Ismael Clemente, CEO at Merlin Properties
This measure, which includes a 15% tax on benefits non distributed by REITs in Spain – an amount which, up until now, was not taxed –, seems to have no impact on one of the largest Spanish REITs. Ismael Clemente explained in an interview to El Economista that «the effect it will have on us, will be zero because every year we distribute amongst our shareholders between 140% and 170% of our accounting profit and in some years as much as 200%».
Despite being sure of the fact that this measure will have no impact on Merlin Properties, the CEO admitted that foreign investors «were alarmed by the changes to the REIT legislation», a regime that exists in other European countries and around the world. And he alerted that «an international investor may choose to invest in a country that changes its regulation from time to time or in one that maintains it on the long-term».
Pandemic reduces rents in 10% and cash-flow in 20%
On the impact the pandemic had on its business, Merlin Properties admitted an impact on rents of around -10% and on the cash-flow of around -20%. But there are prospects of improving these predictions.
«2020 was a year to receive some 520 million euro in rents, and we will reach 450 million euro, with a 70 million loss caused by Covid. At the beginning of the year, we were expecting a cash-flow of around 300 million euro, but it will be reduced to 240 million euro, representing an impact of 20%», revealed Ismael Clemente during the same interview.
Despite these corrections, Ismael Clemente believes that «if nothing else happens, we will be a little better by the end of the year». And he further recalled that «we had a scare in March, but we reacted quickly. We did everything by the book: cash accumulation, prioritising the CAPEX, reduction of general costs ... Operationally, everything is working as normal», he assumed, stating that in terms of the company’s operational performance this is a «good» moment.
Concerning the distribution of dividends for next year, Ismael Clemente placed on a table a proposition which includes «making a mix between cash retention and distribution of dividends, strictly following the REITs’ legislation (right now we distribute much more than is required) so that the company can, at all times, maintain the ability to repay the necessary debt and stop the LTV (loan to value) from having a ridiculous increase». But this decision is up to the Spanish REIT’s administration board.