Hello everyone, and welcome to the six months 2022 results presentation for MERLIN Properties. My name is Emily and I'll be moderating your call today. At the end of the presentation, you will have the opportunity to ask a question by pressing star followed by the number one on your telephone keypads. I will now turn the call over to our host, Inés Arellano. Please go ahead, Inés.
Thank you. Good afternoon, everybody. Welcome and thank you for joining MERLIN's First Half 2022 Results Presentation. The materials for today's call can be found both in our website and on the webcast, sorry. I would please ask you to abide by this disclaimer contained in it. Both Ismael Clemente, our CEO, and Miguel Ollero, our COO, will walk you through the presentation, and we will thereafter open the line for Q&A. With no further delay, I pass the floor to Ismael. Thank you.
Good afternoon. Welcome to MERLIN Properties First Half 2022 Results Presentation. It's been a, I would say, a very productive semester for the company. Particularly, I am proud about the performance in the top line, because in all the three asset categories that we operate, we have experienced very interesting like-for-like rental growth, blended to 7.1% at the company level. While many people believe that this is owing to inflation, let me explain that inflation is less than 40% of that figure. Although it is very easy to do the math, that inflation is 5.4% and therefore 5.4% of 7.1%, the truth is that it is 5.4% for the whole year.
Not all clients renew and apply new inflation on first of January. In reality, the inflation driven like-for-like increase is 39% of the total figure. The other 60 is basically net occupancy gain and nominal rent increase, which is important, I believe. Occupancy stands now at 95.1% overall in the company, despite having sold the BBVA portfolio, which as you all know, contributed with 100% occupancy to our overall portfolio. In offices, we had a very good performance, I would say, with a 5.5% like-for-like, a 6.3% release spread that I think it was even surprising for us.
A 90.4% occupancy, which still is below what you might expect, that we hope will significantly improve towards the second half of the year. We maintain our 91.5% guidance for full year. Logistics is having a fantastic semester. It's been all wine and roses, and the cut-off date effect this time has been favorable to us. So all stars have been aligned. No clients have left just before the cut-off date. As a consequence, we have recorded 99.2% occupancy, which is, you know, incredible even for us. 9.3% like-for-like growth, 6.7% reletting spread, which is strong. You know, very good prospects for the rest of the year.
In fact, given the situation, we are resuming at least one spec development in order to have some product, because otherwise we will run out of product during the year. Towards the end of the year, there could be, although we are working to change it, there could be a significant exit of a client that will create a cutoff date effect in 31st December. We are losing a client. We are in fact not losing, we are moving to a different shed of our portfolio, a client of 38,000 sq m that eventually might create the optical impression that occupancy has gone down in the fourth quarter.
Again, I believe the expected performance for logistics this year is going to be very similar to the one we have had so far. Also very interesting operating performance in retail that keeps surprising us, let alone all the retail market on footfall with a 6% like-for-like growth, a 5.4% rent spread, and a 94.3% occupancy, which includes our three non-core shopping centers. I mean, in the absence of those, it would have been much higher. We expect that occupancy figure to even go up slightly in the second half of the year. We are not in denial of the fact that the second half of the year is going to be operationally more challenging.
I mean, we are perfectly aware that, starting in September, there could be a significant disruption in the market, et cetera, but these things are a little bit more predictable than people believe in companies like MERLIN. Regarding financial performance, we have produced EUR 0.34 FFO per share, 19.5% increase. But in this case, it is a consequence of better margins, because we have better top line and we have been withdrawing also the oxygen we provided during the first half of last year to our retail clients. Of course, there is nothing to brag about the improvement in margins in our business.
Revaluations were relatively flat, +1.2% in the period. The interesting thing is that, talking about passing yields, we have taken on some yield expansion of about 15 basis points. If it would have been my choice, I would have preferred a little bit more expansion because I am concerned about what is lying in front of us, and I believe it's a little bit dangerous to play too much of continuing to inflate values at this point of the cycle. I believe it is better now that we have a lot of rental growth, it is probably better to get more yield expansion so that we go back above 5% in passing gross, 4.5% in passing net, as soon as possible.
I believe this is sound, good, and healthy. I mean, companies apart from revaluing assets need to produce cash flow, and it is our objective to continue to have one objective in line with the other. In terms of the BBVA portfolio disposal, it has allowed us to pay in excess of EUR 2 billion of total debt. The EUR 670 million of associated mortgage loan debt, EUR 850 million of the bilateral syndicated loan we had with banks. As you may know also, we have already paid EUR 548 million of our bond in February.
All in all, we have gone down to 27.4% LTV, which pro forma, once we pay the extraordinary dividend owing to the BBVA sale in mid-August, will be 30.4%, which is, you know, more or less the number you should more keep in mind rather than 27.4%, which is extraordinarily low. It is not the good number looking forward. Interestingly, of course, now all of our debt is 100% interest rate fixed. We have very marginal bank debt. The rest is bonds, so it's fixed by nature. 98% of it is now unsecured.
As you also may know, we requalified all of our bonds as green at the beginning of the year, which, you know, will, I think, be interesting in terms of tapping the market in the future because it's clearly the pool in which there's more money available. Total shareholder return has been 7.7% in the semester, although part of this is attributable to the capital gain generated in the sale of the BBVA portfolio. It is not fully operational and therefore you shouldn't multiply by two in estimating the full year total shareholder return.
Value creation, apart from the BBVA disposal, which has been effected at 17.1% premium to GAAP, we have sold more than EUR 110 million of, let's say, ordinary non-core disposals. As you know, we had a target for the year of around EUR 150 million. We are now very close to reaching the yearly target. What we have done during the semester has been executed at a 9% premium to GAAP. In Landmark Plan, as you might remember, there's only one building remaining that continues with its works normally, Plaza Ruiz Picasso, and is now, you know, in the sweet moment in terms of pre-leasing.
We are now moving to market and you know we are finding very, very interesting demand, and we hope to be more specific before year end. Then, in our MEGA Plan, the Bilbao-Arasur works are underway and well underway. In fact, we are about one week ahead of schedule. The data center is now in structure. Columns are being erected. I mean, all foundations were already done. We are starting to receive also the equipment supplies, so we can deliver in June next year to our client, you know, in according to schedule. In Madrid Getafe and in Barcelona Port Logístic, we got licenses as expected before summer as we had anticipated to all of you.
Works will start in third Q 2022. In fact, works will start on first of August, I mean, next Monday in both construction yards. As for the extraordinary dividend, the board approved yesterday the payment of an extraordinary dividend linked to the BBVA disposal of EUR 0.75 versus the previous EUR 0.67. The difference is simply that we were considering a -20. I mean, in round numbers, value of derivatives.
At the end, when we liquidated the derivatives, we obtained +20. Simply we are distributing the difference, the balance as part of the ordinary of the extraordinary dividend. It will be paid on the eighteenth of August. Shares will go ex-coupon on the fourth of August, for your information. Without further delay, I pass the floor to Miguel Ollero who will comment on the details of the financial results.
Good afternoon, everybody. We will go further into details of the financial results for the first half of the year. As you can see on page six of the presentation, the gross rents for the period were EUR 222.6 million, 8.3% higher than in the previous year for the same period of time. It is an 8.3%. That if we look at the different asset classes that we have, office was contributing EUR 120 million with a 7.3% increase. Logistics, EUR 36 million with a plus 10.5%. Shopping centers, EUR 61 million, plus 6.2%.
In the end, the three asset categories have been contributing very positively in the 8.3% increase in the gross rents of the company. As you can see, we are not including as gross rents in net leases, mainly the BBVA portfolio, because as they have been sold and was up for sale, we have been reporting it as discontinued operations, and we will comment later, which is the outcome out of it. The three asset classes, as I said, very positive. In terms of net rents, we were at EUR 186.4, which implies that close to 90% goes to net net of incentives. This is mainly driven by the fact that have reduced largely the rent discounts during this first half of the year.
As Ismael was commenting, we stopped this year any COVID commercial policy which were already in place in the last year. We moved from EUR 28.5 million of incentives the first half of last year to EUR 13.2 million. It is a 54% reduction in incentives for this period of time. As a result of it, if we look at the EBITDA level, we were at EUR 165.8 million with a margin of 74.5%, well ahead of the 63.3% we were reporting last year for the same period of time. In terms of FFO, 19% increase, EUR 157.5 million, with a margin of close to 71%. Which implies in some sense 0.34 EUR per share.
FFO very close to the area, to the FFO, EUR 0.33. Then in terms of EPRA NTA, we were EUR 17.10 reported. As Ismael was commenting before, we are going to be distributing EUR 0.75 per share on the fifteenth of August as an interim dividend linked to the BBVA disposal. Which implies a straightforward correction or reduction of our NTA to EUR 16.35. This should be like the starting point for the next period. Finally, to remark here is that the BBVA portfolio sale was generating EUR 222 million of profit.
It's a combination of the premium applied to the sale of the portfolio and also the generation of cash flow during the period it has been within the portfolio, mainly until the fifteenth of June this year. For the net profit, you have to bear in mind that EUR 152 million are related to the revaluation of assets, which, as we were commenting before, is a 1.2% like-for-like increase. If we move to page seven, we have here the GRI bridge for the semester. It is a 7.1% like-for-like increase.
Big contribution for all the asset classes, 5.5% in offices, 9.3% in logistics, and 6.0% in shopping centers. They have been driving largely the rental increase. Bear in mind that in the like-for-like, the main contributor, as Ismael was commenting before, has been the CPI indexation and the increase in occupancy as we are reporting an occupancy that is, so to say, the highest one we have been reporting since inception of the company. Finally, on page eight, we have here occupancy, as I was commenting, 95.1%.
Also considering that we have taken out the 100% occupancy that we had in net leases. Also in terms of WAULT, we continue to have a very good WAULT. There is a reduction related to the fact that we don't have anymore with us the long-term leasing of BBVA. Again, we have 3.2 years as MERLIN average. Now I'm passing the word to Ismael. He's going to be commenting further on the different asset classes evolution during the quarter, during the semester.
I will go very quick on the different asset categories. In offices, performance in the semester has been quite good. In Madrid, we continue to be slightly weaker than in Barcelona and Lisbon. We believe that during the second half of the year, we will improve significantly our occupancy in Madrid as the municipal works on the A1 corridor in the north of Madrid progress. You know, little by little, we notice a renewed confidence and interest in the area. We believe that we will have positive news in this regard.
In the following page, you will see that we have contracted 65,000 sq m in 142 transactions with a release spread of 6.3% and, you know, very good tenant names, very reflecting the underlying quality of the portfolio. In our LOOM subsidiary in our flex office division, we have added already significant footprint and will continue adding during the second half of the year for a total of about +50% as compared to what we used to have last year.
We will be adding more than 20,000 sq m for 2,200 desks with a 72% occupancy and 10 spaces, and we will be adding another six spaces, you know, almost multiplying by 1.5 the total number of desks. It is performing well, and clients are clearly demanding that formula as part of their total mix. I mean, normally, between 85%-95% of the space they contract with us is under urban lease law. In most cases, they add a layer of flex space that allows them to play with the peaks and valleys of activity, you know, and adjust better their P&L. In logistics, as commented, very, very strong quarter.
In Barcelona, it optically looks that we reduced significantly the occupancy. Remember, this is outside the Fincat perimeter, so this is only our part logistic Zona Franca, which is about 130,000 sq m of logistic space, so not significant for the rest of the portfolio. In the rest of Spain, the performance improved significantly with the lease-up of the Zaragoza plaza shed to XPO. Regarding clients, we transacted more than 150,000 sq m in gross transactions with a 6.7% release spread and fantastic client or tenant roster. In ZAL Port, we achieved 100% occupancy. Again, I mean, this is just a little bit by chance, but sometimes it happens.
More importantly, the FFO increased by double digits with a 35.2% increase, which is simply a consequence of the new deliveries. I mean, we delivered new product in ZAL Port. We have now run out of space here, and that caused the FFO to increase so significantly. In shopping centers, excellent performance in the quarter. We are already at 19 figures. You might say, no, we are still 1.5% down in sales and 11% down in traffic in footfall. In the end, this is mainly attributable, or I would say, almost exclusively attributable to cinemas. I mean, this is an industry which is, of course, going through a difficult situation.
It is in fact the only part of our tenant base that remains with a little bit of oxygen in our portfolio. Of course, you know, they are causing a little bit of a discrepancy in performance as compared to 2019. I would say that the rest of the tenant mix of our shopping centers is already at or slightly above, in fact, the 2019 performance figures. We leased up 30, close to 35,000 sq m with positive new absorption and occupancy slightly up to 94.3% with excellent prospects for the rest of the year.
More importantly, we remain with a very sound occupancy cost ratio of 12.5%, which in principle, it is well in the low range of the comfort zone. We expect that the rest of the year, despite the difficulties that we anticipate for the end of the third and beginning of the fourth quarter, we believe it will be relatively peaceful in our shopping center portfolio. Miguel, valuation and debt position?
Yes. Regarding valuation, as we were commenting before, we had a 1.2% like-for-like uptake in the valuation, mainly driven by logistics and office. In fact, in office, it was perfectly aligned with the average of the portfolio, 1.2%. Logistics continues to be the one producing more valuation within the portfolio as we continue developing our land banks and unlocking value from the very well acquired and low entry price land banks that we are holding in our balance sheet. In terms of shopping center, was 0.4% down. Again, approaching the landing point in terms of valuation of shopping centers.
Regarding decompression or expansion, there was zero expansion all across the different asset classes, mostly compensated by the cash flow improvement, mainly due to better due to CPI and also positive lease spread that we have been commenting on the portfolio. Regarding financial structure and net debt position, first of all, we should say that we have reduced like EUR 2 billion of our gross debt position with regards to the beginning of 2021. So we moved down from EUR 6.2 billion of gross debt to EUR 4.2 billion of gross debt.
One third of the debt of the company has been prepaid in the first half of the year, linked especially to the sale of the BBVA portfolio, which allow us to pay back the whole debt attached to the portfolio, EUR 670 million, on top of the EUR 850 million of syndicated bank loan that we had with a group of banks. In the end, our debt composition right now is mainly based on bonds. Out of the EUR 4.2 billion, we have EUR 4.05 billion of bonds, and the rest is minority position of debt financing. Our average cost is 1.94%. We have, I should say, 100% of our debt on a fixed rate basis and our average life of 5.4 years.
Very well placed for the future, especially in an interest rate hiking environment. We have long-term maturity base within our portfolio on a fixed term basis in terms of interest rate. Also, liquidity position is strong, close to EUR 1.8 billion of liquidity within the company. Only in cash in the books, we have more than EUR 900 million as of today, so very positive. Also, as a result of the BBVA transaction, both rating companies were reviewing the rating with a positive outlook. This is like the first step towards to get a re-rating of the company in the following months.
Looking at our maturity profile, we should say that first of all, to remark that we don't have short-term, so to say, commercial papers within our balance sheet. Our first maturity will take place in April next year. It is a bond of EUR 745 million that we are working on for the refinancing in the following months. We are not in a hurry, but at the same time, we are working on it. As we said, we have different options, and we're exploring all of them.
In addition to that, it's important to remark that we have also EUR 700 million of our revolving facility in place, on top of the large amount of cash that we have already in the bank accounts, as I was commenting before. Once we surpass the 2023 maturity, the next one is coming only in 2025. Again, the company is deleveraged, fixed interest rate, and a liquidity profile that is very comfortable on timing-wise. Finishing with this, I pass the word back to Ismael on the sustainability section.
Thank you, Miguel. In the first semester, we have achieved three main milestones that we would like to share with you. The first one is that we officially launched our pathway to net zero. First, by reducing our operational carbon in Scopes 1 and 2. Second, by reducing our embedded carbon in developments. Third, by trying to reduce the Scope 3 emissions in cooperation, in close cooperation with our clients, putting our money where our mouth is. Four, in offsetting, by offsetting our unavoidable emissions that we will try to reduce to the minimum amount. We also successfully re-qualified all of our outstanding bonds into green bonds.
We are proud to say that our certification program in shopping centers is completed, and in offices and logistics, it's 94% and 91%. We are approaching our commitment to the market, which was at the end of 2022, to have close to 99% of our portfolio certified. In fact, you know, come the end of this year, we will stop reporting on achievements in terms of certifications. Although every building which has been certified will need the certifications to be renewed on a constant basis. It will be a significant ongoing effort for the asset managers of the company.
In terms of value creation, of course, the most remarkable achievement was the sale of the BBVA portfolio, but we have already touched on this. The amount of the extraordinary dividend is EUR 351 million. Very importantly, this is very close to the or almost equal to the IFRS capital gain. For those of you who you know are thinking about what EUR 0.75 that have been sold of assets of the company, actually, this is not the truth. That was simply the capital gain. The principal of that portfolio, the base value of that portfolio is what has been employed in reducing our debt.
In terms of the ordinary non-core portfolio disposals, we sold four office buildings comprising almost 34,000 sq m. Three of them located in peripheral locations and one in what we call new business area. The premium was close to 9% to the latest GAAP appraised. We are happy of the performance so far. Let's see what happens in the second half of the year. We expect a tougher investment market environment that anyway, I mean, we will continue trying to rotate what we think makes sense to be rotated.
In terms of the Landmark Plan, we progress on the works in Plaza Ruiz Picasso, which as a reminder, is a 37,000 square meter building. Absolutely state of the art both in terms of having obtained all certifications possible but also in terms of it looks and its technology. We expect to spend a CapEx of a little more than EUR 60 million and obtain incremental rents in the region of EUR 6 million with delivery in October 2023 for a yield on cost of 9.2%. Very importantly, apart from the 27% pre-let already in place, we have advanced negotiations.
We are exchanging contracts with clients representing another 46% of the building. Commercialization is going reasonably well. On the MEGA Plan, on page 32 of the presentation, as commented, construction works are significantly underway for Bilbao-Arasur with a 66% pre-let. Madrid and Barcelona, license obtained and exchanging contracts. We will report during the rest of the year. I mean, hopefully, we will have definitive news by year-end.
In terms of pre-let, in Barcelona, we are negotiating 1.6 MW of pre-let out of the total 3 of the first module that we will fit in the building. Sorry, in Madrid and in Barcelona, we are negotiating 0.6 MW with an option to a further 1 MW in that building. The four buildings will be linked by carrier type fiber. You know, it is clear that this is now part of a network of data centers that we plan to develop in the Iberian Peninsula. They will be first connected to the cables coming from the other side of the Atlantic, whether North Atlantic in the case of Bilbao-Arasur or South Atlantic in the case of Lisbon.
Then beyond being the landing station for the cables, they will also be linked by cable to the Madrid and Barcelona edge computing, you know, data centers. Very interesting advancement in our effort to become a leader in the data center segment. The one in Lisbon is taking more time. Things in Portugal administratively are complicated. However, we are also preliminarily advancing in conversations with another hyperscaler for a specific design of one of the modules that will suit their requirements.
Hopefully, by the time the authorities finally grant us the licenses, we will be in a you know, interesting pre-let position. Outlook for 2022. Well, simply the you know the figures, EUR 0.75 dividend to be paid on August 18th. FFO guidance increased from EUR 0.58-EUR 0.60. Ordinary dividend also increased by EUR 0.02 from EUR 0.40-EUR 0.42. This is our best visibility on how the year should end despite the difficulties that we expect to encounter in the second half. Summing up and to finalize the presentation, well, I think we are happy that we have been delivering a strong performance in all of our key financial and operating metrics in the semester.
Occupancy, like-for-like rental growth, reletting spread, and also FFO. We continue to work on occupancy. In fact, that will become our most important objective from now on, having already worked out the capital structure of the company. What we will try to do, particularly, if next year we see ourselves in the middle of a relatively tough market environment, we will concentrate a little bit in increasing occupancy. Because that will create some extra cash flow, which eventually might compensate, you know, drops, future drops in rents in case they happen.
We, of course, do not know what lies ahead of the economy, but we are not blind, and we are not deaf. We read what you write, and we listen to the radio and the TV, and we are deeply concerned about what is in front of us. We don't see that on the street at present. We believe, and we will say it during the fall, that judging by the operational performance of our assets, we are far yet from being in a recessionary environment. Anyway, I mean, we have to be prepared for the worst. As we have commented in many cases, we are seeing some clouds developing on the horizon, and we are sailing.
We better take a big reef or three reefs in the mainsail, and you know, hoist the storm jib rather than the genoa. Because you know, at the maximum, we will lose a little bit of speed. If the storm is not a squall, it is a gale, at least we will you know, go through the gale safely. I mean, which is at the end, the most important things, particularly in times of uncertainty. Inflation is clearly helping us, hence why I was commenting that I wanted to widen a little bit more the valuation cap rates, because I believe we are at a good moment to do it.
I know my colleagues argue with me that it is better to inflate as much as possible to fall from a higher number. I counter-argue that eventually that goes against credibility in the market. We will, during the second half, let's see what we do with our valuers. Eventually, I would like our implied cash flow yields to go back to, let's say, more normal levels, not the ones that we have had during the past years that were reflective of extraordinary accommodative monetary policy. Logistics continues to be the jewel of the crown.
We continue seeing excellent performance in our portfolio. However, we have been capturing mainly the gap between our passing and market rents. The truth is that market rents are not going up that much. Let's see what happens in the future. Anyway, if rents go up by double digits, of course, we will enjoy it because we have a very significant portfolio. We are the leaders in the market by far, so it will continue to be, you know, wine and roses. If it doesn't happen, I think we are very well prepared to react. In shopping centers, of course, numbers look fantastic as compared to last year.
To me, what is important is that they look now pretty much in line with 2019, which is our pattern year, and by the way, the best year ever in the history of our shopping center portfolio. Of course, you know, being on par with 2019 is always a good thing. Interestingly, the OCR, we see the clients passing on inflation to their patrons, to their clients as well. As such, you know, the OCR remains pretty much in healthy territory. Value creation beyond BBVA, we continue seeing tension in the demand in the market. Of course, it's not a super year.
With the take-up figures that we have seen during the first and the second quarter, Madrid seems to be on track to doing between 550 and 600,000 sq m of gross take-up for the year, which is above a normal year. A normal year is between 450 and 475, around 500 max. So this year seems to be a reasonable year in terms of total demand. New supply remains very much under control. I mean, in Madrid, there is virtually nothing. In Barcelona, there is a little bit more oversupply risk in the 22@ district, but I believe so far it is being absorbed pretty well by the market. Lisbon is also relatively tight in terms of new supply, and as such, you are seeing that rents are going up very strongly in that market.
Our MEGA Plan goes as expected. We are very, very happy and very proud of it. I know it will not be reflected in our valuations till, you know, 2, 3 years from now because you will all probably need to see cash flow from that plan in order to attach any value to it. But anyway, we are long-term players, and prior to having cash flow, you need to lay out the foundations for that cash flow, which is exactly what we are doing at present. Well, in terms of dividend policy, we will remain, we'll try to remain a high dividend company. We have now achieved what we consider financial stability. I mean, the company is not clearly in need of capital.
As such, you know, the big difference for the future is that part of the cash flow from non-core sales might be added into a dividend payout in case we see that dividend payout is at risk because of you know, complicated market environment. We will try to continue being a relatively high dividend flowing company for those of you who appreciate that type of you know, management style. That's it for today. We are open to Q&A. Please make your questions through the line to the operator, and we will be happy to answer them if we know the answer.
Operator, can you please open the line for Q&A? Thank you.
Of course. If you would like to ask a question, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to remove your question from the queue, please press star followed by two. When you are preparing to ask your question, please ensure that your device is unmuted locally. As a reminder for any questions on the phone lines, please press star followed by one on your telephone keypads now. At this time, we have no questions registered on the phone, so Inés, I will hand back to you.
Not sure if somebody needs another minute to do their questions, but if not, you know where we are.
They can call you.
You know where we are. Apparently there's one. Let's give him one minute for one investor or one analyst to raise his hand.
We do now have a question on the phone line.
Great.
From Fernando Abril from Alantra. Fernando, please go ahead.
Hi. Hello, good morning. Well, good afternoon, thank you for taking my questions. I have a couple, please. On your strategic plan, it's only very few months since you announced that one, no? My question is, how things are going with your two main, let's say, future growth drivers, the logistics and data centers, versus your initial expectations regarding schedules and CapEx and revenues, no? Second question is just, if you can remind us how do you report occupancy from your LOOM portfolio? I don't know if it's fully rented to LOOM, and then it is shown at 100% occupancy on your portfolio or adjusted by how LOOM is performing. Thank you.
Well, starting by the second, which is the easiest. The space which is rented to LOOM is reported at 100%. LOOM occupancy is specifically reported, and you have the number 72%, which is more than sufficient to pay 100% of the rent. In LOOM, we have positive EBITDA at a space level. We are not yet covering in full the corporate overhead of LOOM, specific of LOOM, but we are very close to getting there, so eventually next year we should be there. That means basically that our rent is fully covered. In any case, just for your information, it represents 1.4% of our total rent. It's relatively meaningless in the totality of our portfolio. Okay.
Logistics and data centers. Well, in logistics, as you know, we released a little bit of pressure from the throttle in light of the rising construction costs that we saw in the market. Now the situation is changing. We have already received a quote for a shed recently that reflected a 14% decrease versus the same quote three months ago. We are starting to see some, let's say, appeasement of the construction costs in the market, and that means basically we will resume as soon as possible our normal activity in logistics.
That will have resulted, I mean that, let's say interim period will have resulted in a delay of about six-nine months in the deployment of our CapEx in logistics, and hence the future obtaining of the cash flows that you have in your schedules, in the ones you know that the company has been releasing for long. Very importantly, next week we will be delivering to client and inaugurating a 47,000 shares in Cabañas with Logista. That one will be therefore operational for the majority of the second half and producing rent. For the year, I think we have no further deliveries. There is the DSV, sorry.
The DSV Road shed will also be delivered in the second half. You know, for next year, we will be reporting in the year-end results the deliveries that we expect and we will be considering in our numbers the effect they will be having in our cash flow. In terms of data centers, we are now accumulating a delay of between three and six months in CapEx, owing mainly to the delay in the obtaining of the licenses. In the Basque Country, authorities have been a little bit more clever, and we have obtained our license in six months. In other parts of Spain, it has costed us one year to get the licenses.
In Lisbon, it is impossible to know, you know, how long will it cost to get the license. It's not that the license is in danger or there is any threat. None of it's simply administrative process. Hence, the deployment of CapEx in data centers has been also slower than anticipated. At the end, this will mean that the total CapEx expenditure of the company, total CapEx investment of the company, for the year 2022 overall, will be lower than anticipated, which will have, of course, a positive reflection in the end of year loan to value. We will do a new calculation for the years to come.
Regarding commercialization, I believe the data centers have surprised us probably on the upside because we were working on the assumption that data centers are not an easy asset, an asset that lends itself very easily for prelet. However, we have been very lucky to capture one interesting prelet that spans across three of our data centers from a big hyperscaler. This is clearly helping us establishing our, let's say presence in the market, and also very importantly, testing our technology. Because, you know, of course, the prelet with a big and respected hyperscaler is a proof of validity of technology for the rest of the hyperscalers, and we are already in conversations with other names for our data center network.
Just a follow-up. Are you able to catch up investment once you receive the license? Just to get a sense if this is only a one-off or will all the plan be delayed by three, 6six months, you know, by 2026 or something.
Normally, you can't. I believe we have been conservative. In this first batch of data centers we are building, we have, on average, we have projected 14 months of construction. The American engineers are telling us that you can go as low as nine. We wanted to be safe, rather than sorry. Because there is of course, a learning curve. I mean, the first l ogistics sheds we put in the market cost us, you know, 11-12 months, and now we can produce a logistics shed in 8 months if we need it.
In data centers, I guess it will happen, we will have the same learning curve. But at the beginning, we prefer to be a little safe on the construction period. Yes, you can validly assume between 3 and 6 months delay in the production or in the entering of production of the data center program. What we have projected for end of 2026, it will probably, you know, move into mid-2027, but not very significant. Construction-wise, it is also important to note that Bilbao-Arasur is perfectly on time.
In fact, it's one week ahead of the construction schedule. We are not recovering the delay in the obtaining of the license, but at least we are now building absolutely according to the calendar that we negotiated and committed with the client.
Okay. Thank you very much.
You're welcome.
We have our next question from Beltrán Palazuelo with DLTV. Please go ahead.
Hello, good afternoon. Congratulations for all the team for the hard work. I have two questions. Maybe well, the first one is in the investment landscape, you were sounding a little bit conservative. Everybody of us are reading the newspaper. So if you could give us a little bit more, maybe of color, how you're seeing the financial players in the office logistics and the shopping centers. Any, let's say, sale process that's going on that you're seeing that maybe the seller is not getting what they ask. Maybe the second question is on offices. How are your conversations with your clients? Are you seeing your clients more cautious or at the moment they're not as cautious as maybe the news?
Okay. On investment, Beltrán, so far, we have to admit that we have been surprised by the robustness of the market. Which in fact, you know, it's producing some transactional evidence which goes slightly against widening too much the yields as one would expect following the movement in base interest rates and more importantly, in credit spreads. This is so far. A very different thing is what we expect for the second part of the year. What we are seeing in offices particularly, is that for big tickets, I believe the demand is weaker. The big players are now waiting on the sidelines. Private equity was already out, but now is out with a reason.
Because in the prior two years, they were out because they were not obtaining the returns. Now they are out because they simply cannot raise the debt at the LTV levels and costs that they require in order to be, you know, a little competitive with the industrial players. In logistics, the demand remains very strong. Of course, you know my opinion about the yields that we have achieved in logistics, which were a little bit too fantastic for my personal taste. So far, I mean, it remains an asset class which is on the radar of investors, and there is no problem of size.
I mean, whether you sell a share or you sell a portfolio, the only doubt to me is if you sell a EUR 2 billion portfolio, eventually that is completely different. But if you sell one share or three shares, eventually there is enough interest in the market. In offices, the demand remains concentrated mainly in small ticket buildings. Between EUR 20 million and EUR 50 million, you find enough depth in the market because family offices, some insurance companies and mutual funds and mutualidades continue buying assets as a protection to inflation. As a consequence, we have found interest, and we have found depth in the market, certainly in the first half.
We expect to continue seeing some interest in the second half, although this will be a question mark as, you know, the recessionary fears translate little by little into the society. Shopping centers is the only asset class in which we are absolutely shocked. There is a lot of interest, and people is now transacting shopping centers as if there were no tomorrow. Yields have gone up a little bit, particularly because all transactions that have happened are mainly of secondary shopping centers. But certainly, I mean, there is interest in the market.
There is some people going after that asset class. The only question mark is what will happen with the two, three big schemes which are in the market, b ecause those ones, of course, cannot be bought by a PE or cannot be bought by a relatively riskier family office. Those ones need to be bought by industrial counterparties. This is my only doubt, what will happen to the product that Unibail-Rodamco has in the market, which are excellent shopping centers.
You know, eventually, you know, in a normal world, they should meet significant demand. I don't know. We, as you know, we have three non-core shopping centers. We have now, you know, at least preliminary conversations on two of them. Let's see. I mean, of course, I will give no hopes or any assurance as to what will be the result of those conversations. At least, some interest has been recovered. If we can match the prices that we want for those assets, eventually we will keep on rotating what we consider non-core, you know, following the three that we sold a couple of years ago.
You also asked about demand. Demand for offices. As commented, Beltrán , not bad at all, I think. Well, first, WFH fears, work from home, et cetera, not significant. Not a significant factor that we are seeing. A little bit more important in prime CBD because the type of company is a little more prone to the work from home comfort to employees. The price of real estate attached to an employee in city center is of course higher. In the rest of the market, not a very significant rate of adoption of WFH. Some expansion of square meterage attached to employees.
We are seeing now the companies a little bit more concerned about creating good quality office spaces. The hen farm style of density is now in clear retreat. That is interesting, of course, because that creates more demand for sq m. The market remains reasonable. The problem we see in the market is more a problem of blunted demand, but this is mainly owing to uncertainty. It's a very similar situation to the one we experienced during the COVID. Companies do not dare to do anything because they are paralyzed by uncertainty.
In reality, this is not a problem of that they do not need the square meters or that they are leaving square meters. It's simply that they do not dare to do anything specific because of the fears of recession looming in the horizon. As commented, our worst fear, which is always oversupply, is completely out of our radar screen in the markets in which we operate. Take-ups in Madrid and Barcelona, gross take-ups, have been pretty healthy in the first semester, decelerating a little bit in the second quarter versus the first quarter, but still, I mean, very, very healthy.
One single transaction can change those figures. I mean, eventually we expect a weaker second half of the year. One or two transactions done eventually by us, you know, can change completely the dynamics of take-up in a given city. You know, this is what we see. Certainly not yet a clear recessionary environment which if it happens in the future, I will be the first to relay to you.
Okay. Thank you very much for the information, and thank you for the hard work for all the team. Thank you.
Our next question comes from Allison Sun with Bank of America. Allison, please go ahead.
Hello. Just one question from my side. I noticed your average lease term has reduced from 5.2 years to slightly over three years after the disposal of this net lease portfolio. I wondered, is it a concern that lease term has been shortened, and you might have a higher tenant turnover in the future? Especially right now, the macro economy is quite uncertain. Thanks.
Okay. Look, Alison, the lease term in Spain is what it is. The urban lease law, the typical contract signed under urban lease law is between three and five years, with a three or a five-year extension. It is very, very hard in Spain to go much beyond 2.5 years in terms of WAULT. The only reason why we go beyond is because we have, like, 30% of our portfolio, which is headquarter leases, which are slightly longer than that. This is Spain, but I know that we are always judged from an Anglo-Saxon perspective, and particularly the ones people in the UK is accustomed to much longer leases.
Knowing this, in the IPO, we included in the tenant mix a long-dated lease, which was BBVA. With this long-dated lease, we have had, or we have enjoyed much longer WAULTs for a big period. Therefore, there were no fears in the investors. That's simply because the BBVA lease was waiting, you know, for 15 or 18% of our total portfolio, was waiting 20 or 25 years in every calculation we were making of WAULT. Now, without BBVA, you know, you see what is the reality of our WAULTs in Spain. What are we doing to remedy that?
Well, two things. One, we have brought data centers on board, which by definition is an asset class with much, much longer lease terms. Data centers will help us to expand the average WAULT of the portfolio in the future. For the one that we have signed in the Basque Country and the two that we are negotiating in Madrid and Barcelona, we are talking about 45-year leases with first break at 15 years, with certain penalties. Given that we report on first break, we will report, or we will record those as 15-year leases. They will help balance a little bit the optically short WAULT that you noticed.
The second thing that I am anticipating that I believe will happen 2, 3 years from now is that we will start facing from clients a little bit of resistance to translation of inflation. That is, you know, human nature. At present, we are happy campers because in Spain we are still far from the historical highs in rent, particularly in offices. Given that people have a maximum rent in Madrid in the region of EUR 46-EUR 48, if you are now inflating starting from 37, 36, you know, you have still a lot of room before you get to a point in which your tenant believes that the rent is too high. This is helping us.
The second thing which is helping us is that the average permanence of clients with us in the portfolio is far beyond five years. In the cases of clients that have been with us for five years, they have enjoyed two years of negative indexation, one zero and the other slightly positive. Now, if we now put a 7% rental uplift, when they make the average for the last five years, they will go to between 1.2% and 1.8%, average inflation applied during the five-year period, which for them is perfectly reasonable.
Two, three years from now, eventually, if we remain in a superinflationary environment, and if we continue with our portfolio, you know, looking like Brazil, you know, eventually, then there will be a very interesting discussion with investors or with clients, sorry, that will be rent uplift in exchange for contract waivers for contract breaks. That will also result in slightly longer WAULTs, although it will not be, I would say, extremely important.
I mean, we are forecasting something between 0.3 and 0.5 extra of WAULT if that situation happens. It is important to have in mind that in that kind of negotiation, you have the upper hand. If you relinquish inflation in the contract, which is due by law, eventually you will obtain at least rental backlog in the form of a longer WAULT in the contract, which will help compensate a little bit the optically short WAULT you are fearing.
Great. Thank you.
You're welcome.
Our next question comes from Florent Larousse-Choubert with ODDO BHF. Please go ahead.
Yes, hello. Thank you very much for the presentation. Actually, I would have a follow-up question on indexation. Is there any risk in Spain that the indexation could be capped, I don't know, by government, by a professional organization? Or do you- Or is it- Or do you think that it would remain on a negotiation discussion on a case by case with clients?
Hi, Florent. At present, there is no noise or attempted initiative or nothing in commercial real estate. In residential real estate, as you know, a rental cap has been applied to big owners, which, you know, is a completely targeted measure to screw up the American opportunity funds that bought dwellings in the market. In commercial real estate, of course, there is nothing. Nothing attempted or rumored or noise on the street or, you know, the senators in the legislative chambers are not delivering so far any noise in this respect. Anyway, you never know because we are in Europe and, you know, it's an increasingly communist continent and, you know, something could happen in the future, but not now.
That means that for most of cases you expect to be able to apply indexation in 2023 if CPI inflation is still within able?
Well, Florent, the only thing which is absolutely sure is death and taxes. I can tell you that so far we have passed on 100% of inflation. Between now and year-end, we expect to pass 100% of inflation. For 2023, g od will provide, but I believe we will be able to pass 100% of inflation. Beyond, I believe, I cannot be more specific because of course, I don't know. Anyway, if we cannot pass on all inflation, at least we will have something valuable to get in exchange. Like for example, rental backlog as I was referring before.
Also, importantly, let's see what happens with inflation next year, because we are starting from a relatively high point. Let's see what happens with inflation, because eventually we might see a lower inflation than people is anticipating. I mean, we know it's going to be very high between now and year-end. Then, you know, towards mid next year, some macro economists are already predicting, you know, significant softening of inflation rates. Then inflation will no longer be on the plate when talking to tenants because it will go back to, let's say, normal levels.
Yes. Okay. Thank you very much. That's very useful.
Thank you.
Our next question comes from Ana Escalante with Morgan Stanley. Please go ahead.
Good afternoon. Thank you very much for the presentation and for taking my questions. I have two, please. The first one is, regarding guidance. Could you please provide a little bit more color on the reasons for the upgrade? Is it due to, better than expected operating performance in the first half that you expect, will offset a more challenging second half, as you said before?
The second one is on potential margin pressures on the retailers of your shopping centers. You have said that you're back to 2019 levels overall, but, the cost base for your tenants will have to go up a bit. Are you worried about this and how, especially as we go into a weaker economic environment? Thank you very much.
You're welcome, Ana. Well, regarding guidance, Ana, this is simply our internal forecast. I mean, we have been producing around EUR 0.17 in the first two quarters of the year with BBVA in, because remember, the FFO figures have not been performed, so you know, it's actual FFO. So we have produced 17 basis points or EUR 0.17, sorry, with BBVA in, and we expect to produce around EUR 0.13 for the next two quarters with BBVA out. So we will be producing like EUR 0.08 less of cash flow because we have 500,000 shares. That would mean around EUR 40 million less cash flow, which is half of the EUR 84 million net income that was provided by BBVA.
The reason for the new guidance not being 68% is purely that BBVA, we will be lacking BBVA on the second half of the year. It's purely mathematical. Regarding the margin pressure in our shopping centers. Look, so far, what our tenants are telling us is that they are being able to translate that, the inflation to their clients, so far. What will happen in the future, we don't know. There are things in favor and things against. The nature of the crisis that we see in front of us is mainly a public sector crisis. Families and corporates in Spain, the hard way, that have significantly deleveraged since 2008.
If you take 2008, you consider that at the time, the total indebtedness of the country relative to GDP was, like, 260%. The government, the state at the time was a little over 40%. Families and households and corporates were in the region of 220%. Today, we are back into 260%, but the state, the government is 120%, so families and corporates are 140%. That means families and corporates have delevered about 80% of GDP. That is EUR 1 trillion, more or less. Deposits are at the maximum ever level recorded in Spain, reaching 970 billion, so reaching EUR 1 trillion also, deposits.
The elephant in the room is mainly the public sector, which has reached its maximum spending capacity. It's levered to the bones, 120% of GDP, and still incurring ever-growing deficits and, you know, increasing the salary mass of public employees and indexing, re-indexing pensions. You know, that means it will get in trouble very, very soon. Then when they get in trouble, a lot of people will get in trouble, namely the unproductive part of society that depends on them. You know, that is what worries us in the shopping centers.
We don't know what will weigh more, whether the average patron, which have no problems and will continue going to the shopping center and spending or the patron which is subsidized by the state, and as such, when the state starts getting into dire straits, will see its lifestyle significantly affected, and as such, their spending power will get significantly reduced. Anyway, what is true is that our starting point at 12.5% is, I believe, very strong. Certainly what many of you had doubts about whether we would be able to withdraw the relief packages applied to clients to tenants during the COVID crisis.
We have you know withdrawn them without any problem. That means basically that our tenants are in good shape. They continue to be in good shape. In fact, some of them are now thriving. They are faring very well. Other than retail, fashion, which is always, you know, suffering a little bit more. Health and beauty, do it yourself, food, beverage, sports, home furniture, all that is going fantastically well. Very importantly, too, the clients that were weaker, they were already affected by the COVID crisis.
We have been rotating all of them because disgracefully, at the peak of the COVID crisis, there was a point in which in our traffic light, internal traffic light between red and yellow, we had almost 8% of the freaking tenant roster. We have been little by little rotating all of them with no impact on occupancy. We have in fact increased a little bit the occupancy. All the tenants that have replaced them are new and sound tenants, which, you know, are in our shopping centers because they wanted to be in our shopping centers. Let's see. I mean, I don't know what will happen.
What I can tell you, because I perceive I was yesterday talking to the board of MERLIN. What I perceive is that people believe that our real estate commercial real estate company is like a yo-yo, and it will not be the case. I mean, you can be absolutely afraid of the performance of the economy and havoc and disaster happening in the next couple of years. Still, I mean, we are more resilient than people think. You know, little by little, given our diversification, we have different sources of income, different asset classes. Not all of them go bad at the same time, as we proved during the COVID recession.
I think eventually, you know, maybe income goes slightly down, but now our gross income to debt service is, like, 6.5 x or, you know, between 6.5x and 7 x. I mean, I think we are in good shape. Eventually, you know, the top line might go slightly down. Maybe the value of assets gets slightly down, and so what? I mean, our NAV is EUR 1,635 pro forma for the dividend, and we are trading at EUR 10. You know, even if our NAV goes down to EUR 15.50 or EUR 14.85, so be it. I mean, we are trading at EUR 10. The market as always is good in detecting directional movement, not so good in orders of magnitude.
Thank you very much. Finally, we have a follow-up question from Fernando Abril-Martorell with Alantra. Fernando, please go ahead.
Yes. Sorry, only one quick one. A follow-up from the inflation issue. Just, I was wondering if this is something that you are actively pushing to renegotiate contracts, by, I don't know, capping inflation in exchange of two years or three years extension, or is it something that your tenants are asking for?
No. Tenants are not asking for it at present. Of course, our duty is to look beyond the next two quarters. You know, of course, looking beyond the next two quarters, eventually there will be a point in which you know inflation might be protested by tenants. Legally, you have the upper hand. Remember during the COVID, many people thought we wouldn't collect because tenants will not pay. How? I mean, tenants have to pay. This is a legal. This is a contract.
When they are doing very well, they don't come to you and increase the rent. Of course, you know, from a legal standpoint, you have a very good starting point in a negotiation. Of course, it's not capping the rent. What you will do is simply make a bonification. You will say, "Okay, don't worry. The inflation that applies to your contract is 11%, I will only apply 5%. This year, by the way. You owe me one. You know, the one that you owe me is that you have a waiver or you have a contract break in year 2027, that you will be waiving now, so that your contract will move to year 2029.
It's not something that we anticipate, Fernando, but it's something that could happen in the future, and you know we will make use of it. We have seen that in the past in other latitudes. I mean, when I was covering Latin America, people of course protested inflation because inflation was 50%.
Yeah. Okay. Thank you very much.
Okay. Operator, are there any questions? Any other questions?
We have no further questions.
Okay. Thank you. Well, thank you all for joining us today. It's been a long call. Yeah, really thank you for being here with us. For those who are taking a little summer break, enjoy. Do not hesitate to come to us should you have any questions. We'll be more than happy to answer them. Thank you again. Bye-bye.
Thank you everyone for joining us today. This concludes our call. You may now disconnect your lines.