Ismael. Go ahead. Well, Ismael, thank you very much for joining us at the Madrid Economic Forum, and you were also present at the previous edition in Andorra, so it's a pleasure to have you again. As we said, we are going to talk a bit about the SOCIMI, that great unknown, sometimes known but wrongly. So let's try to mark some important concepts and also talk a bit about the trajectory of Merlin Properties. If we start with the figure of the SOCIMI, is it still a great unknown in Spain?
Yes, I think it is. Partly it's a problem of financial culture, but also the fact that because MiFID II already existed when the SOCIMI figure was created to list, all of us came to market without a retail tranche. So retail shareholders have been joining along our journey, and they are still few, right? The large listed companies on the Spanish stock exchange that were listed before MiFID II came out with retail tranches that were distributed on TV through ads and through banks, and that causes a much greater dispersion of capital. Then they tried to protect the retail shareholder and what they did was achieve the opposite effect, simply leaving them out of the placements, and because of that we came out without a retail tranche. Right now we have about 20,000 retail shareholders, which is still very few. Large Spanish companies are between 300,000 and 400,000. We still have a long way to go to get there.
How has Merlin's evolution been? What would you say have been the key strategies that have allowed it to consolidate as one of the main real estate players in Spain?
Well, I think Merlin is a project born out of absolute necessity. It's a team that knew each other and executed together for many years in investment banking, doing asset management, principal investment, and at a certain point we ran out of work and had to reinvent ourselves starting from scratch. The peculiar thing is that it's a team that executes very well, very fast, with great precision and without leaving loose ends. So in a very short time it has managed to do a lot of things, not reinventing, because it's impossible to reinvent such a traditional and well-known sector as real estate, but doing things perhaps in a different way, more agile, with more technology and without fear of occasionally doing experiments, like when we decided in 2019 to dive headfirst into the delicate world of data centers.
We'll talk about that soon. I recall that this morning, I don't know if it was Juan Ramón Rayo who mentioned the topic of data centers, if I recall correctly, he was quoting you. Also, there is something: the media profile of the SOCIMI has become quite controversial, and we are going to try to delve a bit into why, because there is always talk about the tax regime of the SOCIMI, which always generates debate, but perhaps that controversy, that debate stems from ignorance. So I would like us to explain what that tax regime of the SOCIMIs is and why.
The tax regime of the SOCIMIs is a consequence of a historical decision. In the United States, after World War II, the price of housing rose at a compound annual rate of 7%, so between 1945 and 1965 it tripled, and most of American savings at that time were invested in funds, and those funds required liquidity that the banking system had to provide, and they were based on the famous appraisals. This sounds familiar here in Europe. So the American government at some point feared that if there was a downturn in the real estate sector, it could negatively affect the banking system, and they created a new system that was settled via the stock exchange, that is, a hybrid between a fund and a commercial company with the execution means of a commercial company with the format of a public limited company, with management of a public limited company, board of directors of a public limited company, and long-term vocation like a public limited company, but it does not pay tax at the source, it does not directly pay corporate tax each year, in exchange for being obliged to send the bulk of its profit upward, where the recipient of that cash flow does pay tax. So, it exists in 60 OECD countries, and the only reason it has been controversial in Spain, as you say, I think it's already quite resolved, is simply because the figure was poorly known, we were not at all familiar with it. In the United States, 153 million Americans, unless I'm mistaken, own shares in a REIT as a form of savings. So practically half of Americans own REIT shares. That makes it a much more popular figure, that any teacher from Wisconsin uses to save and go on vacation to Florida in the summer thanks to the dividends it pays. And in Spain, the figure is not so well known. But I think it's already overcome. The possible modification of the tax regime has been limited to SOCIMIs operating in the housing market, and those of us operating exclusively in tertiary, what Americans call commercial real estate, are left out of the scope of any measure.
Indeed, I think we can talk about it in the past tense, but as you said, it's partly a lack of information or ignorance. By the way, it was Espina and Espinosa de los Monteros who commented on the data center topic, I apologize for misquoting Rayo. And what is the impact of the government's affordable housing tax package? We know it affects the taxation of those who invest in residential, so Merlin would not be affected.
Yes. Well, for now it's not a very deep modification. It changes the taxation from 15% to 25% on undistributed profits and that's it. For those that do not meet a minimum investment in affordable housing. That's all.
What is the current weight of the different segments of Merlin's portfolio? Do you have offices, logistics, shopping centers? Where is your diversification heading now?
Well, it's a work in progress. We have just started to change the skin of the company. As of today, offices weigh about 55%, logistics around 20%, shopping centers another 20%, and data centers about 5% by asset value, which still represent almost nothing in our income statement. In 2024, now in 2025 they will represent more. So that's where we start from, and with a 2030 horizon we will probably be in a situation where data centers will account for between 40% and 50% of our income statement and probably of our value, and the traditional assets - logistics, shopping centers, and offices - will account for the other 50% among the three. So there will be a significant change in the balance. A fairly substantial change that the market cannot imagine right now because we are in the middle of construction. The market usually ignores these things. Think that when you start a deep transformation of a company, the music plays and in 3 minutes it's done, but we still have 3 years ahead of building, equipping, and then commercializing a lot of IT capacity in our data centers. And in purely stock market terms, investors always try to get ahead of any future scenario, but since we don't have a crystal ball, it's very difficult to discount scenarios that we can't even fully preview yet. But there is also the watchful eye of companies to anticipate those scenarios.
What criteria does Merlin follow when acquiring or divesting assets?
Well, basically we try to beat our cost of capital in everything we do. In the assets we have, we try to refine them, improve them through investment. In those we don't have and have to develop, we try to achieve returns higher than those of the assets in our portfolio, because if not, it wouldn't be worth making new developments. That's what we do with a strategic criterion that is defined on a multi-year basis and that tendentially tells you more or less where the company is heading. Right now we are mainly developing data centers, secondarily logistics, and we are quite quiet on offices and shopping centers, but the cycle will turn. There will be another cycle moment, oversupply will be reached in some of the asset categories we work with, and in 5 years we might be developing offices. Nothing is written. We adapt to the market quite agilely.
Do you have flexibility, room to maneuver?
Quite a lot, especially now that we have a very good capitalization and the company has no restrictions from a leverage point of view. It is a very well-capitalized company and right now it clearly has the favor of the market. We are probably in the top five in terms of favor among investors in Europe right now.
You were telling us about the weight of the office segment. What is the current state of this market? Office...
