Merlin Pptys Socimi Ord

Good afternoon, ladies and gentlemen. Thank you for joining Merlin's full year 25 results presentation. You can find all the materials that will be presented in today's call in our website. I will please ask you to abide by the disclaimer contained in it. Our CEO, Ismael Clemente, along with our two directors, Ines Arellano and Francisco Rivas, will walk you through the main highlights of 2025. We'll then open the line for Q&A where you have to press star five. With no further delay, I pass on the floor to Ismael.

Thank you, Teresa. Good afternoon, everyone. We are in front of a very interesting set of results, certainly the best I have seen since we have been leading this company. It's been an almost perfect year because the fantastic performance of the data center division has been accompanied by very, very solid performance also on the traditional asset classes. And all that has been reinforced by an excellent behavior of the share. So, you know, frankly speaking, what can I say? I mean, the operating momentum is super strong. We are enjoying satisfactory rental growth in all asset classes, traditional and non-traditional, because in data centers we are also achieving better rents than underwritten. We have a high occupancy, 95.6%, and continue solidly generating FFO with a plus 5.1% print in the year. In offices, we have a very remarkable like-for-like of 3.5%, but more importantly, an interesting release spread of 4.8%, which is probably the highest Reflection of what we commented in past calls that, you know, the Madrid market particularly is now under a certain like, you know, short squeeze. I mean, there is a distraction on the offer side, which is causing, of course, an effect on the pricing of the demand. The occupancy stays at all times high, 94.2, and this is particularly noteworthy in a year in which Barcelona has been a relatively softer market than it was in the past and has lost occupancy. So, you know, Madrid has been able to compensate Barcelona, which will continue for the coming years to be one of our weak spots that we will continue working because sooner or later the market will digest. the current situation of other supply and will come back to normality. In logistics, we have been positively surprised by the release spread, particularly because, as commented on a number of past calls, this is a market where we were seeing a little bit of less strength than we have been seeing in the past years. But this year has been extremely strong, particularly on the release spread. The reason why the like for like is low is simply because we have lost three points of occupancy, which is normal because we were occupied at 99% and we told you that there was only one way to go from there, which was down. And that we ended the year with a very good printing occupancy of 96.4. Shopping centers, another super strong year, surprising us on the upside with And very good for like 4.7 and still with very affordable rental levels for our clients at 11.0% in occupancy cost ratio. So very, very strong year in shopping centers. On data centers, well, basically, we have achieved a full de-risking of phase one. So phase one is now water under the bridge. I mean, we will report it as assets in operation from now on in order to try also to simplify your lives because, you know, if we continue reporting phase one, phase two, and soon phase three, it's going to be a ruby cube. So, you know, that will convert into assets in operation. with an occupancy of 100%. We have also achieved a very interesting de-risking of Phase 2 with the lease-up of our Arasur-2 asset, 48 megawatts, which is around 20% of the total capacity of Phase 2, but more importantly, it was the next Indian trying to attack the fort. I mean, it was ready for service December 2026, and as such, now it's you know, done. The next Ready for Services are end of 27, so we have now plenty of time to work on the lead in which we are already working and starting exchanging technical documentation, and then we will need to come to terms in the economic side of the business and then move into documentation, which in some cases, particularly with hyperscalers, can be a painful process. In terms of financial performance, the value uplift has been very strong. But this has been mainly boosted by data centers who have contributed close to $360 million increase to the total revaluation of the portfolio, 4.7 GAV increase in the year. The total shareholder return, 10.2, is fantastic. But more importantly, we believe it's relatively sustainable. because we know what is coming and we think unless the world goes upside down, which is another possibility, if 2026 is a relatively simply flat year in terms of performance of traditional asset classes, we believe we can achieve very similar figures at the end of December. Our financial situation remains very strong. The loan to value is low at 28.9. 100% fixed rate, and we don't have maturities until November 2026, a maturity which is already tackled. I mean, with the existing cash advance and a number of bond taps and bank lines that we are signing in the coming days, that maturity will be, you know, already tackled without affecting the CAPEX needs of the data center department. And we have been able to maintain our rating both with S&P and Moody's, which is always interesting because at the end, that cost is one of our raw materials. I mean, we need to continue keeping our competitiveness in terms of rating. In terms of value creation, 129 in non-core divestments as already disclosed to market. You were perfectly aware that we had these investments almost done, and probably the most interesting thing is that we have another close to 130 already signed and to be executed in 26 and 27, which is very interesting because basically almost half of our targets for 26 and 27 are already covered in the absence of any accidents. It's important to pay homage to the activity of our different business divisions. The year has been excellent in terms of pre-lets. In offices, we have signed more than 56,000 square meters, you know, beyond the daily trading. I mean, the ins and outs that, you know, happen every day in the portfolio. In logistics, 73 plus and head of terms, which we believe is going to become a reality of another 55, so significant progress also in logistics. And in shopping centers, to me, the most salient activity in the year has been the inauguration with an almost full pre-let of the Marinetta extension, 26,000 square meters. which, you know, has made the Marinera concept in La Coruña even more dominant than ever. I mean, it's a center which is really rock solid and is one of the jewels in our little crown. And in data centers, well, We are now at 112 megawatts IT versus 45 latest reporting. And therefore when 66 new megawatts have been let and the prospects for the risking of the rest of the phase two remain brilliant. So in terms of main financial magnitudes, the GRI print was 541.9 million plus 3.5 like for like in the year. The FFO, well, we broke our own record is better than the one of year 2019, 326.7 plus 5.1% year on year. But it is important to note that in 2019, we had 84 million of BBVA rents in our belly. So, you know, with a little bit of help from data centers, around 30 million, we have been able to overcome the sale of the BBVA portfolio, which with hindsight, I believe was an excellent decision because we delivered the company in anticipation of a high interest rate cycle. And that gave us also sufficient financial muscle to be able to develop phase one of our data center deployment program, which was absolutely necessary because, you know, Had we tapped the market to develop data centers starting from scratch, the market would have been a little bit incredulous about our capacity to do so. So we had to do it with our own money, and the ABA was instrumental for that. The 58 cents achieved are plus 7% versus the initial guidance, although we updated to 56. I think it was in 3Q, no? We updated to 56. In reality, we expected 56, but, you know, we have had little income, particularly from better margin in our data center operation, and, well, some income also from NRCs, from the installation of machinery on behalf of our clients through remote hands agreements in our data center division. The LTV stands at 28.9%, which is pretty low, but more interestingly, net debt to EBITDA stands at 9.0 times. Of course, it is growing, but it is growing as we are spending the construction of new units in our data center division. The NTA per share is 1536. And for the first time, we are very, very close in our share price to our NTA, which is, you know, incredible to see. I mean, I'm really, really enjoying, you know, enjoying to see that when I, you know, shut up, shut on my computer and I see the share price evolution, I am really humbled. The GAF, like for like, has gone up by 4.7%. But very importantly, with a net income yield of 4.6%, which is sound because, you know, these days, you know, improving NDA or improving GAF through asset revaluations is easy, but we have taken exactly the contrary way. I mean, we have completely recalculated our prospects for particularly logistic preleds and part of the logistic division, and we have decided to expand a little bit our yields in order to make sure that we repair the roof now that the sun is shining, you know, rather than, you know, doing it when the things start to get rough. TSR, as commented, leads us to propose a dividend per share of 0.44 for the year. which is slightly above the 80% threshold. But I think we have to share a little bit with our shareholders the good operating momentum of the company. In terms of EPS, we have, after careful reflection for the moment, we have taken the decision to continue to not capitalize interest expenses. We believe it is cleaner. We believe it reflects better the real, you know, operation of the company. Therefore, as a consequence of that, we are indicating for 2026 a relatively flat figure in terms of EPS and DPS. But, you know, we will, of course, endeavor to beat it if we can. It won't be easy because it is mainly attributable that the reason why it's flat is mainly attributable to the fact that all the growth in top line is absorbed by more financial expenses as we continue basically building. We continue building our inventory and as a consequence, we continue employing our debt capacity. And this is, of course, you know, raising our the bar of our financial expenses. And, you know, for the moment it is keeping in our top line growth. 2027 will be a different thing. I mean, 2027 will be a year in which we will start, you know, seeing the first, you know, hints of what the DC division will bring in the future to this company. And 28, 9, and 30, as commented on many other occasions, at least on the model. Of course, you never know, but they look like a big party. That is it. I mean, I pass the floor to Inés Arellano, who is going to comment on the different asset classes, and Fran Rivas will comment specifically on the data center division.

Thank you, Ismael. So moving to what today represents 55% of our portfolio, we've generated 292 million of rent, and that is a 3.5% increase in like-to-like, as commented by Ismael, very, very sound, with a very high release of spread, up 4.8%. It is true that if we were to take into account this one list that we mentioned last year, it would have been 0.4%, but at least it's in the positive arena. The occupancy at 94.2, all times high. Again, we'll watch very carefully how the evolution in Barcelona is ongoing, but we are confident that eventually this will be digested. It's been a very healthy leasing activity market with more than 275,000 square meters contracted. And in terms of valuation, we see a 1.2% like-for-like increase. with an implied gross yield of 4.9, not reaching five yet, which as you know, it's always been the number that we thought should be the right one for offices.

5.25.

Okay. And net initial yield of 4.2%. And this implies a two basis point yield expansion. And as I said, the leasing momentum continues as demonstrated in slide eight, with five very good examples of standard leasing deals spread across not just CBD, but also key peripheral corridors. And they all have secured very high-profile tenants. You have three assets here that are still in the work-in-progress portfolio, meaning these are not in operations yet. But you also have two, like Cassiana 278 and Las Tablas, where we've secured very high tenants, very high-quality tenants. like a university and a bank. Moving to slide nine, we continue, again, to see a strong trend of reconversion. And we wanted to lay down what is the current stock of Madrid. You see a little bit of everything, so this number may seem a little bit big to you. depending on the source that you used to consider. We've taken the Belbex number.

CoStar.

This is not only made by pure office buildings. It's also taking into account the offices associated to industrial uses, some residential buildings that are being used as offices as well, also administrative buildings. What we see is that there is more than one million square meters expected to go back to their original residential use, because right now, as we found, the highest and best use for a lot of these spaces is actually beds. Beds, because this is both living, resi, hotels. And there is an additional 1.5 million square meters that could be reconverted again, to these other uses out of the pure office building. What are we doing? We have identified 7% of our stock in Madrid office, okay, not the whole stock, but just in Madrid, whereby this doesn't mean that we're going to be selling the whole 7%, but we've identified 33,000 square meters that will be sold so that somebody else reconverts it plus another 27,000 square meters that we are going to suddenly refurbish or reconvert them for educational uses. Moving to slide 10, what we see is that, well, we still believe that unique assets deserve to remain as offices. And this is a perfect example, Alfonso Onsen. There's a clear scarcity of good space, 10,000 square meter size buildings in prime CBD, and we are fortunate of having a zoning this unique asset is right in the middle of Madrid, and we know that there are best-in-class tenants looking for space like this one. So we are going to refurbish this asset. We are actually refurbishing this asset, and the expected yield on CAPEX will be around 9.6%. So there's another example in page 11. Again, super prime office building, Liberdade. As you know, this one we bought it on purpose to be converted into what it will soon be probably the best office building in the Lisbon market. And as of today, even if we have not started commercialization, we have fully led to a top luxury group of the retail, the high street retail space. Then we have Adequa, and this is to show you that there's no only demand for pure prime CBD assets. Adequa is one of those examples where a tenant of ours that was willing to expand to grow in a campus, very, very close to La Castellana, has actually signed an agreement with us, a turnkey project. And so, again, the yield on this one is around 10%, 10.4%. And we will soon, in 28 and 30, we will have these two buildings built up and completing what today is Campus Adequo. And then finally, this is a jewel. This is a very small building, but a true jewel, and it's gonna be even more valuable once the Renata project gets executed. As you know, it has been approved, and once it is executed, we know very well that a lot of tenants will be willing to pay very high rent for these unique assets, which, for those who have visited our Plaza with Picasso building, it's just next to it. You can actually monitor the works from that one. Moving to logistics in slide 15, GRI like-for-like has been positive despite the loss of a tenant in a 48,000 square-meter warehouse in Cabanilla that had an impact of 3% in occupancy. The sound 5.8% release spread together with an average CPI of around 2.5% has helped to increase rent by 2.5%, reaching $86 million. Gross yield at 5.7%, slightly higher than the average yield of the portfolio, 5.3%, and net initial yield at 5%. The lifting activity has been strong with more than 440,000 square meters contracted compared to only 100,000 square meters in 24, while valuation uplift has been moderate, being only 1.2% on a like-to-like basis. This has been mainly driven by the increase in CAPEX. Certainly more on future developments, but a little bit as well on existing assets due to, for example, fire safety measures. In 2035, we finished construction and delivered 21,000 square meters fully left to Noati, Huerta and Total. And we've also sold 73,000 square meters warehouse that was under refurbishment in Victoria and have added a couple of projects to the committed pipeline, now amounting 279,000 square meters. Yield on coverage for all these projects remain quite appealing at 13.2%. The noncommitted land bank has therefore reduced by 61,000 square meters, now standing at 183,000 square meters, located mainly in Madrid and Barcelona. If we move to shopping centers, well, this has been said already by Ismael, it's great performance in every KPI that you can look at. The GRI of 133 million, it's an uplift of 4.7% light for life. It's a great combination of a very high release spread plus CPI. In terms of valuation, this 2.1 billion portfolio has gone up by 2.9% with an implied gross yield of 6.4 and net initial yield of 5.7. And the portfolio, the shopping center portfolio is shifting to adapt to market trends and customer needs. And we are seeing retailers demanding new formats. So fewer but bigger. and certainly better located. The synergies with logistics, they continue to be a reality, and this is value also for the larger storage spaces that they require, and experience of our customers keep on being the main and main focus of everything that we do. And in slide 21, you have a few examples of new retailers living space in our office, mainly focused on health and beauty and leisure slash home entertainment. And with no further delay, I pass the floor to Fran, who will explain where the future is coming from, so data centers. Thank you.

Many thanks, Inés. Moving into the data center section, I would like to start by congratulating, as Ismael did, our data center team and division for a fantastic 2025 year, which had a very strong workload and, you know, proved an excellent execution. Part of this effort, as you have seen, has been crystallized at the beginning of this year, 2026, with the signing of very significant contracts across our assets. Turning now to the presentation on page 24, we provide, as always, an overview of the two phases under operation and or construction with updated figures. On the one hand, we present the results of phase one, which we will now refer, as Ismael said, as assets in operation, where the 64 MEC have been fully contracted. The originally 14.5 cross-gallon cost shared with you 12 months ago has now increased to 15.8%, with a stabilized GRI of 97 million above the previous 88 million reported 12 months ago. Regarding phase two, which we will refer as work in progress with, we have been able to redensify the first two buildings in Lisbon, moving from 36 meg IT each to now 40 meg IT each, increasing the total size of phase two from 246 meg to 254 meg as you have here in the presentation. This has led as well to an update of both the total investment amount and the expected stability rate now at 397 million. delivering a very attractive 14.4% gross G-Loan cost. In terms of commercialization, I'm moving now to page 25. We have successfully completed the letting of the three assets of this phase one, following the signing of an 18-meg contract with a very well-known new cloud operating, Getafe, first time in our portfolio, and reaching the full occupancy of our assets in operation. And for those of you who are more curious about the technical aspects, 34 megs out of these 64 are air-cooled, while 30 megs are liquid-cooled. And, you know, by the type of specification we have, it means that these 30 megs liquid-cooled are targeting above 70 kV per rack. In our experience right now, they are more than 120 kV per rack. which shows that, you know, the type of technology they're using is the last one of NVIDIA. On page 26, we show how the rental income will ramp up on a yearly basis, with 31 million already received in terms of rents in 2025, and a forecast of 66 million for 2026, resulting in a stabilized GRI, as we mentioned before, of 97 million in 2027. From a value creation perspective, page 27 shows the breakdown of total cost incurred. The valuation already captured, although it's a little more limited in Getafe until the signing of this new contract that the appraiser was not aware of. And the expected additional value to be accrued if the values assumptions remain unchanged as we are disclosing in the footnote. So this 291. estimated value we expect to be captured in the next evaluations, if those, I'm sure, are retained. Moving into phase two, on page 28, we include a brief reminder of the commercialization status of our data center assets that we divided, as you know, in bookings, advanced negotiations, and led or pre-led. And with this in mind, in page 29, we summarize the status of the different parts of phase two, with now a total capacity of 254 MEC IT. Going one by one, in Bilbao 2, what we call ALA 2, the construction is progressing on schedule. After 14 months of execution, we have gained sufficient certainty to enter into a pre-let agreement, as the ready for service dates that we show in the presentation, December 2026, very, very short length. This is a highly complex deployment because we will coexist the deployment of the equipment that we have as landlords, but also the client equipment, which are largely based on a liquid cooling solution. The client was already in our portfolio. It's a very well-known new cloud operator focused on AI, and the level of densities that the client is requesting allows us to know that the they are using state-of-the-art NVIDIA technology, as all of you know. The connection to the substation of this building two has been already completed with our first building, what we call R3. And right now we are just progressing with cabling of those conduits that were created for our first asset there. Regarding Bilbao R1, As we will show in the following slides, the construction has started at the end of last year, beginning with piling works, and we have a mundane hour estimated ready for service by the end of 2027. Moving now to the center part of the page in Lisbon campus. At the end of 2025, we started the construction of the first two buildings following, believe it or not, one and a half years of piling works. And please consider that the Lisbon region is both flood-prone, as unfortunately we have experienced a few weeks ago, but also is located in a seismic zone, which has required a significant soil preparation, reason why of these 100 years of previous works. And as an example, the piling works have reached approximately 35 meters in depth, just to avoid situations as we commented. And thanks to this preparation, none of the works were affected by the heavy rains experiencing the region earlier this month. From a construction point of view, we have once again re-densified the buildings, increasing capacity to 40 meg per building IP, benefiting from the insights gained from clients' discussions that we have all over the last months. In parallel, substation works have also started with a ready-for-service in all these first two buildings by December 2027. In terms of leasing, we are in very good progress regarding the initiative that we will comment on the following slides while keeping the buildings ready for the latest computing technologies in case the first lease option does not ultimately materialize. Moving into the two Madrid projects, in tres cantos we have obtained the reporting approval, what we call reparcelación in Spain. of the land and we are in the final stages of securing the urbanization permit to begin on-site works, which will run simultaneously with the building construction. The Ready for Service is currently planned for the first half of 2029. Regarding Getafe 2, located as you know on the same street as Getafe 1, we obtained the Parliamental Assessment Approval at the end of last year and right after demolition works started and are ongoing and the construction permit has been already requested just to make sure that when we finalize the demolition works, we can immediately start. Given the previous timing experiences, we are still maintaining ready for service in the second half of 2029. Although knowing that we have already power on site, what in our naming we call power ready supplied, We have already entered in negotiations with several clients interested in this site, precisely for the reason that power is already there. Regarding CapEx commitment planning for phase two, and now I'm moving to page 30, 2025 has been a record year for the company in terms of CapEx commitments. And this is significant because you need to know that a significant portion of this CapEx relates to equipment, which typically has shorter execution timelines once we commission it on site. Commitments have reached 987 million versus the previously reported 836 million, but also the next two years looks very strong in terms of CapEx commitments. So in the absence of any capital event, the company expects to tap the debt market, as Ismael was mentioning before again, mainly during the second half of the year, once the equity that we raised in 2024 is fully deployed and at work. The target stability GRI is planned for 2013, as mentioned in the last quarter presentation, at $387 million, delivering a 14.4% stabilized gross yield on cost. All these figures are reflected in page 31, 32, and 33, which include images showing construction progress in both Bilbao Resort and Lisbon campuses. And for those attending to our Capital Markets Day on the 9th and 10th of March, you will have the opportunity to see this place at a human scale, which I think I can tell you that is pretty impressive. Finally, on page 34, we would like to share the status of our EU Gigafactory Initiative. As previously mentioned in the last year call, the timeliness of this initiative have experienced significant delays. And based on our latest information, the award resolution is now expected before year-end 2026. As we have stated several times, our Phase 2 projects were not conditional upon obtaining the EU Gigafactory Award. In fact, this initiative was not given under, you know, consideration when we launched Phase 2. And we have always maintained discussions with traditional clients, both hyperscalers and new class operators in line with our original business plan. Nevertheless, as we always say, we try to be constructive stakeholders and good citizens, and we remain prepared for any initiative that could benefit the regions where we operate, and particularly the Arabian Peninsula. And we, as Trump believes, we continue believing that bringing the gigafactory status to our region will create a lot of value, whether or not we are directly involved. As you may recall, we received most of our capacity in ARA 2, Getafe 1, and the full capacity of ARA 1 for this initiative in Spain, and the first two buildings for our Lisbon campuses of the Portuguese initiative. And we were always getting an Iberian construction, so both Spain and Portugal, something that looks like we're well-received because most of the countries are doing exactly the same. in other parts of Europe, and offering several locations per country to allow synchronized computing and redundancy across the campuses. The situation as of today is that the Spanish government has shown a preference for another Spanish project, and thereby they release the capacity that we have reserved for that initiative in IATA 2 and Getafe 1, which as you have seen are both now fully led as, you know, following what we have always commended to have, you know, one option and the other. With regards to other one, we are in advanced negotiation with a particular client and those negotiations of course will be more intensified and documented once the ready for service dates are becoming more and more and more closer. Regarding our LISBON campus, we remain committed to this EU initiative, which is now why we are moving forward with the first two buildings in connection with the Portuguese proposal. And once again, as we approach ready for service dates, the number of clients inquiring about availability continues to grow. For this reason, we will welcome, you know, clarity from the EU in terms of the timing because as soon as we are approaching and approaching, you know, delivery times, normally more clients are interested and, you know, we would want to have to take a decision there. And now we may close this presentation with a closing remarks and outlook before we enter into Q&A.

Okay, Frank, thank you. Well, on page 36, closing remarks and outlook, everything which is written here is pretty evident. So I'm not going to torture you with any more bullshit. The only thing that I will say is that the idea is to move in terms of leads and pre-leads from the current 112 to as close as possible to 200 megawatts in data centers. And these could be achieved through one or several combinations of facts. More normally it will be through the documentation of the Lisbon lease, which could come in the form of a formalization of the EU Gigafactory program or otherwise through an alternative route. I mean, we have been lately adapting the design of our campus there to the specific requirements of a certain client. You must have noticed that the total capacity has increased by eight megawatts. Well, this came at the cost of 12 additional million in construction costs, but I believe this makes sense. And, you know, now the white rooms conform to the specifications of a concrete SOQ of a concrete client, but more importantly, are perfectly flexible to adapt to the requirements of either other hyperscalers or neocloud clients. So, you know, with that, I believe the 2026 should be the year of Lisbon. We will work, we will endeavor to achieve that target. And that's it. Dividend and FFO, we have already commented on it. And I believe the best thing we can do is move into Q&A. so that you can make your questions in the line, and we will do our best to be able to reply to your questions.

Thank you very much, Ismael. We'll now open the floor to Q&A. The first question comes from the line of Marios from Bernstein. Marios, you're on the line.

Afternoon, everyone. Thank you for taking my questions and for the presentation. I've got a couple of questions from my side. So firstly, on the lease-up and the pre-letting of your data center pipelines, I think you mentioned that Bilbao Building 2 was pre-let to existing Neocloud tenant and that Madrid Getace was to a new Neocloud operator. So can you comment on the occupier types you're having discussions with across phase two and whether we should anticipate a diversification of your tenant base across that phase?

Okay. Look, Marius, basically the leasing of Bilbao 0.2 has been closed with an existing client of ours. The one in Madrid, however, with a different one. At present, the diversification of our tenant roaster is perfectly descriptible. You can imagine with only 112 mW LED. that I will beg you all to wait till we are one gigawatt in operation in order to calculate the real diversification of our portfolio. Because had you calculated our diversification in logistics in 2014, you will have come to the dismay conclusion that it was 72% DHL. But now no individual client represents more than 10% of our rent. So, you know, We need to continue building if we want to continue leasing. What I can tell you, talking about phase two and preliminary conversations for phase three, is that we are talking to every kind of client you can imagine. You love hyperscalers. We are talking to all the hyperscalers except one, which is a self-builder. But the other three, we are talking to them. And we are talking to... no less than five tier one neoclouds alike. So, you know, sooner or later, we will end up closing an agreement with big hyperscalers and you all will breath with tranquility. But I need to remind that closing deals with hyperscalers is not an easy thing. It comes at a cost because, you know, they are, the fastest cowboy in town. And as such, they have a big pistol. And, you know, you have to be very, very careful because that pistol can kill you. So, you know, it's big organizations, complicated organizations. You can engage in very fruitful and healthy conversations with the infrastructure guys, with the cable guys, with the first line guys. But when you move into middle office and back office, it can be complicated. And at times it is as frustrating as reaching contractual status and then stopping conversations because the conditions can turn abusive very quickly. So we will end up closing deals or reaching agreements with hyperscalers, but probably already in phase two and more surely in phase three, But you need to bear with us for a second because we also need to defend our financials, which are your financials. So let's not be childish on this and let's be careful about what we wish for because, you know, closing an agreement with one of these is very easy. However, the fact that this agreement is good is a very different thing. So we have to continue working in that respect. What I can tell you is that we are now technically qualified with three out of the four hyperscalers. So at least we know that our facilities conform to their technical specifications. And sooner or later, we will end up closing.

Thank you very much, Mario.

Thank you very much. Thank you.

The next question comes from the line of Veronique from Kempen.

Hey, good afternoon. Thank you for taking my questions. Maybe first on just the other business lines. I was hoping, could you give some additional color on what you expect in terms of occupancy rate, any big departures planned in 26, especially for offices and logistics, so your view towards 26 for those business lines?

Okay. Okay. Well, in offices, the idea is to remain relatively flat. So, we have finished this year at 94.2. The idea is to finish this year between 93 and 94%, which is already a significant effort because you have to take into account that in April, we are losing 11,000 square meters from meta in Barcelona in the middle of 22%. Yes, in a building which is a winner, clear winner in the market, but replacing 11,000 square meters in today's market in Barcelona is not an easy task. So we have to be prudent, taking into account the situation of the market there. In logistics, our idea is to improve a little bit the occupancy compared to the 96.4 we have. It's quite binary because it depends a lot on whether we are able to lease one big shed in the Henares corridor or not. If we lease it up, then it's going to be very close to 100% again. But let's not plan for that, at least for the moment. We will inform in due time. And then in shopping centers, we are going to remain relatively flat because it's almost impossible to go higher i mean yes i mean you can you can go 20 basis points higher or that you know it's it's complicated to go significantly higher in shopping centers in fact what we are trying to do now is is to yield manage a little bit of portfolio because uh you know we are the cheapest uh shopping center owner in in iberia uh in terms of ocr And, you know, that is always a very interesting position to start from. And we will manage a little bit our shopping centers, although the behavior is impeccable for the moment.

Okay, thank you. That's clear. And then one question around the data centers. your gross yield costs went up again. And you also mentioned that the margins actually were better than expected. But I see that's a number that you haven't changed in the slides. So could you give some color on the movements on those numbers and why you still report a 70% margin if it was actually better so far?

Because, Veronique, what has been better is today's margin. While we are on ramp-up, we do not achieve the 70%. So 70% margin is on stabilization. And so we were expecting a lower than what we had achieved margin during the ramp up. 70% remains as the stabilization margin.

Okay, and regarding the growth yield cost, it is simply a reflection of the fact that the market is helping us. I mean, yes, of course, I mean, The teams are doing a fantastic job, but we are operating in a market which is quite favorable at present. So this is why we are improving. If you look at our forecast in data centers, both in terms of cost per megawatt and delivery times, we have been absolutely bang on compared to the numbers we gave you. So, you know, our construction cost has been exactly the one we forecasted. Even though you might notice that in phase two is higher than in phase one, the only reason is that in phase two, we had to buy two of the six plots of our data centers. And also, phase two is full liquid, while in phase one, we had some air, okay? So, you know, that is the reason why we have a higher cost. Also, Lisbon, as commented by Fran, is a slightly more costly construction to make because of the strict seismic regulations similar to Japan or California. You know, we expect, I mean, we have already raised by 20 basis points the expected year on course on phase two. Let's see how the leases come up. We might be able to bid it or not. I mean, that we better save than sorry. I mean, we prefer to underestimate a little bit rather than being, you know, absurdly bullish, particularly when there is so much to be done before inaugurating those assets. I mean, The RFSs, other than Bilbao or Asur2, are expected for the end of 27. And between now and the end of 27, there is a lot to see. So let's continue, you know, let's remain prudent.

Okay, clear. Sorry, one small follow-up on LISP, and I just wanted to double-check. It says now advanced negotiations on the slide for the LISP asset. Is that referring to the EU gigafactory, or is that concerning something, a different tenant?

That one is concerning the EU gigafactory. Then with different tenants, it is not advanced negotiations. It simply leads bookings. The Portuguese government is conscious of that. They are honest people, and they are also trying to find a way to firm up part of the commitment rather than leave everything conditional upon obtaining the EU program. they are looking at ways to firm up part of their commitment so that we can close an agreement and we don't need to go through an alternative route.

Okay, that's helpful. Thank you.

You're welcome.

So the next question comes from the line of Florent Laroche from Odo. Florent, the line is yours.

Good afternoon. Thank you to take my question. Actually, I would have just one question on data centers. So we can see that you have made a lot of progress on phase two. So congratulations. But we can see that you have also a lot of work to do before completing phase two. Why is it today's right timing to present us the phase three in two or three weeks? And why it is the right timing maybe to start to launch this phase three? in terms of risk?

Well, the reason is twofold. On one side, we have a number of internal definitions and we report as we reach the milestones of those specific definitions. But in my mind, I see Phase 2 significantly at risk. Let's leave it that way. Second, Powered land is a scarce asset in Europe. I mean, everyone is dying to get powered land. We are lucky enough to have a lot of power land in our ownership because we started asking for power in 2021 and 22 when nobody else was asking for that. So I think it is in the best interest of all of our shareholders that we make full use of that power land. The future, only God knows, but at least make use of everything we currently have because we continue enjoying very interesting yields on cost. And what is more important, we continue commercializing in clear market. At the beginning, when we explained this new venture of data centers to all of you, Our prediction is that we will commercialize maybe phase one in clear market, that there will be no competition. But certainly we were expecting competition for phase two. The truth is that the market is full of noise, full of bullshit. But in reality, very few people are really building or building to the exact specifications of AI. And therefore, very few can really meet the requirements of AI clients. And to our surprise, we are commercializing phase two almost on a clear market basis. The next reasoning is that if we go fast with phase three, we could achieve a very similar result. So basically, I believe it would be extremely unfair to our shareholders not to move We know it's a lot of complication. We know it's a lot of construction yards. We have recently incorporated one executive just for the control of our works. But I think the best thing we can do if we want to be responsible managers is to move on and continue developing capacity because because we are in a situation in the market in which is, you know, as favorable as you can probably think. Okay.

Thank you. Okay. You're welcome.

The next question comes from the line of Celine from Barclays. Celine, the floor is yours.

Hello. I just have two questions, please. The first one is on the beat on the FFO this year. It was driven by better gross to net margin in DCs. Can you explain how you achieved that and whether we could expect the same in 2026? And secondly, it's about retail. Your name popped up in the news regarding a large Spanish shopping center portfolio. Can you provide any comments if you can? And if you can't comment, We've seen the expansion into DCs, but there wasn't much mentioned about retail. So can you clarify your appetite for shopping centers going forward? Thank you.

Okay. Well, starting by the easiest, which is the FFO gross to net. Well, as commented by Ines, we have basically improved compared to our projections because we had a better margin. And talking about margin, the margin we expected for this year, that was not the stabilized margin. It was not 70%. It was well below 70%. That was the margin we expected for this year. But we have beaten that margin a little bit because we have been able to operate more efficiently our data centers. And then we have, as commented before, we have also benefited from a number of little tweaks and things that we have been doing on behalf of our clients. Many of our clients do not have a super big established presence in Europe. And as such, you know, they rely on our own engineers in order to install equipment or make offices fit out, you know, do improvements to their equipment once installed. I mean, we are helping them do that and and they are paying us for for that service and as a consequence we have improved a little bit uh the the uh the gross to net margin in in our in our data centers but not to a point in which we are in a position to um re-forecast the 70 stabilized which we are we will very soon uh reach uh but we we cannot re-forecast that because First, 70% is already a very good gross to net margin, particularly compared to what our peers in the U.S. are getting. And second, because we still do not have all the information in order to be able to reforcast that. And then retail.

Can you, Celine, just to be clear, can you please repeat the question that you made?

There was just the news that you were about to bid on a Spanish portfolio, retail portfolio. So could you comment on that?

Well, basically, we are very happy with the performance of our retail. We have in a number of occasions commented with you that, you know, being a listed company, sometimes you cannot be too contrarian to the market because retail If we had, we would have loved to bid for one or two assets in the past three, four years, but we would have been slaughtered in a public place, I mean, had we done it. So now there is a retail portfolio available in the market that we have analyzed in depth in a number of locations already. It was very difficult to reach an agreement with the sellers because it was a relatively convoluted situation, but now it's out there. What I can tell you is that the assets are high quality. They will make a perfect fit with ours, but I can also tell you that these will be a capital recycling exercise. So if you are afraid about us using one penny out of our data center spending capacity, this is not the case. I mean, if we are to bid for this portfolio, which we will only do if we can achieve a positive capital recycling figure. I mean, if the capital recycling disappears, we will not bid. And we are not going to participate in an investment banking auction. So we will do our best. We have a number of pros and cons. Our main con is that, of course, we don't control the French connection. Our main pro is that the Spanish staff, we know them very well. They are colleagues in the market, and they will be probably very happy to join the family. So we will see what comes out of that process. But if one day we end up bidding for that and we are successful, What I can assure you is that we will rotate internal capital, try to sharpen the pencil a little bit in terms of ROA. I mean, try to obtain a positive print, a positive arbitrage in ROA, and make sure that the data center effort is not even disturbed by this acquisition. Remember, there is a big hype in the market about resi, transformation, et cetera. We have a number of levers that we could action in order to make sure that we can rotate capital in an efficient way. Okay?

Okay. And now, just to be sure, we're talking about a portfolio that is worth more than $1 billion, right? So you would have to sell more than $1 billion. Is that correct?

Yes. That is... Okay. That's a big amount. Yeah.

Okay.

Thank you. The next question comes from the line of Fernando Abril from Alantra.

Fernando, the floor is yours. Hello. Hello. It's . Thank you very much for taking my questions. I have three please. First, on the recent rent, it was clearly above your expectations, no? I think, correct me if I'm wrong, but it was around 140,000, more or less, per megawatt a month. So I know it is Madrid, no? But how should we interpret your embedded 130 assumption for the entire phase two? Because it seems a bit prudent probably to me. Also on the contract terms of the, you know, Bilbao 2 and Getafe, I don't know if there were any material changes to duration or escalator structures compared to previous agreements. Okay. And then last, sorry, and then last, you know, that the Spanish grid operator and also several Spanish utilities have recently announced increased CAPEX plans for the power network. So I would like to know your view on this and whether you believe or not that these investment plans will, you know, meaningfully alleviate grid congestion and improve the power availability in Spain or not. Thank you.

Thank you, Fernando. Well, first, on the price of Getafe 2, we are not going to be very specific because, you know, it's a client and, of course, the terms of engagement of our contracts have to remain secret. But it is true that in the global underwriting of Phase 2, we were relatively conservative at 118.5 on average, and we are beating those figures. um that it's always good to remain prudent because you know there could be deviations in course uh there could be uh you know many things equipment that could uh vary so we have to be we have to remain prudent but it's true that you know in that particular contract it's it's been better than expected and then in in terms of uh contract uh uh basically the same that we have been doing up to now in the region of 10 years and with fixed escalators, which are now slightly higher because the 10 year inflation swap is also higher. So, you know, we are happy with the contractual terms. Remember that one of the reasons among many that why we moved into data centers is because they were able to improve our vault once we sold the three portfolio. That of course was a secret weapon. I mean, it was clearly improving our average vault across the portfolio. One of the reasons why we moved into data center was because the vault were pretty attractive. They remain so. And in fact, not only they remain so, the clients are now wanting longer terms, if they can, in exchange for rent, because they are trying to lock up IT capacity in a market which is, you know, starved of IT capacity. There is very few, very few places where you can, you know, land 20, 30 megawatts of AI-capable equipment. There are not so many places in the world. Co-location is a different thing, but AI... is very special and there are not so many places in the world where you can do it. And one thing also that the clients like a lot and why they are ready to compromise for longer terms is expansion capacity. I think it was a good vision in our side to bet from the very beginning on super large plots with a lot of energy in which we could grow with the client doing one building, another building, a third building, and a fourth building. That has been probably a very good decision. And clients like it because once they send their expats, their engineers to a certain location, they achieve significant synergies if they can operate a more significant capacity than simply just one data center and move to another place within a country. So this is the situation. And regarding RedEA and the increased capex, it's a much welcome piece of news. Of course, our stance with the regulator has always been that they need to improve the grid. The Spanish grid is Believe it or not, because all of you are affected by the 28th of April blackout last year, but that was a different thing and happened for different reasons. That the Spanish grid is super high quality, it is very well designed, very well, you know, duplicated and weft, and it's very robust. Of course, it will need investment in order to adapt to the new demand because at present we are coming from a world in which the consumption was going down year after year because many households were incorporating self-generation and as such, you know, the consumption was going down and down and down. But we are in front of an era in which consumption, contrary to some of the official estimates that were made a long time ago and probably wrong with the new circumstances, a consumption will go up and will go up very significantly, if only because of the effect of the data center industry. As a consequence, the country has to make an effort in terms of bringing together generation and consumption. So that means investing in distribution and transport. And, you know, any news in that respect are very much welcome. The alternative is to allow, and probably could be a very interesting complement, The alternative would be to allow private grids. But, you know, that is always complicated in Europe, as you know. The word private is not very much loved in Europe. And, you know, private grids are only a reality for very small distances. I mean, when you are bringing a certain generation mainly from renewable sources into a certain point, that bigger grids, are not that common in Europe. So very happy to see that they are starting to move. The only problem is the speed of movement, which, as you know, is a problem always with the public sector. For the moment, the only entry door we have found to the grid is through agreements with renewable producers. And this is what we are doing. I mean, we are engaged in a number of negotiations with a number of renewable generators, and you will be keeping abreast of our evolution over the coming months slash years, because it is the only practical way to access the grid as of today. I mean, one day there will be a bigger grid and electricity eventually will be widely available. But if you want to continue honoring your demand requests from your clients. The only way is through agreements with renewable generators. Okay. Thank you. You're welcome.

The next question comes from the line of Stephanie Dosman from Jefferies. Stephanie, the line is yours.

Hello, good afternoon. I would have two questions. The first one regarding data centers and the appraisal values. I understand that appraisers recognize the value creation closer to the time of the lease signing. But could you say how much of phase two is currently factored into the appraisal values?

So what the appraisers are doing is they're just incorporating into their valuation the assets that are under construction. So once we start construction, then those assets come into the perimeter. You have seen June 2025 that we have incorporated several assets, mainly Ada 2 and Lisbon 1, because they have already started construction. And then in December 2025, we have incorporated – we started construction, as discussed before, in Ara 1 and Lisbon 2, which means that the appraisal takes that into the appraisal. The rest of the power land that we have is not being – so it's holding at cost. And only when we start construction, then is when the appraisal enters into that process. From a valuation point of view, then you need to, you know, differentiate between the assets which are under operation and the assets that are, you know, as considered as WIP. In the cases of, you know, assets in operation is exactly what, you know, like an office building or shopping center logistics that we have. So, you know, they do normally a DSF of 10 years. And that's the reason why they arrive at this value. And regarding WIP, As you may remember in logistics, appraisers tend to wait until the very last moment when the asset is, you know, completed and you have a tenant to reappraise the asset and then we're holding at cost the different developments. But also, you know, you need to be aware that those type of exercises normally were carried out over, you know, a period of between nine months and 15 months only because the, you know, construction of logistics is much, much quicker. In the case of a data center is different. First one is first, you know, the land that you call that cost already, just because you are starting a construction there, it means that, you know, this power land all of a sudden becomes more, becomes a reality first. And second, you are incurring a lot of cost and approaching, you know, pre-lets over the period of the two years that normally two years and a half that takes us to build this type of asset. So I will say that the value is, little by little absorbed until, you know, delivery times. Of course, the fact that we have, you know, pre-levs or not pre-levs, of course, give more certainty to the projects. But this is how they are normally approaching it.

Stephanie, just to add to what Frank commented, it is very important for you to know that the four land plots that have been included in the scope of work for the appraisers, they were on land that belonged to us. So just by putting them at market value, which is powered land and not raw land that was sitting in our balance sheet at almost nothing. Just by considering them as powered land, that is a significant uplift on a relative basis, of course, right? So, phase two, as Fran said, the first thing to know is, or the first thing to bear in mind is how that land, the market value of that land stands. In our case, for what we had before, it's certainly an uplift. It is not the same for the land that we buy, of course, because that's the market value. And then as the different milestones of CapEx keep on going and as you approach the cash flow, you will get more value crystallized. But for this four particular projects, there's obviously been an uplift because they had sitting in our balance sheet for long at almost zero.

All right, thank you. My second question relates to more traditional business, the office market in Barcelona. You said it is softer, of course. I was wondering what you expect on the mid-term. I mean, I understand you expect no oversupply shortly, but Will the demand be strong enough to see a higher release spread going forward? And what's your view, generally speaking, on the Barcelona office market?

Okay, look, the Barcelona office market is in a digestion crisis. 320,000 square meters without client joined the market at the end of 2024. And that heat is still being felt across the market. So this is taking a heat on the tension, the demand tension in the 22 ad area. More noticeable in occupancy than for the moment in rents, but clearly noticeable. Our expectation in a normal world is that we had positive release spread overall in Barcelona this year. Not brilliant, 1.7. They're still positive, so rents are holding for the moment. The market has corrected itself, as you can expect. So no new construction starts have happened since 2024. And in normal circumstances, unless the the Afghanistan-Pakistan war expands to Iran, Israel, US, Russia, you know, normally within 18 to 24 months, Barcelona should be able to absorb the excess offer and come back to a certain normality. That would be what we would normally expect. Could be a little bit more, could be a little bit less, but Barcelona remains a you know, strong, small city. I mean, very specialized in certain submarkets within offices, a little bit of pharma, a little bit of gaming and tech. And, you know, as a consequence, we expect the city to continue performing robustly once they have been able to absorb these little bit caused by a situation of oversupply and touristification of the office development.

Hi, thank you very much.

You're welcome.

And the final question comes from the line of Daniela Lungo from Percentier. Daniela, the floor is yours.

Hi, thank you for taking my call. I have a couple of questions, if I may. One is in relation to your guidance for 1026. I'm trying to understand what assumptions are going in there in terms of additional debt funding. I think you said that in the second half, you're gonna raise some more debt in terms of share count, if you assume any change in that. And also in terms of the logistics, whether you assume that that big asset that has been vacated by the client is gonna be list up at any point during the year. So that's my first question.

Okay, Daniela. Look, regarding the guidance, The guidance stands out of our modeling of the year. We believe that the top line, the income could go up by around $40 million easily, but it's going to be eaten by bigger financial expenses mainly. Why is that? Because there will be two events during the year. money is fungible. So, you know, 800 million will disappear when we have to pay or repay our bond. And second, the speed at which we are spending or investing money in CAPEX because of our phase two deployment is significant. Already in 2025, we exceeded Our original budget, I say error, I believe the original budget was like 830 million, and we ended up spending like 980. So we have spent more money in CAPEX commitments, okay, in the year than commitment, meaning when we commission a certain equipment, we pay between 20 and 40% upfront. and then we pay the rest upon the reception of the equipment. However, that money for us becomes untouchable because we need to face that payment even when the equipment is received. So in our models, this is what we are seeing. Whether that could be achieved, I mean, if we are quick in leasing up some logistic gaps we should be able to improve it. They wouldn't move that much the needle, because if you take into account that logistics account for around 84 million of our rents, and the rents expected for this year are going to be in the region of 600 million, you know, it's not going to move the needle that much. What share count considered for the guidance? Same share count. That is, of course, a very Tricky question, I know, because you are already assuming that there is going to be a capital issuance at some point. But this is, I mean, we are talking apples to apples. The 58 is with the same share count we have at present.

Thanks for that, Ismail.

No, no trick, huh?

Second question, if I may. And that's on phase three. I wonder whether there's been any investment, even minimal, in infrastructure preparation in Lisbon. If I'm correct, Lisbon is part one of your phase three. And given what you mentioned about the earthquake risk and all that kind of stuff, I wonder whether there's already been a little bit of investment in infrastructure into that. Related to also phase three, what would be the earliest date that you would like to start ordering equipment or start properly deploying into phase three?

Okay. Regarding the commissioning of equipment for phase three, et cetera, we will inform in detail about phase three on the capital market day. But, you know, you will see what is basically the cash flow schedule in, you know, for Phase 3, and, you know, you will see it significantly overlaps with Phase 2. Regarding whether we have already advanced infra-investments for Phase 3, yes. I mean, in Lisbon, we have been preparing the ground for plots 3, 4, and 5. And we might start precharging land for plots six and seven. But we are talking about relatively humble investments. I mean, we are not talking about significant things. Likewise, we have spent money in the licensing of a number of projects, including, for example, the one in Extremadura, where we have already requested construction license. and we have already applied for specific planning status by the autonomous region. We are building up electric capacity in anticipation of phase three. For example, the whole purpose of the solaria agreement in November was that, was to illuminate plus four and five of Arasur. And some of the other agreements that we might be reaching in or have reached in, as we speak, you know, are also related one way or another to phase three or pipeline. But, you know, we will inform about all that in the capital markets day. The only thing that is important for you to keep in mind is that phase three will be defined with everything that is, you know, being licensed and has power. So it will not include any pie in the sky or talking about things in which we could get the electricity, et cetera. We will be very specific about that on the capital market day.

Okay. Thank you.

You're welcome.

Thank you very much for the questions. Just a quick reminder, many of you already know, but we'll be hosting our Capital Markets Day in Bilbao the following 9th and 10th of March. It won't be broadcasted. It will be recorded and then uploaded into our website. But all of our material will be published in our website that morning, the 10th of March. So hopefully all of you can make it so you'll get to enjoy a nice wine. And you know where we are in case you have any other questions and have an excellent weekend.