Merlin Pptys Socimi Ord

Good afternoon, ladies and gentlemen. Welcome to Merlin Properties, a half-year results presentation. And usually, Ismael Perente, our CEO, and Fran Ribas and Inés Arellano, both directors of the company, will walk you through the presentation that you are seeing on the screen. And it will be followed by a Q&A session. So without further delay, let's start. Ismael, the floor is yours. Thank you, Fernando. Hello. Welcome to Merlin Properties' first half financial results presentation. It's been a very solid quarter of performance for the company that follows also a very good first quarter. So the whole semester has been excellent from an operating standpoint. I mean, beyond the print in net results, which at the end is asset revaluation, which is paper money, The reality is that from a cash flow standpoint, we have improved margins and we have gone one extra inch in every asset class of the company and we are starting to see a little bit of merit behind the debt on the data centers. From an operating standpoint, the rental growth came up 3.4% like for like and the occupancy was also very high at 95.4. You might argue that in the first quarter it was 96.7, but I told you that from the 99% we were in logistics, you can only go down. It's impossible to repeat the same rate in logistics. In offices, we have reached 94.2, which is our all-time high. The rental growth is quite compelling at 3.9%. In fact, as commented in previous calls, we are witnessing an acceleration of the rent negotiations with significant interest in take-up. Part of it is explained, of course, by a client from Spain that also part of it is the destruction of stock that I commented many times with you all the way through the reconversion projects which are starting to be felt in the Madrid stock of offices. Not so much in Barcelona because Barcelona is or residential is a disaster. And they have a disaster of regulation and it is impossible to convert an office building into resi in Barcelona. So it's more difficult to correct excess of the stock that in Madrid is working fine. In logistics, we went down in occupancy to 96.2, but we still delivered good organic growth at 2.2% like for like. And we have continued pre-letting significantly our width. I mean, with a big transaction in the north of Spain and one health terms, very good one for the Henares corridor here in Madrid. In shopping centers, very good like for like at 3.2%. And what is more important, we have reached an all-time low in occupancy cost ratio at 11.0%, which is incredible, thanks mainly to a very strong sales evolution that keeps us absolutely amazed of 5.8% versus the same period in 2024. With all these, the FSO generation came at plus 12.8% compared to year-on-year, with a very significant strong value creation as a consequence of asset appreciation, 3.2% gross asset value like-for-like growth. Mainly it's a data-centered thing, although it is important to remark that the deterioration seen in past quarters in the value of the traditional asset classes has not only stopped, but also reversed a little bit. The appraisers seem to be flattishly, they seem to be compressing a little bit again the cap rate. You know my opinion about that. I would prefer to stay where we were because I believe there were healthy cap rates that, you know, it seems that we are entering a cap, you know, small cap rate compression phase in valuation. What is important is that with all these, the total shareholder return in the first half has amounted to 6.6%, which, you know, is clearly a good indication for the whole year. I believe it's going to be a good, very interesting year from a shareholder's return standpoint, this 2025. Our financial situation remains very healthy at 28.6% LTV, under nine net debt to EBITDA, 100% fixed rate with no debt maturities till November, 2026. And we have 1.6 billion of liquidity position. Standard & Poor's has reiterated the triple D plus with table outlook which is of course very, very good because towards the end of the year we will need to cap the market for debt and it's important to do it on a very good double rating by standard pools and movies. Regarding value creation initiatives, we have been very active in the sale of a number of assets that we now call non-core. We are talking now always about occupied buildings, mainly for rescue reconversion. 36.4 million have been executed in that period, but we have also signed and in some cases received advance payments for another 145.9 million which basically means that we expect to comply with the 2025 budget in terms of disposals. As you know, part of the data center deployment program is financed with the capital increase that we carried out last year, but we also depend on a number of disposals that we have budgeted for 2025, six, seven, eight and nine, and we are very well on track to comply with those internal numbers. More importantly, it's been a very, very good, very good period in terms of pre-lets or listings or big listings. In data center, well, you all know that we finally placed a block of 15 megawatts in Barcelona with a big Neocloud hyperscaler, and then a block of another 18 megawatts in the Bilbao Arasur data center. I won't do spoilers, so Fran Rivas will comment in a moment about the evolution of conversations with clients for the risking of phase two, and the rest of phase one. In offices, we signed two very large headquarter leases. One with an existing client who significantly enlarged their position with us in the A1 corridor. And the other one with a very big energy company, Spanish for a headquarter in the A2 corridor. In logistics, signed with Mercedes-Benz in Victoria, 73,000 square meters, and have signed also ahead of terms for a turnkey project in the Henares corridor for another 55,000 square meters, which is very, very interesting. And shopping centers, what is more notable is that the extension to the already big Marinera Shopping Center. It's going very well from a pre-commercialization standpoint. The opening is in principle pencil in for something around November or beginning of December and yet we are 92.9% pre-led which is a very remarkable achievement by our colleagues of retail and logistics. Regarding financial results, if we move into page six, revenues have grown by 8.5%, of which rent 264.7 million by 6.7% compared to the same period last year. What is important is that we have improved EBITDA margin, so moving from 188 to 205, that with with an increase of 9% above the increasing top line. So very good conversion. Most notable, the FFO has increased from 147.8 to 166.6, which is an increase of 12.8%. Also very interesting exercise in terms of, you know, cost containment by the company. And well, as I've commented before, the EPRA MTA, has gone up very, very significantly. First, as a consequence of the capital increase carried out last year, which of course contributed a lot of cash to the company, but also as a consequence of the asset revaluation that we commented before. With all that, the dilution in FFO that was expectable following the capital increase that diluted naturally the FFO shareholders by around 16.7% has been now moderated to only 6%. and we will try to continue eroding between now and year end. So in plain language, with only the traditional asset classes for the moment working in favor of offsetting the dilution, we are managing to significantly offset the capital increase carried out last year. I mean, which in theory, or in theory in practice, was penciled in for the development of data centers. So without data centers yet contributing to the company on a meaningful basis, we are little by little closing the dilution cost by the capital increase, which is, I believe, a remarkable achievement. And in terms of MTA, the strong revolution has meant that we have almost flattened the dilution cost by the capital increase, and we are more or less where we were last year in the same period with minus 0.5%. On page seven, what you have the like for like divided by offices, logistics and shopping centers and you see what is like for like growth and change of perimeter. And on page eight, you see the occupancies, 94.2% in offices, 96.2 in logistics and 96.5 in shopping centers. later during the presentation I will give you what our estimated figures for year end look like, which offices is going to be relatively flat, a little down from the 94.2. Logistics will go significantly up, depending on a couple of contracts that we are negotiating and shopping centers will remain relatively stable because it's impossible to move it from there. And without further delay, I will let my colleague Ines Arellano explain the details of the different asset classes for your benefits.

Thank you, Ismael. So moving forward to things like PEMS, which today still represents 58% of our portfolio in terms of value, the momentum is quite positive, demonstrated by all kinds of high efficiency levels, both in Madrid and Lisbon. Barcelona is still suffering from a temporary oversupply situation, and it will take some time to be digested. The drop in occupancy, however, has mainly happened in June, and that's the reason why you still see a solid lackalike strength of growth of taxis on the focus sites despite the impact. In Florida, you may have noticed that we reached an agreement with a reputed and not a none of ours, that implies a market-to-market on the existing space in first few, and that we've now signed an additional 21,000 school units expansion with them, in accordance with projects to be developed in the same campus in a deadline. Excluding this impact, however, the overall release spread could have been plus 5.1% overall, and more importantly, plus 3.3% up versus the minus 3.7% in Madrid. We have contracted 165,000 submittees in the first half of the year, which is a wide enough example, or sample I'd say, to provide us with reliable information on what is happening in the market. And this is shown in slide 12. As already flagged in February, the Madrid office market is experiencing a very interesting trend. There is a clear need for residential, amongst other users, and there is no land available in Madrid's city centre, which is driving the reconversion of certain office buildings that have lost current book values. Coupled with no new supply in offices, the overall office stock is shrinking, and this is demonstrating the good quality assets, not just with the cupidity gains, but also with century new vendors. In our portfolio, we have identified 13% of our Madrid stock suitable for reconversion. Please do not think that we're going to be selling off everything. It also means that there's certain uses, like universities, that are compatible with the type of buildings that we have, and we can extract more value in cash flow. And all of that is within our portfolio, we have CUNED, one of the most private universities in Madrid, that has 18,000 screen reader samples in CureVisa. We looked at the statistics, and what we can say is that the performance continues to drop 2.2% in life-to-life rental growth, and the overall drop in occupancy is only due to the expected exit of a tenant in a 47,000 square meter warehouse in Cabanillas, a good area. And the asset, as you may imagine, the Disordinary Portable Business, is under compensation, and we have several victims. Hopefully, it will be occupied, if not by the year end, at the beginning of next, so the cut-off date of December could be either going back to 99% again or staying in the range of the 96% of the interest ratio. But we've also experienced a significant increase in occupancy in Barcelona, which obviously does not impact as much as Madrid does. This is a spread, plus 7.2% in the first six months, with higher living volumes in the second year, reaching 260,000 square meters complex. Moving to slide 16. This is a minority state in Southport, Barcelona. It also showed a practice into the country's spread with around 157,000 committed contactless and a temporary decline in occupancy, which cannot be considered a trend because this, or Barcelona Portfolio Initiative, has shown more than 500 states increasing occupancy. Shopping centers. This, I think my wife likes to call it, or Cinderella became a princess long ago, and it's still showing its strength. All KPIs reported are positive. plus 3.2% like the live rental growth, 96.5% of QPC versus 96.1 plus quarter, sales evolution outstanding at 5.8%, football at plus 2.4% low, OCR at 11%, and the retail spread at 1% coming from 3% plus quarter. And then, Let's go to valuation since July 21. All this through its operating performance translates into valuation. GAV has increased by $518 million, standing at $12.1 billion as a result of a 3.2% valuation uplift, mainly driven by development against new data centers, which have shown a 38.2% like-to-like growth. Evaluations have resulted in a 5.2% passing growth yield, which implies a 4.3% net initial yield, slightly lower from the one shown in December, because data centers are still not yet stabilized. CNS has totaled 361 million, of which around 68%, 208, come from data centers. Operating-based centers have crystallized part of the expected value creation, and Sam will walk you through in a minute in slide 36. And appraisers have decided to also value the assets that we started its construction after obtaining construction license, therefore anticipating value recognition. Now it is very important to say that all the landfills we made are called. So it's only the either operating or already into construction a portfolio that has been given a value by the appraisers. Methodology is as follows. Appraisers assess values with a 10-year GPS, where they apply cap rates. You can see in our results that the range is from 5.5 to 8% and the exit values. And this survey, 9 to 11%, which today still looks high for UBIS assets. For the first time for a while, now we see an overall yield compression in average 7 bits, flat active yields though, in all three traditional asset classes, obviously being not meaningful in data centers as the assets are marked as stabilized, and we'll see the run path in the years to come. In slide 23, we can show you the sales financial structure that we have. This is moving from the asset side of the balance sheet to the liability side of the balance sheet. We finished this semester with a gross debt of $4.4 billion, down from $4.9 billion in December after repaying the $600 million bond in May. We have net debt of 3.6 billion, implying a 28.6% RTV. Cash flow generation and valuation have almost offset dividend payment and capital transfers, and this is shown in this 28.6% RTV. As said by Ismael, net debt to EBITDA stands below 10%. 8.8 times, and the average cost is slightly higher than the one in December, 2.6 times from 2.5. It obviously will increase slightly as we refine it for cheaper stones, but all of that is fixed with average maturity of 4.4 years. Liquor G, also recommended values in IL, are still high, because we still have some of the proceeds obtained on capital increase. And S&P, we confirm our QWC PLUS rating, which gave outlook, together with Moody's, on the basis of sustainable leverage and standing cash flow. In July 24th, very little else to add. 84% of our debt is corporate, so 75% of debt is gone, and 25% is unsecured bank loans. And only 16% of our debt is mortgage-based. The next maturity to be faced in 2nd November 2026 and although we still have time to tackle it, we pray to be prudent here as we've always been when it comes to debt and take advantage if and when we see a window of opportunity. So with no further delay, I'll pass the floor again to Ismael who will comment on the value creation part of the business. Thank you.

Thank you Ines. Regarding capital recycling, the investments in the first semester were you know, very few. We acquired one co-working space that we operated but didn't own, around 2,000 square meters in Barrio Salamanca in Madrid. And we bought a land bank for two data centers, one in the north of Madrid, Tres Cantos, with 30 megawatts of IT capacity confirmed, and then a potential expansion of up to 130 in the future, which is requested but not obtained yet. And in the case of Madrid Getafe, we bought a former industrial manufacturing facility in which we had 48 networks of existing, I mean, confirmed IT capacity given the electric power that we enjoy in the spot. Regarding divestment, we are at 183.2 of which 37.4 executed. and 145.8 signed all above GAB. There are some adjustments still pending in some of the cases. And we execute later in the year and in 2026, as you can imagine. The reason why we operate this way is because we want to keep cash flow as long as possible. I mean, at present, we are a company which is you know, excessively financed. I mean, we have had a lot of cash. We are running out of cash very quickly, but we have had a lot of cash. And of course, what we need to keep now is rent rather than cash. So, you know, when we sell assets, we don't rush. We prefer to keep them in the balance sheets for longer and enjoy the cash flow. Those sales are mainly concentrated in offices in the pre-reconversion play that we have commented with you on a number of occasions. And those assets sold contributed 8.9 or will contribute 8.9 million gross rental income in 2025. Hence, the average disposition yield is 4.9% gross, which is interesting from a capital recycling perspective if reinvested in data centers. Regarding the Marinera extension, the size of the shopping center has significantly increased by about 25%. I mean, total size at present is 126.5 thousand square meters, which is a lot. It was already the third largest in Spain and now is the second. But what is more important, despite the diversity and quality of the existing tenants, we have been able to find further tenants for the extension. We are almost 93% pre-let and with a capex of 41 million which in part was defensive because what we wanted to do is protect the shopping center upon the exit of a shopping list in the area. We didn't want any undecidable neighbor to come near our shopping center which is of course one of the big cash flow producers in our portfolio. So what was once a defensive movement has turned into a decent offensive movement because we are obtaining a yield on cost of 6.5% which is not great but it's not bad. Regarding Adequa 4, this is a large pre-let, one of the largest signed in Spain since the great financial crisis. We have signed 10 years contract with more than 70 million backlog added to our office division and 21,000 square meters with delivery at the beginning of 2028. CAPEX is close to 53 million. The yield on cost is 6.2% on historic cost of land, including historic cost of land. So if you do just the yield on CAPEX, it's 10.4%, which at the end explains why we are doing this, because in reality what we are doing is moving idle office land that we have in the A1 corridor in Madrid, which is now performing very, very well in terms of occupancy. We are moving that, let's say, land bank into WIP, and that WIP into product in operation, hence bringing more cylinders to fight together in favor of the performance of the company. Together with this building, we will assess the convenience of building the remaining buildability in the complex, which is a little tower. It's a low-rise tower of around 100 meters with circa 25,000 square meters of total GLA. In order to optimize first construction synergies, And also, you know, capitalize the momentum in the market. We believe that if we add that capacity in day one corridor, we believe, I know it's a bold movement, or may look like a bold movement, but we believe we will fill it up in due time. Because I know that the corridor now, with the proximity of Operación San Martín starting to perform very, very well and it's our opinion that we will be able to make good use of our money by bringing the power together with the pre-led, fully pre-led building. In logistics, We are building or are in project or will build in the short to medium term 291,000 square meters. The last modules will be delivered in Lisbon in the first half of 2027 but the rest is mainly 2026 business. Total investment will be around 156 million, and the expected gross rental income is 17.2. That will move our logistics, our visible logistic income beyond the 100 million mark, which is important. Although, as you know, there is invisible income in logistics that comes from Barcelona, which is accounted for as equity method, and you don't see the cash flow, but the cash flow, of course, is there. The yield on cost is 7.5% and the yield on capex is 11.1%. So I believe it's an interesting move to put that also into production. We need cash flow in order to continue feeding our little base of the data centers. And with that, the non-committed pipeline will be only 190,000 square meters. mainly in Madrid, Valencia and a little bit in Seville with a pending capex of 101 million and stabilized GRI of 11.5. So a yield on cost in the region of 8% and a yield on capex in the region of 11.4%. So looking forward to mobilize also this pocket of value in the coming future so that we do not keep in our balance sheet any assets which are non-cash flowing other than the land of Operación Samartín, which of course will take more time to become productive. And Fran will comment on the Digital Infrastructure Plan. Thank you Ismael and good afternoon to everyone. I'm going to cover now the update on our Project Mega and the main achievements completed over the first half of 2025. So as you can see in page 32 and 33, we have summarized the current positions of our data center division, that we generally call the Merlin Edge, within the Iberian Peninsula. Precisely in page 33, you can find a table with an overview of different phases. Phase 1, which comprises our three assets in operation. Phase 2, which includes our work in progress, our WIP. Phase 3, for the upsizing of the former three locations. And finally, the pipeline which represents the future growth of our data center division. Starting with Phase 1, and as a snapshot, after we complete the letting of all Barcelona, including the six megs of repowering and Adasur, the vending capacity of Madrid and the fact that the advanced conversations we are holding with one specific client have driven us to update the standardized DRI from the former 88 million to the current expected 92 million, which also improved as well the gross chill on cost up to 15.1%. In our wheat category, phase two, the total IP capacity has grown from the former 210 megawatts to the current 246. after the inclusion of a second building in Lisbon. Consequently, the stabilized GRI that we are estimating in 2029 achieves 379 million with a gross deal on cost of 14.2%. The reason of including now a second building in Lisbon, as compared to former calls we have had, is due to two reasons. The first one is the fact that the US government has finally decided to do not implement the Artificial Intelligence Deficient Rule which classified at the time Portugal among other countries as Tier 2 and that rule basically was impeding Portugal to import the latest technology in terms of chips Secondly, the fact that in light of the performance and also the revaluations seen in Phase 1, we have considered we can stretch a little bit more the funds raised last year in our capital increase and the debt attached to it, of course, without affecting our target LTV and the net debt to be that we have agreed with our rating agencies. In the up-sizing category, we have included now a new repowering of Building 1 in Bilbao-Lazur, that has been already been requested and we will be answered in the following months. Same applies to building 6 in Arasur within our pipeline category with 30 MEC of potential additional capacity. Entering now in more detail in page 34, we can see the current status of our operating assets. In Barcelona, within the 22 meg of maximum IP capacity, we have already equipped, as you know, 16 meg, which are currently in operation. And the additional 6 meg of the repowering will be commissioned during the first month of 2026 with ready-for-service set for first half of 2026. As a curiosity, this additional 6 meg of repowering will be with liquid cooling systems, while the first 16 meg are air-cooled. In the Val d'Azur, what we call building-free, which was the first one we have built, the 22 megs are already equipped. 10 of those, 10 megs will be air-cooled, and 20, sorry, 10 megs will be liquid-cooled, and the 12 originally is air-cooled. We are now working on the fit-out of the client. which from now in June we have already given the first rooms and there are different plans until they are in full operation by the end of Q4 2025. Finally, in Getafe 1, as of June 30th, 2025, As we described in the slide, we have four MEC equipped. Right now, this figure has jumped to six MEC, is what we have equipped right now, with the remaining 14 MEC to be commissioned by the end of this year. In terms of commercialization of Madrid Getafe 1, we are in well-advanced conversation, as I was recommending before, with one client, which is what we find booking, considering the level of both technical and commercial involvement that we have already achieved with this client. For the available capacity that we have of these original six megs, which in this case is five megs of leads, And regarding the second phase of power, the additional 14 that we will get next year, we have also booked for them another five, you know, that will increase, basically, that legging with the client up to 10 megs in Madrid-Jetafer 1. And then, finally, also, we give them, basically, the option that if, when, or when, they are empowering of 6 megs that we are foreseeing in this asset, once we get it, they have also booked that capacity as our future growth in the next years. As you know, we have been holding this capacity until we have some visibility on the power delivery, but now we assume there will be more clarity on the timing to get the power in the recent week, so we have included this in the negotiations of carbon availability. Now moving to page 35, we are showing you on a year-by-year, the expected GRI generation of our operating assets until 2027. where, as mentioned before, we forgot 92 million of GRI. Out of these 92 million, 66 million have been already contracted so far, and with Madrid, Getafe, once it's fully left, we will jump to this magnitude. In terms of value creation of phase one, it's showing in page 36, The total investment remains at $608 million, valued as of June at $719,000, implying basically from the capital already invested another $155 million of capital. value captured as of June, and considering the expected value of the asset after our appraisals, there will be another 293 million of estimated value to be captured, which if you add also the rent that is being generated over the periods, this will convert this Phase 1 investment in a very profitable project for our shareholders. Moving into the update of our WIP, phase two in page 37, both Bilbao Azure Building 2 and Lisbon Data Center Campus Buildings 1 and 2 are already under development. In the case of Lisbon, we will see this again at an early stage. In the case of Bilbao Azure Building 2, we will see in the following slide the progress in construction is evident because the building is already almost ready. All equipment regarding this building has been already ordered to guarantee that delivery date by Q4, 2026. And regarding Building 1, which is the third building that we are constructing in Bilbao, Brasur, which is the largest one once the rebowering is obtained, we expect it to start construction by the end of the year. And also equipment orders are well on progress to guarantee as well the delivery date by the end of 2027. The particularity of this building is its connection to an on-site photovoltaic project that will feed renewable energy into the site which also improves even more the sustainability character of this development. In terms of commercialization, we have two initiatives launched. one with a client interested in taking most or you know with different ramparts even all of this capacity of building two and another that I will give you more details at the end of this section which could comprise both in Lisbon although its construction started last September right after the capital increase the conditions of the Lisbon area of like us as commented several times in several calls to carry out soil compaction and special piloting works as we will see later on the presentation. News in this project is now the inclusion of Buildi2 in the same first phase of construction for the two reasons I commented before. Also taking advantage of the power ability we have on site, which covers the first 180 meg of IT in one of the fields, and then we have also secured the second step to reach maximum capacity of the first phase without the upsizing. In addition to this power availability, we have also signed an agreement with EVP to provide, in the same case like Arasura, another on-site photovoltaic plant at 200 MEC, which will be physically connected to the data center campus and also will generate a significant part of the energy consumption of this building. In terms of commercialization, it is still a bit early to attend conversations with future customers as the targeted completion date is the end of Q4 2027. But we have included this capacity as well in the European initiative that we will cover at the end of this section. Regarding Madrid Getafe 2, we are awaiting to have real life from the administration to start the demolition works on the site. Those works will be carried out by the seller. of the land and we are finishing our design project to submit it to the municipality in the following months. Finally, on Madrid-Tres Cantos, the licensing process is advancing and urbanization of the land should start within the first half of 2026. Regarding the CAPEX of this week, I'm just jumping to page 38, we are showing you the update figure of the total CAPEX expected for this phase two, which have increased from our former 2.1 billion to the current 2.5 billion due to the incorporation of building to additional campus. We highlight here that the CAPEX in a data center as we have several times commented is around 20 to 25% on civil construction where payments usually are more linearized while the remaining 75% is equipment where payments are more back-ended. That's the reason why we always present CAPEX commitments because you know when the timing of payment is a little different from what we show here. The pace as you can see basically is that we expect to commit 836 million in 2025 out of which 49%, 411 million have been already signed, committed as of 30th of June, 2026. In page 39 you can see some pictures of the construction works in Bilbao Azur building 2 and also basically on the top right photo you can see in the background the building we have in operation which is our building 3. In page 40 we are showing different photos where you can see the soil compaction and piling process at different stages so and the final one is from the right, the bottom on the right side of the slide. And after the heat reconstruction, our work plan will start right away. Regarding phase three, or upsizing barriers, in page 41, the news there of the incapacity in the campus, after including building two in the first phase of construction. Also, we have included the potential of 12-meg IT in building one, that I was mentioning before, and also in , we have the capacity of this power upgrade. And then, going back to one of these initiatives in terms of commercialization for campus, is the possibility of being selected as one of the gigafactories that the European Union have launched in April 2025. As you can see in page 42, the European Union aims to become an AI continent with large-scale AI data and computing infrastructure across Europe by setting up at least 13 AI factories. There are some existing ones like the Supercomputing Center in Barcelona, but also establishing five AI gigafactories to which the European Union wants to devote 20 billion through different loans and grants. With this objective in April 2025 the EU published its call for expression of interest of AI Gigafactories and Merly Edge submitted to this EU a consortium capable of delivering what we believe is a unique AI Gigafactory and the reasons why we believe this is unique is for different reasons. Now the first one is that we have not only permitted land with power assets but That plan is currently under construction, and it fits with your objectives of having capacity ready for service in years 26 and 27, and to achieve these timings, unless you have already started it, it's almost impossible that you can meet those deadlines. And as you have seen before, both of our Alasur, the Alasur and the Lisbon campuses meet these deadlines, and will provide 180 meg of IT capacity. Also, they are looking for toilets with capacity of expansion within the same size. And again, and this one offers additional 358 meg of piping capacity to go there. And finally, they are seeking for technical capacity of buildings to support the levels of densities and ensure us that the artificial intelligence type of computing is requiring. And this needs to of course maintain sustainable parameters. In our case, as you know, we don't use water consumption and we have a very low UV, which basically matches to what they are looking for. After this discussion of interest, the different consortiums across Europe, because as I said this is a European competition, will need to submit binding proposals by October, and the European Commission expects to decide the final locations of their gigafactories by the end of December 2025. As I said before, this is an initiative from a commercialization point of view, and of course we are competing with other countries and with other countries, but after seeing that the timing that the EU is looking for and our ready for service capacity and the reasons I mentioned before, we decided to apply to it. Unfortunately, I'm not allowed to provide you with much more details of the nature of our structure or members of the consortium, first because due to confidentiality reasons, but also because we are in a competitive process And so, of course, if there is news regarding this potential initiative, we will keep you posted. And yeah, that's all from my side. Ismael, closing remarks? Thank you, Fran. Well, just closing our part of the conversation today, I mean, opening the Q&A, simply to stress what I commented at the beginning, We are seeing strong organic rental growth at the company. We are seeing a strong momentum in offices in Madrid, a little bit of weakness in Barcelona, and good performance continues in Lisbon. We are generating significant FFO in the company. I mean, the company continues to be a highly cash-flown one with very healthy margins, which is always a nice thing to see from a managerial perspective that we don't lose the tension and we don't become and you know, and sclerotic like happens in many. We continue stressing our teams to work towards high occupancy levels and also we are enjoying a certain tailwind because Southern European economies seem to be having a good momentum and Spain is clearly not an exception Regarding value creation, what is particularly satisfactory is that we are generating a lot of alpha, basically by moving projects into WIP and WIP into assets in operation, and we are meeting that with a very significant success in commercialization. In data centers, when you know what we have been doing with Core WIP, In offices, we led two big headquarters leases to Tecnicas Bonitas and another big Spanish energy company. In logistics, we delivered 33,000 square meters just two weeks ago to Wharton and Moatum in Lisbon Part B. And we led almost 73,000 square meters to Mercedes-Benz in Victoria Fundis. And what is important, the long-term non-committed CAPEX GLA is only 190,000 square meters. So we keep reducing the land bank that we acquired in 16, 17, 18 at very good prices. We keep reducing that land bank and adding cash flowing assets to our inventory. And in shopping centers, I believe the Marinera extension is a remarkable achievement. The leasing teams have done a fantastic job and by pre-letting in record time, close to 93% of the very significant GLA addition which is close to 27,000 square meters is a lot. So as a very quick outlook, we see an improving investment market. We see also an improving underlying market in leases, particularly in offices. in shopping centers a little bit business usual for the moment. The evolution of private consumption in Spain keeps us absolutely amazed. I believe it's a mix of a very low household indebtedness, a little bit of doping from fiscal deficit, that clearly spending capacity of people continues to surprise us. As a consequence, we have decided to raise a little bit the FFO guidance for 2025 to 0.56. Many of you will take the 0.30 of the first semester and multiply by two. Please don't do that because we will have less 700 and change million working in cash at bank for seven, eight months of the year because we repaid the bond on the 26th of May. So that will subtract about two cents of that theoretical calculation of 0.60. And then we are also counting on tapping the bond market between end of August and October. I mean, we will of course be quick and benefit from the in pricing in the market and volumes and also in the maturities. And that additional cash will of course because the remuneration we will obtain in cash advance will be a point and a half lower than the cost of that money to us. So that will subtract another two cents easily of cash flow to the theoretical calculation of 0.2. So, 0.56 is okay. I know some of you are now expecting 0.57. Please, bear with us. I mean, I don't believe it's super important that we will, of course, do whatever is in our hands to excel the guidance that we are giving to you. But, you know, it's pretty much accurate at this point is what we see. And regarding translation into dividend, well, as you know, we were a little bit below the 80% payout ratio. You know, going back to 80, that increase of two cents in cash flow per share allows us to recommend to the board another two cents of extra dividend per share. So we will propose to the board raising the dividend from 0.40, that was our initial estimate at the beginning of the year, to 0.42. And that is basically it. So we can move into Q&A. We are here to answer your questions. Thank you, Ismael. We will now start with the Q&A session. Please remember, in order to raise the questions, you need to press star five. Star five. So the first question comes from the line of Mariusz Pastu. Mariusz, the floor is yours.

Great. Thank you very much. Thank you for taking my question from the presentation. I've got three questions from my side. Preference to ask them one by one or all in one go?

But if you make one by one, as you wish. I mean, we are simply, I mean, we will take note.

Okay. They're all related to data centers, so I think maybe we'll do them in one go. But maybe we'll start with slide 35, where you've now provided the GRI buildup of phase one. Can I just check how you're including Madrid capacity in there and how this has been included in the buildup of, say, 2026? and into 2027 based on the discussions you're having. And then secondly, on the data center, we're now revaluing both operational assets and those under construction. So can I just check, is there anything that's been taken across phase two? And if not, when will this likely start? And then finally, on the timing of the value creation, like you provide in slide 36, How should we think about it in terms of the remaining 293 million to be captured, say, between the second half of this year and into 2026? Thank you. Okay.

Well, regarding the timing of value creation, in principle, we should be running at full cash flow around 2027. end of 27 if you multiply December by 12 probably we will already be at let's say cruise speed. So starting from that point I believe the appraisers will start let's say normalizing the appraisals of those data centers in phase one. And I believe they will start lowering significantly the discount rates because at present, between 9% and 11% looks to me a little high. I mean, if you can buy data centers in the market at between 9% and 11%, it gives them all to me. because we wouldn't take the risk of building if we were able to buy data centers in the open market at those rates. I mean, I believe that if you calculate the gross rental income which is 92 and you multiply by a NOI margin of say 70 change, percent, you will be at an NOI of between 60 and 65. And it looks very clear to me that that warrant evaluation in the region of 1.2 to 1.25, even 1.3 billion, given the hype in the market and the fixed escalations, which of course play a role, particularly on very, very long contracts like the ones we are signing. So, you know, I believe, let's say, starting end of 27, being prudent, starting end of 27, probably in the valuation of end 27 or in 28, we will probably be able to wait the benefits of most of those 300 million that we believe are still pending to be recognized in phase one. Then regarding the value of phase two at present, the only thing that has been recognized is a little bit of value in Bilbao too because it's already with construction license and being built and the two buildings, the first building because we have not yet taken the decision to to start the second building, the first building in Lisbon. So this is the only thing that has been appraised and has captured a very little value because the discount rates which are applied by the appraisers are very high and also the cash flow projections are also very high. So the PV, as you can imagine, suffers as a consequence of that and very little value is recognized. But, you know, we have a doctrinal discussion with the auditor. And their stance is that it's good to be prudent, but if you are too prudent, sometimes you are not transmitting to the market the fair image of value of your company. So we came at kind of a middle ground, which is, okay, we are not going to reappraise our land bank as such. even though we might have obtained power, we will only start appraising when we start building. So, upon obtention of the license of construction, when we start building, when we start erecting columns, we start appraising or reappraising that building, which up to then is carried out in our books at cost. including lamb cost plus whatever capex we have incurred as a consequence of lamb compaction or foundations or similar. Okay, and then regarding the data center in Getafe, yes, as commented basically we are in discussion with a client for taking in different steps capacity within the building uh right now what we have available um you know is five meg of of uh capacity as we commented several times um the clients when they were coming they want to see uh you know growth so five meg you know used to be a very decent uh amount uh now normally people you know type of clients want to have capacity to expand within the same asset so we were waiting and holding a little bit those conversations until we have more clarity on the additional junk in power up to the maximum capacity of the 20 IT that we designed originally and so out of that additional capacity that we expect to receive in the first half of 2026 if you have several months of the fit out for the client until this is ready for service, so probably will be by the end of 2016, beginning of 2017 ready for service for the client, so that is exactly what you were mentioning, so like 5 May will be like 26, 5 March will be beginning of 2017, and then they also deserving the option to take the capacity in case of repowering, that of course at the time it comes we need to equip that, that we are not equipping in advance, and so once it comes there will be other options as well to complete that. So that's basically the current status of Madrid Head Office One. The client is a cloud operator. which is bringing not only few IT capacity but also telecommunications or interconnection equipment. So that is of course important because that normally drives further expansion of capacity in the future. So it's very very important to make the initial movement and then normally you are blessed with additional extensions of capacity so this is what we are negotiating at present.

Okay, thank you, Mario. Thank you very much.

Thank you. Thank you. Next question comes from the line of Florian Lagos. Florian, the floor is yours.

Yes, good afternoon. So thank you for this presentation. I would have two questions. Maybe the first one, a follow-up question on the data centers and maybe the slide 35. So you have provided an expectation in terms of revenue for the next three years. So in which way this is very accurate or in which way maybe you could be able to improve this expected revenues in the coming months. So that would be my first question. My second question would be on logistics. So we can see that your occupancy weight can be very high, sometimes at 99%. and come back lower at 96 today. So, have you any measure list that could come to end shortly and for which you could expect departure of tenants? Thank you very much.

Okay. Well, regarding the question about logistics, the reason why we went down from 99 to 96 was due to departure of a big client, GXO, former XPO, in Cabanillas at 47,000 square meters, which is, of course, it is a big shed. It's a very significant shed. So, of course, now what we are doing is, first, we're waiting for the effective exit of the plant, which will still take some time to fill up completely the shed. Then we will take possession. Then, of course, we will repair in case there are damages or things that need to be looked after. And then we will start the commercialization. So for the moment, it's business as usual. I mean, it's a big list that can depart in the coming months. We have one or two negotiations identified, but, you know, it's part of our business. let's say portfolio, usual portfolio management. I mean, which is not worthy that requires calling your attention. If we can replace the GXO departure before year end, which is not super likely, that we are working on it, but it's not easy, then the occupancy as commented by Ines will go to the region of 98%. that if we cannot replace, the occupancy will stay flat at around 96% as of year end. That probably next year we will replace the tenants and life goes on. On Phase 1, considering that we have building already led and we have Parasur already led, the only capacity we have in order to improve that is Madrid. The only thing basically that if you want to have some hope basically of improvement is the fact that part of this capacity in Madrid will come as well not only air-cooled but also liquid-cooled and normally when liquid-cooled is entering into normally chartered because of a high rent. It would be pretty accurate. There is no little range of movement to improve that. And then, as I said, either because of liquid cool or the part that we are not discussing in this capacity, we are not discussing with this client, which would be basically 9 meg of this jump of additional until the 20th. On that line, of course, we are more or less forecasting that we will obtain similar rents to the one we are obtaining in the building. If somebody comes, of course, at the last minute, then we have probably some sort of negotiation capacity that would be pretty in line with the numbers we have shown you. Okay. Thank you very much. Next question comes from the line of Adam Shatom. Adam, the floor is yours.

Good afternoon, team. Just one from me, just thinking about development pipeline and funding. So you obviously raised equity a good way below where the share price is today. How are you thinking about funding the remaining debt-centred capex over time? in terms of the mix between equity and debt, let's say, and also just wondering if you've taken any lessons from what Equinix has experienced with the public market in its own funding of its pipeline.

Okay. Well, look, for the moment, our preoccupation is basically concentrated in debt, but to raise a significant amount of debt over the coming you know, 24 months to continue funding our CapEx effort. And we have, in principle, no need for equity. I mean, being completely frank and open, I believe we are, we'll have our tank full till at least, you know, the end of 2017. So we shouldn't be needing equity till then. There are, The recent things that we have seen with Equinix, there is very little similarity between Equinix, which is a very big company and a very serious company, and us, we are absolute beginners. A little nuance, a little difference is also the business in which they are, which is they are more co-location we are more hyperscale and that being hyperscale allows us to reduce a little bit the lag between spending the capex and obtaining some returns and an impact on our earnings. More notably, we are now working from a research and development standpoint in a new technology that could come to market at the end of 27, beginning of 28 that will allow us to be even more modular in the way we construct our data centers in order to fine tune even better the time lag between spending and obtaining returns because with traditional construction of course we build, we equip and that is always relatively reduced or significant compared to the new construction technique time lag between spending and obtaining the returns. With the help of Endeavor, we are working on a new way to contract that will allow us to obtain a little cost efficiency, which is very much welcome, plus particularly more accuracy in the way we spend. What can I say? I mean, of course, in retrospective terms, I feel sorry for having raised money at $10,000. what could I do? I mean, at the time, that was my only option was basically raise money in a market exercise at the prevailing, at the then prevailing market price because some of, we had CapEx commitments that were about to be, you know, ordered and our main two shareholders were not very much in favor of incorporating a big shareholder or a new big shareholder into the company in one shot. They prefer to do a market exercise. So we raised the equity at the price we could. Through performance, underlying performance of the company, now we have closed a little bit farther the gap between our stock price and our MTA per share. As you can imagine, I feel only half happy that our MTA is running so fast. because although of course I love the value recognition that this implies and the fact that we are working in your favor as shareholders, that that increases again a little bit the gap between stock price and MTA per share. So our endeavor now, our obsession is to try to continue closing the gap between MTA per share stock price and NTA per share because that opens, that will open a brand new world in terms of options to finance our continued capex like for example convertibles. Convertibles these days are couponing very, very low and are paying very significant premiums upon conversion that paradoxically enough, the premium and the coupon do not vary a lot between being trading at minus 30% to MTA and being trading at minus 10 or at MTA stock. So of course, the closer we can come to MTA, the more options we will have in terms of raising additional equity if and when the situation comes. One important piece of information is that we have been now advised by our two major holders that they will, you know, support capital raising, further capital raising exercise in their pro rata share. So that is always very, very important because that gives you a very significant support when you go to market. When you go to open market, if you ask 33, 34% of your placement already secured. That gives, of course, a lot of confidence to the market. And if you look in retrospective to the capital raising exercise we did last year, at the end of the day, we placed 84.5% of the capital increase with existing shareholders. So, you know, that, of course, allays the fears a lot of dilutions, more dilutions, less dilutions because at the end the people who is buying your stock are the same that are already your shareholders. I mean the new shareholders that we bring into the book are very, very, in fact in many cases is people that were already shareholders a number of months ago, et cetera. So this is what I can tell you. I mean, of course I know what has happened with Equinix. I take note of it anyway. I wish I was Equinix. I mean, Equinix is a monster company. We are no fucking body in the world. And we are just starting. And despite what has happened, you know, I will exchange my position for their position any day of the year. Because, you know, they are an incredible company that can fund as much CapEx as they want.

That's very clear. And just to be clear, it wasn't intended as a criticism of the previous exit rating, far from it, the opposite. Just that's useful as a look forward view. Thank you.

Thank you for that. That's much appreciated. Thank you, Adam. Next question comes from the line of Veronique Merson. Veronique, the floor is yours.

Thank you for taking my question. Maybe first one question on Phase 2. You mentioned that you upped Portugal on the back of probably needing less funds due to the higher valuation gain. What's holding you back on not fully restoring the full megawatts? Is it purely funding? And a follow-up question on that is that what kind of development gains do you now still take into account for Phase 2?

That's a... That's a very interesting question and the very simple explanation, Veronique, is that we didn't dare. We didn't dare. I mean, we have construction license for the five buildings and we could develop the 180 megawatts in one go. But we only raised 36 megawatts because otherwise we would be stretching too much our financial capacity. So if we were rich, if we were equinix, we could do the 180 megawatts in one go. which of course would bring to the surface very significant value because that land was acquired many, many years ago. All the value was attributed to the logistic land plots. So the residual value for that land in our books is very close to zero. So if we were to reappraise all that land now with power, of course we would obtain very interesting value appreciation in that project. But we want to be prudent. I mean, we are new kids in the block. We have to be very, very prudent in what we do. This is why we decided to do all phase one with our own self-funding capacities. We only dared to raise money in the market when we saw that we were meeting commercial success in the market. sufficient commercial success to predict successful commercialization phase two, but we have always tried to reduce the number of construction sites. I mean, it would be very cool on our side to tell you that we are opening 20 data centers in Spain in every possible province or region and another 20 across Europe. That would be very cool but not very realistic because then you need to send construction managers, procurement managers, a lot of staffing to all those data centers is not easy. So we have decided to be relatively concentrated in very few construction sites and we want to keep that relatively prudent stance. If by any chance, imagine we are awarded the European Union Gigafactory status, Then it's a different thing because with the advancements and the grants awarded by the European Union, we can realistically think about building the whole ship because that extra money of course is a very welcome help to our financial stand. But this is what I can tell you, we did it out of prudency.

Maybe one question. Did I understand correctly that you get clarity on that EU part before the end of the year?

In principle, yes, although with the public clerks, you never know. I mean, in principle, by the end of October, we should firm up the proposals from the consortia. and then the decision should be taken towards year end. End of December, in principle, is the date in which the European Union has decided to meet and take the decisions regarding the location of the five gigafactories.

Okay, thank you. And one question on logistics. You're also working obviously on your pipeline. There's still some pre-letting to do. Can you elaborate a bit on how your discussions in terms of pre-lets are going and how the appetite is in the market for these logistics assets at the moment?

Well, the part which keeps us more occupied at present is Valencia. In Valencia, conversations are are going well. I mean, it's a city and it's a region which is now experiencing very significant strength and industrial activity. So we are happy with what we see there. Then, In San Fernando 3 and Azuqueca, we are significantly pre-let. And it's mainly, Lisbon Park, fully pre-let. Sevilla Sal is 8,000 speculative, that is only two little modules. I mean, we believe that we will be okay. And then at the end is Cabanillas Park 2. which is, you know, we are entertaining conversations for 25,000 square meters shed in there out of the 58. So, you know, for the moment, business as usual. I mean, I know the reason for your question because elsewhere in Europe, logistics is starting to cool off a little bit. For the moment, we don't see that in the market. And if that happens, of course, we will be happy to report. that this is why we are pretty much concentrated in killing of our land bank before the tide turns. So this is what keeps us busy at present.

Okay, thank you, Farideh.

You're welcome. Thank you very much. Next and last question comes from the line of Stephanie Dozman. Stephanie, the floor is yours.

Stephanie? Hello, can you hear me? Yes, we can.

Sorry, I wasn't here still. Sorry, hello everyone. So thank you for taking my questions. Actually, I have a couple of them. Maybe the first one is a follow-up on the evaluation of data centers. It's a bit tricky to understand how the appraisers approach it. So just to clarify, could you... Could you maybe give a bit of breakdown of how much is the value taken into account on the GAV currently related to the land and construction and how much is equipment? As I understand that you start to re-evaluate the land when you start the work and so on, but Could you give a bit more of what pace they recognize the value of typical developments and what is included currently in the 720 million euros? And the second one would be you mentioned disposal program all over the plan. So how much would you target to sell in total and maybe next year, for instance? Please.

Okay.

So I'll take the evaluation one. Again, just to remind you how methodology is used for data centers. It's a 10-year GCF. So basically what they take into account is the cash flow. The estimated cash flow before now for phase one is the contract. Okay, so that has moved obviously those cash flows to a sooner time, which derives in a higher valuation. So they take this 10-year GCS. They use, to calculate an exit value, they use a cap rate. Again, the ranges that we provided you with are also in the account. It's still a range. They don't value yet metrics the same as their value in Barcelona or Bilbao. Remember, we are in a ramp-up mood in Phase 1. And so for that exit value, they discount all those cash flows with a discount rate. Again, they use a range. And as Ismael was mentioning, for the operating ones, so the three data centers that we already have in operations, One, providing rent from January 1st, which is Barcelona. The one in Bilbao that will be providing rent at the fourth year of this year, and then Madrid, which is the latter. The values are different. They're using different discount rates, but that's exactly what they're doing. So for the operating gain centers, still value to be captured, as Fran mentioned before. Obviously, as in Kamikaze Station State in Najib Khan. they will be using different discount rates, we hope, because obviously once you've devised completely an operating asset, it makes no sense to be using discount rates that are not market-grading rents, let's put it that way. So that's for the operating side. And then for the working progress side, which again, before it was not valued, we've always maintained a very, very prudent approach to valuing working progress. So for anything that is already under construction, and obviously something is under construction because it has a license, otherwise you cannot start building. So whenever anything is already under construction, then the appraisers come and do give a value for that particular site. Now, they don't do a valuation as if this was already fully done, and then they defund the traffic, so on and so forth. They just say this land that before was at cost, It has a higher value because it has power, it has license, and you're already starting with all of this. So they do provide you with a value. Now, is it a big value that they provide you with? No. It has a longer time period.

In the DCF, the tax flows are... Fran mentioned about this.

The exit value is one thing, but even the cash flow that you will be receiving once you finish with this development is not expected for the new term. And so all that cash flow, put it in the future, discounted at a higher discount rate, much higher discount rate, to today brings you obviously higher value than what you have in books. that's still negligible, I'll say, compared to what you are generating in an operating asset. Okay, so this is a bifurcation of valuation, and that's why we are providing you, and this is in the executive summary, the valuation table, you have the value for the operating one, 719, and then you have the value for what we call data center with a land. Again, land at cost with at an appropriate value.

Regarding disposals, Stephanie, in 2025, we have an internal objective of reaching around 110 to 120 million, more or less, and it will be done. And then for 2026, our objective was a little higher, I mean, 120 plus, and we believe we are also going to be there comfortably. I mean, because of what we have already signed and what now is in DD or in advanced negotiations, I believe we will be there. I don't have yet a lot of visibility on 2027, but I mean, you can rest assured, I mean, we are no longer selling low value kind of things or empty buildings. We are now selling things which are good ones and we will make sure that we obtain the funding needed in order to comply with our capital increase plus internal capital recycling objectives towards funding the data center expansion and delaying as much as possible capital raising exercises.

Thank you so much.

It's a pleasure. Thank you Stephanie. There is an additional question coming from the line of Eleanor. So Eleanor, the floor is yours.

Thank you very much for the presentation. A quick one from me. Thinking about next year's FFO per share, you previously said you thought that 2026 would be positive compared to 2025, but relatively flattish. Is that still true, or is the strong performance so far this year giving you more confidence for next year when good growth is seen?

I think the guidance will provide it in several ways.

The guidance for this year and next? We will provide guidance in due course next year but Eleanor, in all frankness, next year is going to be relatively flattish. We will do whatever we can in order to improve it but it's going to be relatively flattish because the reality is that we don't start seeing a jump in the income from data center phase one till 2027. In 2027, we will have two tailwinds that will be absolutely differential, full year of the new logistic development, which will add another 17, 18 million to the cash flow of the company. And then full cash flow from data centers that will jump from 60 to 90, so another 30 and no significant increases in costs. So that will be the beginning of the good thing because some of phase two will also be kicking in, particularly if we are lucky with the commercialization Bilbao too. You know, we could also kick in a little bit of cash flow in 27. And then of course, you know, the party starts in 28, 29, when we start reaping the benefits of phase two, which is the really game changer, the real game changer for the company. The volume that phase two will bring of additional rent to the company that will of course make a big difference in terms of cash flow per share and dps that's helpful thanks very much it's a pleasure thank you eleanor and thank you everyone so the ir team will remain at your disposal for any further certifications that you may need and in the meantime enjoy the summertime