Spain's Merlin turns to profit as business shifts to warehouses from malls

MERLIN Properties SOCIMI

22/07/2024 16:43

By Matteo Allievi
       July 22 (Reuters) - Spain's real estate group Merlin
Properties  MRL.MC  returned to profit in the first half of the
year as interest rates plateaued and it continued to shift its
business to warehouses and data centre from malls amid a surge
in e-commerce.
    "Logistics - which currently accounts for less than one
fifth of Merlin's rents - will little by little compete with
shopping centres for becoming the second income source of the
company," CEO Ismael Clemente told a conference call on Monday. 
    In the first six months of 2024, Merlin reported a net
income of 132.8 million euros ($144.5 million) after a loss of
47.5 million euros one year ago, when it wrote down more than
160 million euros in the book value of its assets because of
higher interest rates.
    Merlin Properties, as well as its peer Colonial  COL.MC ,
has to update the valuation of its properties every six months.
    High interest rates took a toll on the real estate sector
last year, pushing investors to demand higher returns on
property assets, driving down their values.
    Asset prices are expected to pick up again with the end of
the European Central Bank's rate increase cycle.
    The company said like-for-like rents rose by about 2% for
offices and warehouses, and by 4% for logistics centres.
    Occupancy reached 92.3% and 97.6%, respectively, and Merlin
expects it to rise to 93% and 99% by year-end. Shopping centres
occupancy was expected to remain stable at 96% in the coming
months, the growing e-commerce trend.
    The real estate group, which has already three data centres
in Spain and is building one in Portugal, has been studying a
capital increase to finance its data processing business.
    The group confirmed its 2024 funds from operations outlook
at 0.59 euros per share, slightly less than 0.62 reported in
2023.
    "We remain prudent with our guidance as the second part of
the year is going to be heavier in terms of overhead in data
centre division," Clemente said. 
    
    
    ($1 = 0.9189 euros)

 (Reporting by Matteo Allievi, editing by Inti Landauro and
David Evans)
 ((matteo.allievi@thomsonreuters.com;))