Spain's Merlin turns to profit as business shifts to warehouses from malls
By Matteo Allievi
(Reuters) - Spain's real estate group Merlin Properties 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, 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)