Ladies and gentlemen, welcome to Colonial SFL 2025 First Half Results. The management of the company will run you through the presentation that will be followed by a question and answer session. You can ask a question by phone by pressing star five on your telephone keypad. I would now like to introduce Mr. Pere Viñolas , CEO of Inmobiliaria Colonial. Please sir, go ahead.
Thank you. This is Pere Viñolas speaking. Good afternoon to everyone. Joining me today as usual there is Carmina Ganyet , Chief Corporate Officer, and also Carlos Krohmer, Chief Corporate Development Officer. I also would like to start by mentioning Samuel Santacreu , Head of Investor Relations, who usually is taking a very active part in this kind of meetings. He's leaving Colonial because a brighter future is waiting for him and we are so sorry about him. We would like to thank him publicly for his great job that has been done in Colonial, to thank him for his contribution as you will see later on throughout the presentation. Let's go through the presentation of the results for the first half as usual. We like to frame, to put a framework for our results and to share with you some comments about our strategic positioning.
As you know, our strategic positioning is based on two main pillars. The first pillar is our focus in prime asset class, which is delivering constantly superior growth in our cash flow generation due to its higher pricing power on the back of prime CBD. As you can see on slide number four, this is generating higher and higher cash flows throughout these years and also as you will see today in the first half of 2025. The second pillar of our activity is to extract maximum value of our prime asset class positioning also through our abilities in urban transformation, in delivering pipeline activities and new activities in the field of asset classes next to our office positioning, which are also contributing to our growth. Page five, where do we see current trends in our markets in 2025?
First of all, office demand, which is focused on high quality space, is growing. The demand is increasing, the occupiers are expanding as confidence improves after the early 2025 trade tension. This demand remains concentrated in city, basically. This is because occupiers prioritize well-located grade A space and enhanced workplace quality for job retention and attraction. Demand is increasing, supply is not increasing. In fact, supply is shrinking. Let me mention a couple of relevant examples. In Paris, the new urban planning known as PLUB is set to convert more than 800 assets into residential in the next few years. In Madrid, in the last year, almost 300,000 square meters of office stock are being converted also into residential. The balance between supply and demand where we are is going in the right direction.
We would like also to add our initial thoughts on office employment and AI, which should also be benefiting from office employment for the impact of this trend in society. This is the general framework of our strategic positioning, and that is translated in our results. Our results for the first half of this year are again quite satisfactory. I'm on page six of our presentation, and you can see here the main KPIs. Number one, related to cash flow, you can see a sustained cash flow growth. Net rental income is growing 6% like-for-like year -on -year. The EPRA earnings are growing 17%. Our EPRA EPS is $0.17 for the first half. That is on track with our guidance. Second angle of our results: Operational performance outperforming. Very solid. Rental growth, 6%, 9% in Madrid as a specific quote, relief spread 9% for the group, 20% in Paris.
Occupancy remains at 95%. Number three, after 2022-2023 of asset repricing, 2024 of stabilization. In this first half, we're starting to see asset values back on the growth path. Our gross asset value is growing for the first half 4% like-for-like year-on-year. That is a new gross asset value of almost EUR 12 billion. The net tangible assets growing 15% year-on-year, and our net tangible assets now at EUR 9.6 billion. As we will explain later, this is also impacted by certain exercises of pre-tax optimization, including then we are growing 1% compared to six months ago. Finally, we remain as usual, solid capital structure, credit rating remaining at BBB+ for S&P, Baa1 for Moody's, loan-to-value on 36.6%. Our financial costs remaining at the low level, 1.78% at the end of the first half of this year.
Slide seven is a slide that we always like to share because it speaks for itself. Here in a picture, in a map, you can see where our assets are, where the location is, and as a result, you can see both the occupancy for all of the assets, and then we are highlighting the rental growth, which is 7% in Paris in the first half, 9% in Madrid in the first half, 3% in Barcelona, and the maximum rent that we are signing now in Paris is EUR 1,125, EUR 43 per square meter per month in Madrid, EUR 30, in Barcelona. Our prime assets, as you can see, are consolidating the recovery cycle with a strong value growth. After this profile of a cycle that went through a repricing in 2022 and 2023, we are coming back on track, and transaction market is showing signs of recovery.
On this slide eight, we are sharing with you some examples of prime CBD transactions that have been happening or are about to happen recently in Paris or in Barcelona at very, let's say, normalized yields. That will be my introduction. I will come, as usual, at a later stage with final comments. Now I will ask Carmina to step in to share with you our financial performance.
Thank you, Pere. In this section, section two, as usual we are going to cover the main financial KPIs with more detail. The first one, gross rental income, basically growing on the back of portfolio, $8 million, 4% positive growth, and as well project delivery, 4%, a dditionally, $7 million. These two positive impacts of 8% have been mainly overcompensated by the negative impact from Condorce t and Haussmann. As you know, the rents that the assets, the projects that are now in the project pipeline, house plan is going to be delivered in the second half of this year and Condorcet will take more time. The losses of the rents have been overcompensated by this positive growth from the core assets and as well from the project that has been delivered during the second half, especially of last year.
This solid rental income, I am in page 11, is growing in all markets positively, in all three markets, but especially highlighting Madrid and Paris with 7% growth like-for-like from last December 2024. As well, in the building blocks, you can see how the pricing power has all our portfolios, so 2.2% above inflation that has been impacted in the first semester, and as well a positive impact of 1.5% from occupancy. Pricing power, again, we are repeating from the last quarters, this had pricing power above inflation from all our portfolio impacting in this first semester of 2.2%, resulting in a very outstanding 6% like-for-like growth. If we go in page 12 about EPRA earnings. As I mentioned before, these EPRA earnings are growing on the back of a strong operation.
Strong performance from the core portfolio, $10 million positive impact from the project deliveries and acquisition, $4 million, and as well as you know, outstanding growth of 17%. It thanks as well to the active debt management, cash management, and debt improvement of $10 million positively, all of them overcompensating the negative impact. I explained before from Condorcet and Haussmann being now in the project pipeline. Growth outstanding of EPRA earnings, 17%, which is a very strong growth. In terms of EPS, I would remind you that we have been, as you know, last year increasing the equity 16%. We did the capital increase of 16% from 540 million shares to 627, as you know, to reinforce the capital structure to invest in the growth strategy in project Alpha X.
The fact that we have been increasing 16% and the fact that this growth of 17% of EPRA earnings, we could keep the cash flow per share, the EPRA EPS per share, in a positive way. Remaining at the same levels, although we increased the 16% in the equity. We keep on track and we maintain as of today the guidance for the year end between EUR 0.32 and EUR 0.35 per share. On page 13, you know that every six months we update our appraisal, our assets. You can see here the appraisal being updated in June 2025 has been increased 2%, almost 2%, with two positive impacts. The first is the rental growth and the project delivery, EUR 155 million. The second also as well impact is a slight yield compression, so some improvement in rates, EUR 59 billion. In the appendix, you can see the details of the appraisal yields.
The valuation yields in every market are basically flat in Barcelona and a slight yield compression in Madrid and Paris of 2.1 basis points. Consequently, the like-for-like growth in valuation has remained year-on-year very positively, 4% outstanding, Madrid 6%, Paris 3.3%, Barcelona 4.3%. In the second half of the year, 2%, with very outstanding levels of Madrid of 4%. I would like to remind you and to share with you that the first half of the year 2025 in Paris has been included in the appraisal, the impact of increasing transfer tax 50 basis points. As a consequence of factoring the price of this new transfer tax in Paris that has been included, approved during the first semester, Paris has remained positively being impacted. We absorb this negative impact of increasing 50 basis points on the transfer tax as well. Consequently, year-on-year, 4% growth valuation growing.
We see a very positive trend in our appraisal as well. In terms of balance sheet, again we maintain the investment grade credit metrics. Net debt EUR 4.6 million due to the dividend paid and the CapEx Alpha X still not crystallized. Full value from this CapEx that has been invested in the first semester will come at the delivery of the project loan to value. This is why the loan-to-value comes increased from 36%- 36.6%. Still CapEx on Alpha X to be crystallized in valuation in the future appraisals and we maintain the rating metrics in the investment grade area, keeping as well solid position of liquidity covering 1.2 times the future debt maturity in the next years. In page 15 we have been we would like to highlight or to comment as well the commitment on continually optimizing the cash flow.
As you know, on the debt side we have been very actively preserving the solid and the competitive cost of debt thanks to the pre-hedge. Improving the cash flow from our company, from our shareholders and we keep this low cost of debt in the range of 2%. As well in the first semester we have been optimizing the tax regime in the remaining two companies in France, 90 Champs-Élysées and Haussmann, they were the two subsidiaries, the only companies that still they didn't elect for the SIIC regime. The fact that we were at the bottom of the price of December 2024 we decided to elect for the SIIC regime to save the taxes for the future on the income producing of these assets. As you know in Paris for the election to the SIIC regime intends to pay a tax and exit tax that has been.
We have been committed to pay in four years because the law permits you to invest to pay this exit tax in the following four years EUR 67 million in exchange of that the benefit is saving in a yearly basis between EUR 3.4 million per year. This is a very accretive and interesting IRR investment. Thanks to this election and this optimization from the tax and terms of as well on the EPS optimization, now the full activity of Colonial in France and in Spain all of them are included in the REIT regime. In the last page, in the following page, sorry, in page 16.
You
can see here we show probably more details than in the previous presentations how the NTA has been moved since December 2024. The first point I would like to highlight is real estate valuation increases $0.21. From $9.72 to an additional $0.21. On top, the EPRA EPS adds to the NTA $0.17. The pre-dividend NTA valuation in terms of real estate valuation pre-dividend results in a level of EUR 10 per share, from EUR 9.62- EUR 10 per share. Of course, we have been paid a dividend of EUR 29 per share considering the treasury share, so $0.29 per share. Consequently, the NTA after the dividend paid has been increased 1% from EUR 9.62 to EUR 9.71.
The fact that I explained before about the tax optimization, which improved the future EPS and improves the NDV, the fact that we are recognizing this exit tax to be paid in the following four years impacting the NTA, which is the real estate NTA. It's thanks to this tax optimization impact up to EUR 9.60 per share. This is why we would like this presentation. We have added additional more detail to explain how has been the real estate improvement on the valuation and the fact that this optimization that will come in the future value and the future growth EPS remains a stable NTA. Consequently, the NDV improves from EUR 9.45 to EUR 9.54 because we don't have any more this tax capital gain on the assets that have been elected into the SIIC regime.
In the future, this NDV will show no impact on the tax for these assets because all of them would be or are already under the free prism. Now Carlos Krohmer will cover the following third section.
Thank you very much, Carmina. Now let's step into portfolio management. I will start with page 18. First half has been absolutely outstanding in activity, close to 90,000 square meters, one third more than the year before. It's a clear proof that we are having the assets that is attracting the biggest share of demand in the market. If we go more granular, you cannot see it here on the page and go quarter by quarter. First quarter 2025, plus 32,000 square meters. Second quarter has been 55,000 square meters, or 22,000 square meters more. We've almost doubled. The activity in Q2 of 2025 shows not just that we are signing a lot, but we are signing more. We are having an acceleration in our activity.
This means basically that as of today, during the first half of the year, we have signed a total activity volume of EUR 34 million that are just partly in our P&L because this is an annualized number and we are feeding future growth. At what levels of pricing are we doing this? At the top levels, Colonial 's assets are really setting the reference in the pricing. You see prices in Paris well above EUR 1,000. Actually, we have signed EUR 11 million of annualized rent in Paris that are on a total square meter volume of 11,000 square meters. So on average, EUR 1,000 per square meter and quite some examples well above EUR 1,000. In Madrid, Recoletos have been signed at EUR 43, in Barcelona, EUR 30. We are really setting the benchmark, signing at the top end of the market. We have another driver, that is the project activity.
We have strong pricing power as a source of cash flow and then project that we are delivering. We have here one of our flagship projects that you know quite well. It's a total of 60,000 square meters that has been delivered just recently. As of today, we are having already a strong activity and secured, close to secured, 40,000 square meters, 22,000 square meters signed and 18,000 square meters in very advanced negotiation or even head of terms status. Quite strong. 70% of the total premise already with secured tenants with a huge project that just has been delivered recently. What is also important? We are signing at rents well above our initial underwriting. Once this asset is fully stabilized, this will generate a chunk of EUR 20 million of rents per annum with the yield of cost in excess of 8%.
Let me talk on page 20 about pricing power. This is one of the most distinctive elements for prime business model as we are in a segment where there is a very scarce supply and we are providing the best product. We have the ability to deliver on a sustainable permanent basis a significant extra growth compared to the normal CPI growth. You have seen the section of Carmina that our like-for-like growth was 6% in rents, whereas that CPI was 2%. We've beaten by 400 basis points the growth. Here you see what we have signed year to date. We have signed an ERV growth of 6% in the group. Our rents are 6% higher than the reference market rent as of December 2024, 6% just in six months. It's not 12 months, it's six months.
If we compare this with the current indexation levels, the planet indexation levels of the segments where we are, we have 300 basis points in excess of the indexation that applies to the contracts in the group as of today in Madrid, even 600 basis points. The main message here, our business model, our assets are delivering, are providing an extra growth between 300 and 400 basis points on top of inflation. Also as a consequence, free lease spread has been quite strong, 9%, one of the highest in the European arena, driven in particular by Paris, the 20% release spread. On the occupancy, we are remaining, I would say, at the structural very healthy level to have enough activity in order to capture this rental growth so that we have always some space available to take the upwards trend of the rents.
We are at 95%, more or less at the same level as that of 2024. I would like to highlight, if we compare with the past, that we have things that entered into operation and that were bought last year, the Alpha X portfolio. If we take this out, more comparable like-for-like perspective, the occupancy is even a little bit higher. It's around 97%. When we look across segments, the prime segment where we are basically focused is strongest. Then we have secondary in Barcelona 22@ . We've always said that Barcelona, we have a positive outlook. This will gain momentum in the coming quarters. Let me just finish this section with a little more forward-looking view. It's on page 22. Peter already mentioned this.
When we look at the two biggest segments of our portfolio, what you can see is that there is a significant removal of office supply in the Paris market. More than close to 400 assets, 700,000 square meters. This further plays in our favor, making a much better imbalance between strong demand and non-available supply. You can see the playing field of Colonial. It's high quality assets in the city center. The availability today in Paris is 1%. In Madrid, we have had a significant improvement of the availability in Madrid marketing sense. For us, there is nothing really available. We are today for the total CBD at an availability of 2.6%. If we look at the product that is a high quality product that gets the rents above EUR 40, the availability is 0.8%, so almost non-existent. We have here a quite relevant business to play in Barcelona.
It's not here on the page. The availability of grade A product in the city center is 1.2%. Also, a way to see the high quality, the underlying high quality of our portfolio, if you want to get some operational KPI, an indirect way to see it is the sustainability level of our activities. We are at the top level. Just to share here on page 23, we have been again for the third year in a row included in a very selected narrow group across industries of climate leaders by Financial Times. We are part of the Climate Leaders 2025 Financial Times. With this, I give over to Pere for the conclusive chapter, chapter number four about future.
Thank you, Carlos. Yes, I would like to go through the last section on future growth. You know that what we are trying to accomplish as a company is the delivery of sustainable growth of cash flows based on our prime positioning in the prime CBD arena and based also on our capabilities in urban transformation that allow for additional value add coming from our different initiatives and projects. In slide 25 you can see that at the end of this first half of 2025 we again are delivering this growth which is now 12% CAGR starting first half of 2022 until first half of 2025. If we look forward in the future, how this growth behavior, how this growth profile looks like. There are several layers that should be shared or discussed.
Number one, what's coming that will be coming from the urban transformation projects where we expect an impact in EPS of around $0.11. Number two, what's coming from prime asset reversion that will deliver superior cash flow growth. We are expecting, roughly speaking, EUR 47 million in the midterm. Number three, new initiatives in our particular case in the field of science and innovation with third party capital that should be adding additional $0.02 - $0.03 to the EPS. Finally, what may come from our opportunistic capital recycling. These are the pillars of our future growth in our cash flow. Going more in detail about each of them. Page 27. Urban Transformation. As you know, we are now developing a few projects. Four outstanding. Two in Madrid and two in Barcelona. Plus other ones, Magnum project and the last renovations. What we call the Alpha X initiative.
You can see here that we will be delivering almost 90,000 square meters in 2025 plus more than 100,000 square meters from 2026 - 2028. These boats that we now have out of the water, when they go back to the water, they should be contributing with, roughly speaking, EUR 100 million of rental income. That means an additional EPRA EPS of more than $0.11, 33% of growth compared to 2004 EPRA EPS. As of today these projects are going nicely as expected. We are positive on their delivery for the next few years. Number two, on page 28 another driver of cash flow growth will come from the prime asset reversion. You can see here a number of examples that will generate cash flow coming from renovation programs that in the case of Paris we're talking about more than 20,000 square meters.
Here you can see a few examples like Louvre Saint -Honoré, Champs -Élysées 90, or Cloud Paris. All these could account for EUR 47 million of additional gross rental income. Number three, page 29. You know that we started this new initiative about science and innovation. Recently we announced the final execution of our agreements. This partnership with Stoneshield is going quite well. We signed a transaction that included an investment of around EUR 200 million, looking at a target levered IRR of 15%. That would mean EUR 0.023 of contribution to our EPRA earnings on the back of investing into this vertical. We are working on a short-term pipeline of EUR 700 million of new assets under management where we could be investing in the near future. This is another vertical of growth that is enhancing our strategy going forward. Finally, a comment on the cycle.
Cycle by definition is not so easy to track or to define, but it's clear that today we are presenting results, some results that for the first time in the last few years are showing a positive contribution from increased asset valuation after 2022 and 2023 of repricing and 2024 of bottoming and stabilization. There are increased transaction activity that are opening for deal windows. That generates another source of value that would show up soon in the case of time office assets and will allow for a stronger delivery of growth for Colonial, for our company. This is basically the outlook for the next few years. Finally, let me share a quick comment on our progress on the merger between Colonial and SFL. We are in the final stages for the creation of this pan-European platform. The calendar has been going through the different milestones without any negative remark.
As of today, at the end of the first half of 2025, the general shareholders meeting of both Colonial and SFL have already approved the merger. As we speak, we are going through the completion of the final regulatory stages. No pending open issue as of today. Therefore, our expectation is that the merger will be finally executed and the listing of SFL will be taking place probably at the beginning of the last quarter of this year. The Colonial SFL as a pan-European platform will start to operate in the last quarter of this year. Final comments just to wrap up on everything we share with you today, basically we are happy with the results. As you know, we've been on a strong delivery of cash flow growth for a few years already. A double-digit year-on-year earnings growth has been with us for a number of years.
This time we also see asset revaluation coming along. The two value drivers are becoming positive, and this cash flow growth is because ordinary course of business is going very well. You've seen fantastic commercial leasing, commercial activity, rental activity, huge increase compared to last year. This is very important because this talks, this says a lot not only about the past but also, and more importantly, about the future. You've seen that it's not only commercial activity, it's rental growth well above inflation with fantastic like-for-like occupancy, very strong, and then a fantastic management of our debt structure, which is super reduced cost that remains with us for the last few years and for the next few years. All of this together means that we can enjoy again a fantastic first half in terms of operational activity and, in other words, in terms of growth.
Looking ahead, we have shared with you the different sources of growth profile that will be coming with us in the next few years. More than EUR 150 million of future rents through new pipeline and version enhances urban transformation growth strategy through the Science and Innovation initiative with third-party capital and the opportunistic capital allocation that can come further. As a final comment, we remain on track with our guidance for strong ongoing growth, the like-for-like revenue growth in line with previous years, a strong EPRA EPS CAGR growth for the next few years, and short-term EPRA EPS to remain in the range of EUR 0.32 - EUR 0.35 as we've been disclosing recently. With this, I will end my presentation. Thank you for your attention. Now, as usual, we are open to any questions or comments you may have. Thank you.
Ladies and gentlemen, the Q&A session starts now. If you wish to ask a question, please press star five on your telephone keypad. Thank you. We now move on to the next question. To the first question coming from Valerie Jacob. Please go ahead with your question.
Hello, good evening. Thank you for the presentation. I've got three questions, if I may. The first one is on your guidance. You've had a strong first quarter and the range you gave earlier this year is quite wide. I was wondering if there was a reason why you didn't narrow the range to the top of the guidance and if there is anything specific we should know for H2 or if you're just being conservative. That's my first question. My second question is on the tax optimization that you did. I'm not sure because if I look at the saving versus the EUR 67 million you spent, it's a yield of 5%. That doesn't look very attractive compared to the other opportunity that you're showing on page 26 or investing in your own share.
I was just wondering if you could give us some explanation of the rationale or why you think it's the best use of this money. My last question is on Barcelona. You've had some negative reversion and you still have some space to let. I was wondering if you could give us an update on what's going on in Barcelona. Thank you so much.
Thank you. I will cover question number one. Carmina will cover question number two and Carlos probably will cover question number three. Now, on the guidance, we prefer to remain prudent as of today. It's true that if you look at the results for the first half, they are pointing more at the upper end of the range of the guidance than the lower end. As of now, we remain with a guidance of 32- 35. I would say that if I had to provide a comment, I would be more confident in the upper range than in the lower range. With six months, we prefer to remain with this range of guidance for 2025. On the tax optimiz ation story, Carmina.
Yes, on the tax different angles. The first one is that these companies had in the NDV recognized and as well in the balance sheet tax capital gain, a tax liability on the implied capital gain on those assets. What are these amount or what was this amount on the latent capital gain taxable? It was EUR 90 million. The way that we choose now is something that we monitor very closely. The way that we have choose now the election for the SIIC regime for those companies, for those assets, it's because the valuation based on the election, based on the appraisal December 2024, it was at the bottom of the level of the appraisal. It means that now we have been a positive growth on those assets. In the future will come additional value.
The fact that we choose the right, we believe that we choose the right moment and why we believe that is the right application of this money or this cash because basically the corporate income tax attached to those assets, it was EUR 90 million and paying now EUR 66 million. We save EUR 30 million value for our shares. We optimize more than EUR 30 million. On top, we have expected in a yearly basis EUR 4 million, EUR 3, EUR 4, EUR 5 million saving tax. It's like basically having an investment of a high, high double -digit IRR. This is why the rationale behind this election and this decision.
Thank you. That's very clear.
I will take the last question just to add also some point to what Carmina said. If you take EUR 4 million of running savings or EUR 5 million of running savings on the money invested, it is a yield on this investment of 6%- 7% at least, without taking the rental growth that these assets could have. On the release spread in Barcelona, it was 1.7, slightly negative. This is basically that in the first half there have been some contracts of our residual exposure in a secondary area, Sant Cugat and 22@. It's also at the moment a little bit weaker, and therefore there has been this negative release spread. Also, the rents in Spain had gone up much quicker than in Paris. All in all, in the prime we are performing well.
As I said, going forward we have a positive opinion on Barcelona and we see the future evolution of the market with our product positioned there as an opportunity more than a threat.
Thank you.
Next question. Veronik Miertens, please go ahead.
Hi, good evening all. Thank you very much for taking my questions and the presentation. Maybe first on the Stoneshield transaction, and appreciate you mentioned that there are over 250 accounts that you've done outreach to, several investors already in due diligence. Could you give slightly more color on how far you are in those processes and how confident you are that you will be able to announce something before the end of the year? I believe in previous presentation you did mention that you were not intending to consolidate as well. Hoping to get some additional color here.
Thank you, Veronik.
Yes, we are working on several conversations with several investors. As of now, we are in advanced stages of discussions, meaning due diligence,
work
with lawyers, structuring, and so on. I would say that our central scenario would be a first closing with new investors stepping in on the last quarter of this year and also on the back of certain additional pipeline opportunities that could come for the last quarter of this year. Before that, we don't see anything in particular happening.
Okay, that's clear. Thank you. You mentioned capital recycling already as one of the opportunities. Obviously we've seen you already make some investments, but you mentioned that the market is opening up. I think there were also some market news articles on Colonial potentially being in the market selling lower -yielding assets. Currently, more top of mind are the more interesting opportunities at the moment and more buyers knocking at your door?
Yes, I think that what we can see across Europe in general is that if you, if we concentrate on the prime CBD, the market is there, meaning that investors are there. What has a question mark is if the sellers are there nor the product is there. For example, as of today in Spain, I would say that it's difficult to invest because of a lack of opportunities in prime CBD. In our case, we may do both things. We may be selling and buying. We are going through discussions or separate through a process of disposals of the first disposals in France. Also, we may consider disposing tactically of some of the residential in Spain. At the same time, we are looking at investment opportunities in our local markets.
I would say that by now we don't have yet a clear positioning for the short term because we'll depend on individual opportunities. Certainly, we see the market more open for prime CBD both in Spain, France, and across Europe in general.
Okay, thank you.
Maybe one follow-up because you mentioned you're exploring in local markets. I think it was last year where you mentioned a couple of times that maybe exploring in different markets was also an option. That's now not really a top of mind?
It is, it is. We remain very open to investment opportunities outside our core markets, but of course going through the normal process of carefully assessing the investment opportunities that maybe are there. By definition, yes, we will always have a look at investment opportunities, of course, in France and Spain, but we do not exclude investment opportunities in other countries.
Okay, that's clear. Thank you very much.
Next question. Ana Escalante, please go ahead.
I have two questions. The first one is on your EPRA vacancy rate for offices that has gone up slightly due to the delivery of some of the projects. I was wondering what's the state of that vacancy rate as of now in July? Is that taking into account some of the leasing that you've done in Magnum or not yet? Where do you expect that trending towards the end of the year based on your ongoing discussions with tenants? The second question is on the agreement and the joint venture with Stoneshield. You say that you have some quite advanced discussions in terms of third -party capital.
Maybe if you could share, of course, with respecting the confidentiality, what type of investors are looking at this and also in the context of improving real estate investment markets across Europe, to what extent do you think there will be appetite to do both? In terms of Paris offices and also these type of assets, whether the third party that's looking at this is the same, or there are some differences across the investors that are looking to invest in the two types of assets, let's call it that way, the premise you own and the assets that will fall into this joint venture.
Yes, I will go through the second question, Anna, and then maybe Carlos can step in with your first question. As of now, we are in advanced discussions with potential investors, but at the same time still maybe too soon to provide additional color. What I could say as of today, first of all, high quality names, names that anyone would be comfortable with. That's the first comment. The second comment, these kind of investors are sharing our views on this particular adventure of our joint venture with Stoneshield. So, we believe that there is an opportunity for those sectors and companies operating in those sectors that have a particular profile for growth on the back of innovation and science.
Also, because of this activity, this allows for a certain relationship with the landlords that goes beyond the typical real estate relationship, provides a more kind of a long-term relationship with value added content and a higher stickiness, let's put it this way. All of this providing both higher returns and higher growth. As of today I would say that the investors we are talking to are buying into this story. It's also the story they like and as I said at the beginning, they're basically good names. We expect that by the end of this year, the last quarter, we will have more clarity. By the way, the other thing to highlight is that this is already going beyond the Spanish, let's say, borders. Spain is a fantastic place to be because it's the highest growing economy in Europe today.
A pan-European approach to this initiative is also the strategic bet that these investors are taking. We are satisfied with where we are. Hopefully by the end of the year we will be able to be more specific. Carlos, if you could step in on comments with the EPRA vacancy rates.
The EPRA vacancy rate had a little bit of movement in Madrid. Actually, we are talking about we had in March 26,600 square meters available. Now we have 27,200, a movement of 600 square meters, a little bit more availability. Typical activity of a little bit of rotation. It's in good assets. Sometimes people change and we see this more as an opportunity on the other side. All of the head of terms and advanced negotiations that we have in Magnum are contracts that will come in the coming months and that are not part today of the occupied space. We have already today secured a very relevant chunk of current availability. The slight movement, the slight uptick of 600 square meters that are moreover located in a very good location, we see this more as an opportunity that is now at a very good rate.
Thank you. Maybe as a follow-up to my second question, the one that Pere answered, could you please remind us what's the expectation that you have from the investment in the joint venture with Stoneshield in EPS for 2027, 2028? I think that's the guidance that you provided earlier.
Ana, as we said, we have an exp ected EPS in the range of $0.03 per share. Of course, it will be subject to timing, pipeline, et cetera, and also the business plan. It is the expectation that it's included as well in the growth strategy and the growth avenues that we have.
Thank you.
Next question. Pierre Emmanuel Clouard, please go ahead.
Yes, good evening. Thank you for taking my question. I have several questions. The first one is on France. I see that when I'm looking at the report that has been published by SFL yesterday, the GRI is up 1% year-on-year, but you are saying that it's actually down 3%. Is there anything that we should have in mind that could explain this difference? Just to fully understand the figures, you have a 6% like-for-like growth in Paris, but your GRI is down 3%. Is it fully attributable to the rent lost due to tenant vacating and assets being put into a strategic vacancy in H1? If we can add the amount of rents it represents, it would be useful.
Carlos, would you like to take this one?
I'm not really sure if I understand clearly the question. I think it's a very detailed technical question, and I have now not here with me the SFL presentation of yesterday. I would suggest we can just clear this in a separate technical. I don't have specifically the future.
No problem. The second one is on Barcelona. Just to understand, how can you explain a 2.3% like-for-like value growth when the release spread has been negative by 2% and the like-for-like growth actually is zero? If I'm not mistaken, there has not been any yield compression in the city. How can we explain the value increase?
Because the value increase is basically what is the driver is the market rent, not the release spread. Please keep in mind also that the release spread is a very limited part of the commercial activities. Only those contracts where there have been a renewal that have been affected. When you look in general at the ERB growth of the portfolio of Barcelona, the ERB growth year to date is 3% just in six months. It's a healthy growth. Moreover, as you know, we are also progressing quite successfully with the projects and one of the projects in Barcelona, and then we had here and there minor refurbs. It's fundamentally driven.
The release spread, as I mentioned, is especially affected this first half by contracts that have been one of them in Sant Cugat, another one in 22@, but it represents a super tiny part of our portfolio in the city of Barcelona. It's not really fully representative. What really counts is the ERV growth that really affects a much broader part of our activity. This is the reason.
Okay, the final one is on the capital allocation. I see that your EPRA LTV is up to 45% today. Can we have in mind the CapEx that you are planning to spend in 2025 and 2026 in million euros?
As you remind, our project pipeline has roughly CapEx deployment of EUR 360 million. What we expect in terms of the project pipeline: these are the Project X assets, and Méndez Álvaro Magnum is basically finished. Roughly an amount of EUR 70 million of pending CapEx for 2025. We have incurred year to date EUR 30 million and something in the range of EUR 140 million for 2026.
Okay, if we include everything, the refurbishment CapEx, not only the pure pipeline projects plus Stoneshield, what could be the amount of total CapEx to be spent?
This additional figure, I have it now not with me. I would include it together with the other question that you have on the technical part for this call.
Okay, thank you very much.
Next question. Michael Finn, please go ahead.
Yes, hi there. My first question is on the asset in Barcelona that was finished recently called the Diagonal 197. I believe at the first quarter it was mentioned that there may be a tenant for that building and I was expecting it to maybe be in the press today. I'm just curious if you have any update on that. My second question is based on the science fund. In the presentation in April you mentioned I believe eight different cities and I'm just curious which cities are currently screening as the best. Should I assume that it is the three cities included on page 29? Any other details there please would be great. Thank you.
I could not follow the second question. Maybe Carlos could answer that better . On the first part, no, at this moment we don't have additional progress on Diagonal 197.
There was certain visibility that didn't have additional progress yet. Let's say we are where we were last time we talked about this. The second one, Carlos, maybe you can answer better.
Sorry, the second one, I did not get it correctly. What was the second question?
Yeah, the second part is out of the eight cities that were in the press back in April, I'm just curious which ones now screen as the best ones. Which ones?
Which ones do you feel will be the first target?
I think this is very much opportunity -driven. At the end, we will see where the opportunities come. This is not today, not so easy to define.
If I can add something, Carlos, as you are saying, very opportunistic, very driven by individual opportunities. If I may say something, recently in our core markets, Paris and particularly Madrid are showing super strong performance. Looking at our, let's say, long term experience in these markets, the way we see them recently, particularly Madrid, I would say it's outstanding.
Okay. Okay, brilliant.
Thank you.
Next question. Jonathan Kownator, please go ahead.
Good evening.
Thank you for taking my question. One question on leasing, please.
Obviously, you highlight quite a positive environment.
Particularly for Madrid and Paris beyond, you have quite a number of letting challenges or upcoming projects to be delivered. Can you share perhaps with us any interest already for these projects? Obviously you've got the, I think, scope project for 2026 in Paris. Do you have already conversations on this project?
Thanks.
Maybe I start. I think the first very clear case study to this is that you're seeing when you look at Magnum. It's a large project, 60,000 square meters, super, super large. Just has been delivered and we are today 20,000 square meters left [SS net] and close to another 20,000 very advanced conversations. So almost 40,000 square meters secured. This is a perfect case study to show that our product really is attracting in the market on the Project X pipeline. You know that this is a little bit more midterm in terms of delivery, more back end driven. It's a little bit early. Typically the commercial activity starts when you start to see and to have a little bit of look and feel. First one that will come into this situation, into this phase is scope.
Scope.
Probably the marketing commercial activity will start somewhere around the second half of this year, but it's already generating quite positive momentum in the market. We really believe that our product is attracting sufficiently and will attract strong. We are positive. The first of the assets that we come close to such a phase, where this starts, the other ones is later, is more later in a second.
If I may add something, Carlos. Yes. As you say, scope is the first one. We are starting commercial activities, as Carlos was saying. Now in the second half we are prioritizing a multi-tenant start strategy for this one, and we'll have more color by the end of the year. On the other three, as you know, there's one in Barcelona that already has the tenant in place, which is the Sanitas one, which is already identified in Sancho de Avila. On the Santa Hortensia one, the only thing that I can say is that here we are giving a higher priority to a definition of this project, more on the living segment, including the student housing and other kinds of users. We've had a huge, huge attraction or interest coming from the established operators in this segment. I believe that this site could be outstanding.
Finally, in the case of Condorcet, yes, it's long term. As of today, too soon to provide any additional color on this one.
Thank you. Just on the Stoneshield project, obviously I think you had also some leasing challenges to lease there. Are you able to provide any update on that.
Please?
Can you repeat, Jonathan, because we could not follow you exactly.
Yeah, the question was the same question on [audio distortion] Splashfield, whether on the innovation assets, whether you were already leasing in the market and whether you had any discussions.
Already on these assets.
Obviously, I think the yield that you gave originally was a target yield when.
These assets would be.
Finished.
Just trying to gauge interest already for these assets. Thanks.
Yes. Yes, Jonathan, this is Carmina. Yes, we are. We have very interesting of both teams. We are working together in a very interesting pipeline, based on investment thesis. This is the main reason that we have some of them deeper conversation and some of them with some exclusivity. We stated the strategy of triple net lease strategy, long-term contracts, BBB names as a corporate credit metrics with a spread between 400 bps, 300 above the risk-free rate attached to this corporate rate. What it means in reality is that we expect stabilized yields at 6.5% in some cases at 7% stabilized yields with some contracts. We state that the target of leverage IRR of 15%. There are this kind of approach and investment opportunity that we are analyzing and of course we see if we succeed or not.
This is the investment thesis and the conversations we are having in some of the opportunities.
Okay, thank you.
I understand that there are more questions.
We have one more question. We have a question from Fernando Avril. Please, go ahead.
Hello.
Thank you very much for taking my questions. Two quick ones please. First, on the renovation program in Prime Paris, what will be the needed CapEx for this program? Also, timing expectations for this plan to capture these extra rents. I don't know if you mentioned this. Second, a P&L question is basically the overhead line. I've seen it is up around 6% in H1, but it is also up 20% in the last couple of years. I don't know if you've had some one-offs or if you think this is a fair assumption for the overhead line for the next few years. Thank you.
I take the one on the renovations. There's always a little bit of rotation in the assets and then some renovation program opportunities. I would say, as you know from the past, these are in Paris terms. Talking about Paris KPIs of spending minor activities. Minor means maybe EUR 1,000, EUR 1,500 per square meter. Sometimes if it's a little bit more ambitious, a little bit more. This is a little bit the range. It's not like the Project X full refurbishments. They always have had a very, very interesting payoff because you then really get a significant, very significant uplift in rents that is not fully reflected here in the reversion. Reversion is that today's ERV, typically when you do such a renovation program, you do it to get an extra premium to convert the space in an even better one.
In terms of timing, I would say the one that will come a little bit more in the shorter term because we are benefiting from finalizing also the Cartier premises. We've done some things on the entry hall for the office part, which is the Louvre building. Part of the things that have been done in the last quarters have been really fantastic with a significant pickup in rent. The Louvre part is maybe the one that would come more in the shorter term in a time frame of between 12 and 18 months. The others would then come more progressively. It has typically a very, very super high payoff in terms of underlying assurance that we get compared to the marginal CapEx to be put on it.
Fernando, on the overheads, I'm not sure if I understood which kind of series of data you are looking at. Basically, the main issue impacting the overheads is one shot; it's about what the cost or the fees and the advisory that we have been in court with cross-border measure with SFL. You know that during the last two years we have been working with the regulator, with the tax administration, with some analysis as well on the independent experts, as well as restructuring part of the organization. This means that this is one shot cost in the overheads that is impacted between 2024 and 2025. The rest is organic on the same level that we had in the previous years. It is true that during the last years a lot of efforts and, I would say, cost attached to the restructuring and reorganization and cross-border measure.
Okay, thank you.
There are no further questions. Therefore, I give back the floor to Mr. Pere Viñolas . You have the floor.
Thank you all for your attention. I think that again we are happy to be sharing with you a nice trend in the performance of this company of Colonial. Hopefully very soon we'll be able to share more of this with you. Nothing more on my side, thank you very much for your attention and have a fantastic day. Thank you. Bye bye.