Carmila's Strategic Expansion and Credit Strength: A Compelling Case for Retail Real Estate Exposure

The retail real estate sector in 2025 is navigating a complex interplay of resilience and reinvention. Amid shifting consumer behaviors, technological disruption, and ESG-driven demand, companies that balance disciplined capital allocation with forward-looking strategies are emerging as standout performers. Carmila, Europe's third-largest listed commercial real estate owner, exemplifies this duality. With a BBB+ rating from Fitch (stable outlook) and a BBB stable outlook from S&P, the company's credit strength, operational momentum, and strategic agility position it as a compelling case for investors seeking exposure to a transforming asset class.

Credit Strength: A Foundation for Long-Term Stability

Carmila's financial resilience is anchored by its conservative leverage profile. As of 30 June 2025, its Loan-to-Value (LTV) ratio stands at 39.7%, significantly below the sector average, while its net-debt-to-EBITDA ratio of 7.6x reflects robust liquidity. The company maintains €652 million in liquidity, including €112 million in cash and an undrawn credit facility of €540 million. These metrics not only insulate Carmila from near-term volatility but also provide flexibility to capitalize on value-creating opportunities in a tightening market.

Fitch's BBB+ rating for Carmila's senior unsecured debt underscores the company's ability to access capital at favorable terms. This credit rating, combined with S&P's stable outlook, signals strong confidence in Carmila's risk management and alignment with ESG standards. For investors, this dual endorsement reduces counterparty risk and reinforces the company's appeal in a sector where credit differentiation is critical.

Operational Momentum: Delivering Consistent Returns

Carmila's operational performance in the first half of 2025 highlights its execution excellence. Net rental income grew by 15.4% year-over-year to €203.4 million, driven by a 3.6% like-for-like increase and a 3.3% leasing reversion. With 96.0% financial occupancy and 467 new leases signed, the company has demonstrated its ability to attract and retain high-quality tenants.

Spain, a cornerstone of Carmila's portfolio (21% by value), delivered the strongest regional performance. Retailer sales in the country rose 4.4% year-over-year, supported by a 1.5% footfall increase. This outperformance is no accident: Carmila's 75 Spanish shopping centers benefit from strategic locations adjacent to Carrefour hypermarkets, a grocery-anchored model that remains resilient even in inflationary environments. As global retail vacancies hit record lows, Carmila's focus on essential retail and experiential tenants—such as boutique fitness studios and tech-driven retailers—ensures sustained demand.

Strategic Expansion: Aligning with Sector Trends

Carmila's value proposition lies in its proactive alignment with three key retail real estate trends:

1. Experiential Retail and Omnichannel Integration: Carmila's portfolio is increasingly attracting tenants that blend physical and digital experiences. By prioritizing locations for “retailtainment” and tech-enabled shopping, the company is future-proofing its assets against e-commerce encroachment. For example, its mixed-use developments in suburban areas—aligned with the migration of urban populations to lower-cost regions—tap into growing demand for walkable communities.

2. Sustainability and ESG Alignment: Carmila's commitment to net-zero emissions by 2030 (validated by the Science-Based Targets initiative) is not just a regulatory play—it's a competitive advantage. The company has already cut emissions by 54% since 2019 and deployed 1,650 kWp of solar capacity in Spain. Green-certified properties command premium rents and attract ESG-conscious tenants, a critical differentiator as institutional investors increasingly prioritize climate resilience.

3. Capital Efficiency and Asset Transformation: Carmila's disciplined capital allocation strategy—balancing redevelopment, acquisitions, and debt management—ensures optimal returns. With €652 million in liquidity, the company is well-positioned to reposition underutilized assets or acquire distressed properties at a discount, a tactic that could unlock value in a market where supply constraints are driving rents higher.

Investment Implications: A Balanced Approach to Growth

For investors, Carmila offers a rare combination of defensive characteristics and growth potential. Its credit strength and conservative leverage provide downside protection, while its strategic focus on high-demand sectors (e.g., essential retail, ESG-aligned assets, and mixed-use developments) positions it to outperform in a fragmented market. The company's BBB+ rating also makes it an attractive option for investors seeking yield without overexposure to speculative credits.

However, risks remain. A slowdown in European consumer spending or a regulatory shift in ESG reporting could test Carmila's resilience. That said, the company's diversified portfolio across three core markets (France, Spain, and Italy) and its focus on non-discretionary retail mitigate these concerns.

Conclusion: A Strategic Bet on the Future of Retail

Carmila's success in 2025 underscores the importance of adaptability in a sector undergoing rapid transformation. By leveraging its credit strength, operational discipline, and strategic foresight, the company has positioned itself at the intersection of resilience and innovation. For investors, this represents a compelling opportunity to gain exposure to a sector where the best-in-class players are not just surviving but thriving. As the retail real estate landscape evolves, Carmila's balanced approach to growth and risk management makes it a standout candidate for long-term value creation.