our cash flow profile in the coming years through our data center activity. And well, as you all know, we carried out a successful capital increase mid-year in order to fund the Phase II of our data center development program....

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