MERLIN Properties SOCIMI – AGM 16 June 2020
In item 2.1, the Board proposes the allocation of results: 10% to reserves and the remaining 90% to cash dividends for a total of €0.35 (€0.20 already paid as interim plus an additional €0.15) per share and an aggregate of €161.4 million, which is not covered by free cash flow. We understand the need of the Company to distribute such a significant amount to enjoy the beneficial tax regime and consider that this legal obligation is covered by the proposed distribution, therefore we recommend approval.
In item 2.2 it is proposed to authorise the Board to resolve upon the distribution of an extraordinary dividend, out of premium reserves, of up to €0.17 per share, or €81.1 million. The total aggregate amount would be €242.5 million (€0.52 per share vs. €0.50 in 2018), in accordance to Merlin's dividend policy of distributing 80% of operating cash flow. In light of COVID-19, ECGS recommends that companies postpone decisions regarding dividends to avoid liquidity or financial risks, hence we recommend that shareholders oppose this item.
In item 7, the Board proposes to approve a new Remuneration Policy for FY 2020 including the reduction of incentive caps for executives, addition of a malus clause, attendance fees for Directors and fixed salaries for the Chairman and the LID, which we welcome. However, the maximum amount of variable remuneration for the CEO is significantly over ECGS limits and we believe that the Board holds too much power establishing the annual bonus. Furthermore, no metrics for variable remuneration are disclosed, hence we recommend opposition. Shareholders are called to an advisory vote on the 2019 Directors'Remuneration Report in item 8. We have serious concerns over the excessive total remuneration of executive Directors, over four times the medians of peers. Therefore, we recommend opposition.
Merlin Properties SOCIMI SA is a Spain-based company engaged in the operation of a real estate investment trust (REIT). The Company focuses on the acquisition, management and rental of commercial properties located in the Iberian Peninsula, primarily in Spain. The Company's activities are divided into the following segments: Office buildings, operating a portfolio of office space; High-street retail, engaged in leasing retail stores; Shopping centers, engaged in managing department stores; Logistics, operating logistics warehouses and distribution centers, and Others. The Company's other activities include property management services rendered to third parties.
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