MERLIN Properties SOCIMI, S.A. (MRL.LS): BCG Matrix [Dec-2025 Updated]

Merlin's portfolio is sharply bifurcated: high-growth Stars - hyperscale data centers, prime logistics, Lisbon offices and sustainable landmark redevelopments - are eating CAPEX to capture structural demand, funded by stable Cash Cows in Madrid CBD offices, flagship retail, Barcelona offices and long‑lease assets that generate the liquidity to fuel expansion; management's near-term playbook is clear - scale digital and logistics winners, test Question Marks (LOOM flex, speculative logistics, build‑to‑rent and data‑services) selectively, and accelerate disposals of Dogs (non‑core offices, legacy street retail, fringe warehouses and low‑value land) to recycle capital into higher‑return segments.

MERLIN Properties SOCIMI, S.A. (MRL.LS) - BCG Matrix Analysis: Stars

Stars - Rapid expansion of hyperscale data centers

Merlin Properties has scaled its data center division to a projected 60 MW of installed capacity by Q4 2025, underpinning a hyper-growth digital infrastructure business. The segment currently contributes ~12.0% of total Gross Rental Income (GRI) and recorded a 25% year‑on‑year revenue increase in the digital infrastructure vertical. Total committed CAPEX for the Mega project across Madrid and Barcelona exceeds €450 million, allocated to land, build‑to‑suite shells, critical power, and optical backbone.

Key operational and financial metrics for the data center Star:

• Strong demand drivers: AI/ML workloads, cloud expansion, enterprise migration to colocation.
• High tenant credit quality: Tier‑1 hyperscalers and major cloud providers.
• Structurally high margins and sticky cash flows via long‑term power/capacity contracts.

Stars - Dominant logistics footprint in Iberia

The logistics portfolio manages >3.2 million m2 of prime gross leasable area (GLA) with a sustained occupancy of 98.2%. Logistics revenue now represents 18.0% of group revenue. E‑commerce penetration in Spain is estimated at 14.0% of total retail sales, supporting rental growth and demand for big‑box and last‑mile assets. Merlin's market share in the Big Box logistics category is c.20% in Iberia.

Operational and financial logistics metrics:

• Investment focus: expansion of Last Mile delivery hubs to capture urban logistics premium rents.
• Revenue resilience from high occupancy and low churn among logistics occupiers (3-7 year average lease terms).

Stars - Prime Lisbon office market leadership

Merlin's Lisbon office portfolio is delivering ~10% annual rental growth driven by international corporate relocations and constrained new supply in Parque das Nações and CBD. The portfolio represents ≈10% of prime office stock in these submarkets, with occupancy at 99.1% as of Dec‑2025 and a GRI contribution of 11.0%.

Lisbon office financials and KPIs:

• Demand composition: multinational tech, finance, and regional HQ relocations.
• Value creation via active refurbishment and grade‑up strategies targeting strong rental uplifts.

Stars - Sustainable landmark office redevelopments

The Landmark program targets high‑tech, sustainable office stock in Madrid and Barcelona, delivering c.15% annual capital appreciation for completed refurbishments. These assets command a 20% rental premium over traditional Grade A stock due to LEED Platinum and Net Zero certifications. Pre‑letting success is high, with a 95% pre‑letting rate achieved prior to completion on projects where Merlin has invested €250 million to date.

Landmark program metrics:

• Competitive advantage: certified sustainability credentials drive tenant willingness to pay and lower obsolescence risk.
• Financial outcome: high ROI and rapid value creation justify continued capital allocation into green refurbishments.

Aggregate Stars portfolio summary

Combined, these Star segments (Data Centers, Logistics, Lisbon Offices, Landmark Offices) represent the primary growth engine for Merlin, characterized by high market share, above‑market growth rates, strong occupancy and pre‑letting metrics, elevated yields on invested capital, and strategic barriers to entry that support long‑term cash flow durability.

MERLIN Properties SOCIMI, S.A. (MRL.LS) - BCG Matrix Analysis: Cash Cows

Cash Cows

The Madrid CBD office portfolio serves as the primary Cash Cow, representing 42% of MERLIN's total Gross Asset Value (GAV) of approximately €11.5 billion (GAV contribution ≈ €4.83 billion). These prime central business district assets maintain a robust occupancy rate of 93.5% despite secular shifts toward hybrid work models. The portfolio generates stable cash flow with an average passing rent of €21/m² and an EBITDA margin of 86%. Operating in a mature market with a growth rate near 2%, MERLIN emphasizes active asset management over expansion, resulting in a net initial yield of 4.5%. The high market share in Castellana and CBD districts provides liquidity to fund Star projects and capital deployment across the group.

The core shopping center portfolio functions as a resilient Cash Cow. MERLIN's 13 flagship retail assets contribute 16% of group total revenue and have stabilized occupancy at 95.8%. Footfall recovered and surpassed 2019 levels by 6% in the 2025 reporting period, supporting tenant sales growth of 4% p.a.-well above the mature retail real estate market growth of 1.5% p.a. The shopping centers deliver a high cash conversion rate and require limited CAPEX (≈3% of Gross Rental Income) focused on maintenance and ESG upgrades. The retail segment contributes a steady dividend yield component of 6.2% and secures a 12% market share within the Spanish institutional retail space by dominating regional catchments.

• High-margin tenant mix and stable consumer demand
• Minimal maintenance CAPEX supports cash generation
• Regional dominance enables pricing power and leasing leverage

Barcelona office portfolio operates as another Cash Cow, contributing 14% of total Gross Rental Income with concentration in 22@ and Diagonal districts. The portfolio holds an 8% market share in Barcelona's professional services office market and sustains occupancy at 91.4%. With local market growth slowed to 3%, the assets nonetheless produce an EBITDA margin of 84% due to tight operational controls. MERLIN has reduced CAPEX in this segment by 40% year-on-year compared to prior periods, prioritizing lease renewals and tenant retention strategies. Income from Barcelona offices underpins the group's aim to maintain a 35% Loan-to-Value (LTV) target and contributes to overall balance sheet stability.

• Focus on lease renewals and tenant retention
• Efficient operations sustain high EBITDA margin
• Lower CAPEX frees cash for higher-return investments

Long-term net lease assets - including bank branches and specialized facilities - are classical Cash Cows within MERLIN's portfolio. These assets report 100% occupancy and are secured by long-term, inflation-linked contracts. They contribute approximately 5% to total revenue while requiring virtually zero CAPEX due to being fully depreciated and tailored for incumbent tenants. EBITDA margins for this cohort exceed 95%, and although market growth is stagnant at ~1%, the predictability of cash flows supports reliable dividend distributions. Historical sale-and-leaseback transactions with major financial institutions underpin MERLIN's dominant market share in this niche, yielding high ROI on fully depreciated assets and informing capital allocation toward growth opportunities.

• Highly predictable, inflation-protected income streams
• Minimal capital expenditure needs
• Strong historical relationships with institutional tenants

MERLIN Properties SOCIMI, S.A. (MRL.LS) - BCG Matrix Analysis: Question Marks

Question Marks - Expansion of LOOM flex space.

The LOOM flexible office brand is classified as a Question Mark: market growth in coworking and flex-space is estimated at ~10% CAGR, while LOOM contributes less than 3% to MERLIN's total revenue. MERLIN has expanded LOOM to over 30,000 sqm across multiple locations with current occupancy averaging 82% versus ~95% for the core office portfolio, indicating higher volatility and lower yield stability.

• Challenges: intense competition from IWG, WeWork, local boutiques; price-sensitive demand; service-based operational model required.
• Investment needs: significant marketing, platform/IT, staffing and fit-out CAPEX; estimated payback horizon 5-8 years under optimistic growth.
• Strategic options: scale via roll-out in high-demand micro-markets, partner with operators, or divest to focus on stabilized office income.

Question Marks - New speculative logistics developments.

Speculative logistics projects in Tier 2 Spanish cities (examples: Valencia metropolitan polyzones, Seville logistic parks) are Question Marks: target markets growing ~8% annually, MERLIN has earmarked ~€80m of project CAPEX currently under development, with these assets contributing 0% to present revenue while in construction.

• Risks: construction cost inflation (steel, labor) ±10-20% impacts, local economic cyclicality, lease-up timing uncertainty.
• Upside: strong rental reversion in undersupplied corridors could lift IRR if logistics yields compress 25-50 bps.

Question Marks - Residential for rent pilot projects.

Build-to-Rent (BTR) pilot projects are Question Marks: urban Spain BTR market growth ~15% CAGR, MERLIN's current market share <1% as it pilots conversions of underused office assets into rental residential stock. Current revenue contribution <1% of the group; pilot requires substantial conversion CAPEX and new operating capabilities.

• Decision levers: scale-up if pilot metrics (cost per unit, time-to-stabilize, tenant retention) meet IRR thresholds; otherwise divest/consolidate.
• Constraints: land-use planning, conversion permits, community opposition in dense neighborhoods.

Question Marks - Digital infrastructure ancillary services.

Digital infrastructure services (managed cloud connectivity, edge computing nodes, ancillary data-center services) are Question Marks: market growing ~20% annually, current revenue contribution <0.5%, and MERLIN's market share is minimal versus telecom and specialized providers.

• Strategic considerations: pursue selective deployments adjacent to core assets to improve tenant stickiness; form partnerships/joint ventures with tech providers to reduce upfront CAPEX and expertise gaps.
• KPIs to monitor: ARPU from ancillary services, utilization rates, incremental occupancy lift, EBITDA margin contribution.

MERLIN Properties SOCIMI, S.A. (MRL.LS) - BCG Matrix Analysis: Dogs

Non core secondary office assets located in peripheral areas of Madrid and Barcelona are classified as Dogs due to low market growth and declining relative market share. These secondary offices record an occupancy rate of 78% versus the portfolio average of 92%, require estimated CAPEX of €45-60 million to meet 2025 energy efficiency standards, and contributed only 5% of total Gross Rental Income (GRI) in the last fiscal year. Market growth in these peripheral zones is negative at -1% year-on-year as tenants migrate toward central locations with better transport links and amenities. Management has instituted an active divestment program targeting a reduction of this segment's Gross Asset Value (GAV) by €200 million by year-end, with an expected transaction pipeline representing ~3.5% of total group GAV.

Key management actions for these secondary office assets include focused disposal, limited capital expenditure authorization, and targeted marketing to local occupiers until transactions complete.

• Planned asset disposals: €200m GAV reduction target
• CAPEX freeze on non-essential works
• Short-term leasing incentives to limit vacancies

Legacy street-level retail units in non-prime locations are also classified as Dogs. These small storefronts account for less than 2% of total GRI, face annual tenant turnover in excess of 15%, and exhibit an ROI below 3% on refurbishment projects. Consumer migration toward e-commerce and experiential shopping centers has produced stagnant or negative demand for non-prime retail. Merlin has halted CAPEX for these units, classified many for potential liquidation, and consolidated management to reduce operating overheads.

• Operational consolidation to reduce management burden
• Sale or lease surrender encouraged for underperforming leases
• Targeted write-downs where marketability is absent

Underperforming fringe logistics warehouses-older buildings in non-core locations-are categorized as Dogs. These assets show an occupancy rate of 85% compared to 98% in the Star logistics segment, with revenue growth of 0.5% and a declining market share as occupiers demand higher clear heights, automation readiness, and ESG-compliant buildings. The EBITDA margin for this sub-segment is ~70% (adjusted) due to elevated maintenance and refurbishment spend and periodic vacancy gaps. The strategy is disposal to local/regional operators, freeing capital for investment in the high-growth data center division where returns exceed group averages.

• Divest fringe warehouses to specialist local buyers
• Reallocate proceeds to data center and core logistics stars
• Targeted capex only where sale is not feasible

Vacant non-strategic land plots in low-growth regions are Dogs: they generate zero rental income, incur annual holding costs and taxes (~€2 million per annum across the portfolio), and represent less than 1% of total GAV. Industrial land market growth in these areas is approximately 1% and institutional buyer interest is limited. Merlin recorded a 10% impairment on this land stock in the most recent fiscal cycle and is pursuing disposals to eliminate the recurring €2.0m in carrying costs.

• Active disposal program to eliminate €2.0m p.a. carrying costs
• Selective write-downs where sale prospects are remote
• Consider land swaps or joint-venture exits to improve liquidity