Good afternoon, ladies and gentlemen. Welcome to MERLIN Properties half-year results presentation. As usually, Ismael Clemente, our CEO, and Francisco Rivas and Inés Arellano, both Directors of the company, will walk you through the presentation that you are seeing on the screen. It will be followed by a Q&A session. Without further delay, let's start. Ismael, the floor is yours.
Thank you, Fernando. Welcome to MERLIN Properties' first-half financial results presentation. It's been a very solid quarter of performance for the company that follows also a very good first quarter. The whole semester has been excellent from an operating standpoint. I mean, beyond the print in net results, which at the end is asset revaluation, which is paper money, the reality is that from a cash flow standpoint, we have improved margins and we have gone one extra inch in every asset class at the company. We are starting to see a little bit the merit behind the debt on the data centers. From an operating standpoint, the rental growth came at 3.4% like for like. The occupancy was also very high at 95.4%. You might argue that in the first quarter it was 96.7%.
I told you that from the 99% we were in logistics, you can only go down. It was impossible to repeat the same print in logistics. In offices, we have reached 94.2%, which is our all-time high. The rental growth is quite compelling at 3.9%. In fact, as commented in previous calls, we are witnessing an acceleration of the rent negotiations with significant interest in take-up. Part of it is explained, of course, by a resilient economic performance of Spain. Also, part of it is the destruction of stock that I commented many times with you, all the way into the rescue reconversion projects, which are starting to be felt in the Madrid stock of offices. Not so much in Barcelona because Barcelona is for residential, is a disaster. They have a disastrous regulation and it is impossible to convert an office building into rescue in Barcelona.
It's more difficult to correct excesses of stock that in Madrid is working fine. In logistics, we went down in occupancy to 96.2%, but we still delivered good organic growth at 2.2% like for like. We have continued pre-letting significantly our width, with a big transaction in the north of Spain and one head of terms, a very good one for the Henares corridor here in Madrid. In shopping centers, very good like for like at 3.2%. What is more important, we have reached an all-time low in occupancy cost ratio at 11.0%, which is incredible thanks mainly to a very strong sales evolution that keeps us absolutely amazed of 5.8% versus the same period in 2024.
With all these, the FFO generation came at a plus 12.8% compared to year-on-year, with a very significant strong value creation as a consequence of asset appreciation, 3.2% gross asset value like-for-like growth. Mainly, it's a data center thing, although it is important to remark that the deterioration seen in past quarters in the value of the traditional asset classes has not only stopped but also reversed a little bit. The appraisers seem to be flatishly, but they seem to be compressing a little bit again the cap rates. You know my opinion about that. I would prefer to stay where we were because I believe there were healthy cap rates. You know it seems that we are entering a small cap rate compression phase in valuation.
What is important is that with all these, the total shareholders return in the first half has amounted to 6.6%, which you know it's clearly a good indication for the whole year. I believe it's going to be a good, very interesting year from a shareholders' return standpoint this 2025. Our financial situation remains very healthy at 28.6% LTV, under 9% net debt to EBITDA, 100% fixed rate with no debt maturity till November 2026. We have EUR 1.6 billion of liquidity position. Standard & Poor's has reiterated the BBB+ with a stable outlook, which is, of course, very, very good because you know towards the end of the year, we will need to tap the market for debt. It's important to do it on a very good double rating by Standard & Poor's and Moody's.
Regarding value creation initiatives, we have been very active in the sale of a number of assets that we now call non-core. I mean, we are talking now always about occupied buildings, mainly for rescue reconversion. EUR 36.4 million have been executed in the period. We have also signed and, in some cases, received advance payments for another EUR 145.9 million, which basically means that we expect to comply with the 2025 budget in terms of disposals. As you know, part of the data center deployment program is financed with the capital increase that we carried out last year. We also depend on a number of disposals that we have budgeted for 2025, 2026, 2027, 2028, and 2029. We are very well on track to comply with those internal numbers. More importantly, it's been a very, very good period in terms of prelets or listings or big listings in data centers.
You all know that we finally placed a block of 15 MW in Barcelona with a big NeoCloud hyperscaler. And then a block of another 18 MW in the Bilbao- Arasur data center. I won't do spoilers. Fran Rivas will comment in a moment about the evolution of conversations with clients for the risking of phase II and the rest of phase I. In offices, we signed two very large headquarter leases, one with an existing client, Técnicas Reunidas, who significantly enlarged their position with us in the A1 corridor. The other one with a very big energy company, Spanish IBEX certified, for a headquarter in the A2 corridor. In logistics, signed with Mercedes-Benz in Vitoria, 73,000 sq m. Have signed also a head of terms for a turnkey project in the Henares corridor for another 55,000 sq m, which you know is very, very interesting.
In shopping centers, what is more notable is that the extension to the already big Marineda shopping center is going very well from a pre-commercialization standpoint. The opening is, in principle, penciled in for something around November or beginning of December. Yet, we are 92.9% pre-let, which is a very remarkable achievement by our colleagues of retail and logistics. Regarding financial results, if we move into page six, revenues have grown by 8.5%, of which rent EUR 264.7 million by 6.7% compared to the same period last year. What is important is that we have improved EBITDA margin, moving from EUR 188 million to EUR 205 million, but with an increase of 9% above the increase in top line. Very good conversion. Most notable, the FFO has increased from EUR 147.8 million to EUR 166.6 million, which is an increase of 12.8%. Also, very interesting exercise in terms of cost containment by the company.
As commented before, the EPRA NTA has gone up very, very significantly, first as a consequence of the capital increase carried out last year, which, of course, contributed a lot of cash to the company, but also as a consequence of the asset revaluation that we commented before. With all that, the dilution in FFO that was expectable following the capital increase that diluted naturally the FFO of shareholders by around 16.7% has been now moderated to only 6%. We will try to continue eroding between now and year end. In plain language, with only the traditional asset classes for the moment working in favor of offsetting the dilution, we are managing to significantly offset the capital increase carried out last year, which in theory, or when in theory in practice, was penciled in for the development of data centers.
Without data centers yet contributing to the company on a meaningful basis, we are little by little closing the dilution caused by the capital increase, which is, I believe, a remarkable achievement. In terms of NTA, the strong revaluation has meant that we have almost flattened the dilution caused by the capital increase. We are more or less where we were last year in the same period with - 0.5%. On page seven, you have the like-for-like divided by offices, logistics, and shopping centers. You see what is like-for-like growth and change of perimeter. On page eight, you see the occupancies: 94.2% in offices, 96.2% in logistics, and 96.5% in shopping centers. Later during the presentation, I will give you what our estimated figures for year end look like, which you know offices is going to be relatively flat, a little down from the 94.2%.
Logistics will go significantly up, depending on a couple of contracts that we are negotiating, and shopping centers will remain relatively stable because it's impossible to move it from there. Without further delay, I will let my colleague Inés Arellano explain the details of the different asset classes for your benefits.
Thank you, Ismael. Moving to offices in slide 10, which today still represents 58% of our portfolio in terms of value, the momentum is quite positive, demonstrated by an all-time high occupancy level both in Madrid and Lisbon. Barcelona is still suffering from a temporary oversupply situation, and it will take some time to be digested. The drop in occupancy, however, has mainly happened in June, and that's the reason why you still see a solid like-for-like rental growth of +3.4% despite the impact. In slide 11, you may have noticed that we reached an agreement with a reputed and large tenant of ours, Técnicas Reunidas, that implies a mark-to-market on the existing space in first view and that we've now signed an additional 21,000 sq m expansion with them in return to projects to be developed in the same campus in Adequa.
Excluding this impact, however, the overall reuse of space would have been +5.1% overall, and more importantly, +3.3% up versus the -3.7% in Madrid. We have contracted 165,000 sq m in the first half of the year, which is a wide enough example or sample, I'd say, to provide us with reliable information on what is happening in the market. This is shown in slide 12. As already flagged in February, the Madrid office market is experiencing a very interesting trend. There is a clear need for residential amongst other users, and there's no land available in Madrid City Center, which is driving the reconversion of certain office buildings that have old current book values. Coupled with no new supply in offices, the overall office stock is shrinking, and this is benefiting the good quality assets, not just with occupancy gain, but also with tension in rent.
In our portfolio, we have identified 13% of our Madrid stock suitable for reconversion. Please do not think that we're going to be selling off everything. It also means that there are certain uses, like universities, that are compatible with the type of buildings that we have, and we can extract more value on cash flow. A good example of it is within our portfolio, we have UNEP, one of the most reputed private universities in Madrid, that trusted us with its 18,000 sq m campus in Tetuán. We move to logistics, and what we can say is that the performance continues to be robust with a +2.2% like-for-like rental growth. The overall drop in occupancy is only due, as Ismael commented, to the expected exit of a tenant in a 47,000 sq m warehouse in Cabanillas, Madrid area.
The asset, as you may imagine, with its ordinary quality of business, is under compensation, and we have several visits. Hopefully, it will be occupied, if not by year end, by the beginning of next. The cut-off date of December could be either going up to 99% again or staying in the range of a 96% occupancy ratio. We've also experienced a significant increase in occupancy in Barcelona, which obviously does not impact as much as Madrid does. Release of spread + 7.2% in the first six months, with higher leasing volumes in the second quarter, leasing 260,000 sq m contracted.
Moving to slide 16, this is a minority stake in Southport, Barcelona, which also showed a + 3.2% release of spread with around 157,000 sq m contracted and a temporary decline in occupancy, which cannot be considered a trend because, as said, our Barcelona portfolio in logistics has shown more than 500 states' increase in occupancy. Shopping centers, as Ismael likes to call it, our Cinderella became a princess long ago and is still showing its strength. All KPIs reported are positive. + 3.2% like-for-like rental growth, 96.5% occupancy versus 96.1% last quarter. Sales evolution outstanding at 5.8%. Footfall at + 2.4%. Record low OCR at 11% and release of spread at 4.1%, coming from 3% last quarter. Let's go to valuation since slide 21. All this good operating performance translates into valuation.
GAV has increased by EUR 518 million, standing at EUR 12.1 billion as a result of the 3.2% valuation uplift, mainly driven by development engaged in data centers, which have shown a 38.2% like-for-like growth. Valuations have resulted in a 5.2% passing ratio, which implies a 4.3% net initial yield, slightly lower from the one shown in December because data centers are still not yet stabilized. The revaluation impact in B&L has totaled EUR 361 million, of which around 58%, EUR 208 million, come from data centers. Operating data centers have crystallized part of the expected value creation. Fran will walk you through in a minute in slide 36. Appraisers have decided to also value the assets that we've started its construction after obtaining construction license, therefore anticipating value recognition. It is very important to say that all the land bank remains at cost.
It's only the either operating or already into construction portfolio that has been given a value by the appraisers. Methodology is as follows. Appraisers assess values with a 10-year DCS where they apply cap rates. You can see in our results that it ranges from 5.5%- 8% on the exit values. Debt-based 9%- 11%, which today still looks high for de-risk assets. For the first time for a while, now we see an overall slight yield compression in average seven bids, flat exit yields, though, in all three traditional asset classes, obviously being not meaningful in data centers as the assets are not yet stabilized. We'll see the ramp-up in the years to come. In slide 23, we can show you the sound financial structure that we have. This is moving from the asset side of the balance sheet to the liability side of the balance sheet.
We finished this semester with a gross debt of EUR 4.4 billion, down from EUR 4.9 billion in December after repaying the EUR 600 million bond in May. We have a net debt of EUR 3.6 billion, implying a 28.6% LTV . Cash flow generation and value creation have almost offset dividend payment and cap excess rates. This is shown in this 28.6% LTV . As said by Ismael, our net debt to EBITDA stands below 10x , 8.8x . The average cost is slightly higher than the one in December, 2.6%, coming from 2.5%. It obviously will increase slightly as we refinance our cheapest bonds. All our debt is fixed with average maturity of 4.4 years. Liquidity, also commented by Ismael, is still high, because we still have some of the proceeds obtained on the capital increase.
S&P confirmed our BBB+ rating with stable outlook, together with Moody's, on the basis of sustained lower leverage and expanding cash flow. In slide 24, very little else to add. 84% of our debt is corporate. 75% of it is bonds and 25% is unsecured bank loans. Only 16% of our debt is mortgage-based. Our next maturity is to be faced on 2nd of November 2026. Although we do have time to tackle it, we prefer to be prudent here, as we've always been when it comes to debt, and take advantage if and when we see a window of opportunity. With no further delay, I'll pass the floor again to Ismael, who will comment on the value creation part of the business. Thank you.
Thank you, Inés. Regarding capital recycling, the investments in the first semester were very few. We acquired one coworking space that we operated but didn't own, around 2,000 sq m in Barrio de Salamanca in Madrid. We bought a land bank for two data centers, one in the north of Madrid, Tres Cantos, with 30 MW of IT capacity confirmed, and then a potential expansion of up to 130 MW in the future, which is requested but not obtained yet. In the case of Madrid-Getafe, we bought a former industrial manufacturing facility in which we had 48 MW of existing, I mean, confirmed, IT capacity given the electric power that we enjoy in the spot. Regarding the investments, we are at 183.2% of which 37.4% executed and 145.8% signed, all above GAB. There are some adjustments still pending in some of the cases.
We execute later in the year and in 2026. As you can imagine, the reason why we operate this way is because we want to keep cash flow as long as possible. At present, we are a company which is, you know, excessively financed. I mean, we have a lot of, or we have had a lot of cash. We are running out of cash very quickly, but we have had a lot of cash. Of course, what we need to keep now is rent rather than cash. When we sell assets, we don't rush. We prefer to keep them in the balance sheet for longer and enjoy the cash flow. Those sales are mainly concentrated in offices in the rescue reconversion play that we have commented with you on a number of occasions. Those assets sold contributed EUR 8.9 million or will contribute EUR 8.9 million gross rental income in 2025.
Hence, the average disposition yield is 4.9% gross, which is interesting from a capital recycling perspective if reinvested in data centers. Regarding the Marineta extension, the size of the shopping center has significantly increased by about 25%. Total size at present is 126,500 sq m, which is a lot. It was already the third largest in Spain and now is the second. What is more important, despite the diversity and quality of the existing tenants, we have been able to find further tenants for the extension. We are almost 93% pre-let. With a CapEx of EUR 41 million, which in part was defensive because what we wanted to do is protect the shopping center upon the exit of El Corte Inglés in the area. We didn't want any undesirable neighbor to come near our shopping center, which is, of course, one of the big cash flow producers in our portfolio.
What was once a defensive movement has turned into a decent offensive movement because we are obtaining a yield on cost of 6.5%, which is not great, but it's not bad. Regarding Adequa 4, this is a large pre-letting, one of the largest signed in Spain since the great financial crisis. We have signed a 10-year contract with more than EUR 70 million backlog added to our office division and 21,000 sq m with delivery at the beginning of 2028. CapEx is close to EUR 53 million. The yield on cost is 6.2% on historic cost of land, including historic cost of land. If you do just the yield on CapEx, it's 10.4%, which at the end explains why we are doing this.
In reality, what we are doing is moving idle office land that we have in the A1 corridor in Madrid, which is now performing very, very well in terms of occupancy. We are moving that land bank into WIP and that WIP into product in operation, hence bringing more cylinders to fight together in favor of the performance of the company. Together with this building, we will assess the convenience of building the remaining buildability in the complex, which is a little tower. It's a low-rise tower of around 100 m with circa 25,000 sq m of total GLA.
In order to optimize first construction signages and also capitalize the momentum in the market, we believe that if we add that capacity in the A1 corridor, we believe, I know it's a bold movement or may look like a bold movement, but we believe we will fill it up in due time because I know the corridor now with the proximity of Operation Chamartín is starting to perform very, very well. It's our opinion that we will be able to make good use of our money by bringing the tower together with the fully pre-let building. In logistics, we are building or adding projects or will build in the short to medium term, 291,000 sq m. The last modules will be delivered in Lisbon in the first half of 2027, but the rest is mainly 2026 business.
Total investment will be around EUR 156 million, and the expected gross rental income is 17.2%. That will move our visible logistic income beyond the EUR 100 million mark, which is important. Although, as you know, there is invisible income in logistics that comes from the ZAL Barcelona, which is accounted for as equity method. You don't see the cash flow, but the cash flow, of course, is there. The yield on cost is 7.5%, and the yield on CapEx is 11.1%. I believe it's an interesting move to put that also into production. We need cash flow in order to continue feeding our little base of the data centers. With that, the non-committed pipeline will be only 190,000 sq m, mainly in Madrid, Valencia, and a little bit in Seville, with a pending CapEx of EUR 101 million and stabilized GRI of 11.5%.
A yield on cost in the region of 8% and a yield on CapEx in the region of 11.4%. Looking forward to mobilize also this pocket of value in the coming future so that we do not keep in our balance sheet any assets which are non-cash flowing other than the land of Operation Chamartín, which, of course, will take more time to become productive. Fran will comment on the digital infrastructure planning.
Thank you, Ismael, and good afternoon to everyone. I'm going to cover now the update on our Project MEGA and the main achievements completed over the first half of 2025. As you can see in page 32 and 33, we have summarized the current positions of our data center division that we internally call the Marine Edge within the Iberian Peninsula. Precisely in page 33, you can find a table with an overview of the different phases. phase I, which comprises our three assets in operation. phase II, which includes our work in progress, our WIP. Phase three, or the upsizing of the former three locations. Finally, the pipeline, which represents the future growth of our data center division.
Starting with phase I, and as a snapshot, after we complete the letting of all Barcelona, including the 6 MW of repowering and Arasur, the pending capacity of Madrid, and the fact that the advanced conversations we are holding with one specific client has driven us to update the stabilized GRI from the former EUR 88 million to the current expected EUR 92 million, which also improves as well the gross yield on cost up to 15.1%. In our WIP category, phase II, the total IT capacity has grown from the former 210 MW to the current 246 after the inclusion of a second building in Lisbon. Consequently, the stabilized GRI that we are estimating in 2029 achieves EUR 379 million with a gross yield on cost of 14.2%. The reason of including now a second building in Lisbon, and as compared to former calls we have had, is due to two reasons.
The first one is the fact that the U.S. government has finally decided to do not implement their artificial intelligence diffusion rule, which classified at the time Portugal as, among other countries, as tier two. That rule basically was impeding Portugal to import the latest technology in terms of chips. Secondly, the fact that in light of the performance and also the revaluation seen in phase I, we have considered that we can stretch a little bit more the funds raised last year in our capital increase and the debt attached to it, of course, without affecting our target LTV and the net debt to EBITDA that we have agreed with our rating agencies. In the upsizing category, we have included now a new repowering of Building 1 in Bilbao- Arasur, power that has already been requested and we will be answering in the following months.
Same applies to Building 6 in Arasur within our pipeline category with 30 MW of potential additional capacity. Entering now in more detail in page 34, we can see the current status of our operating assets. In Barcelona, within the 22 MW of maximum IT capacity, we have already equipped, as you know, 16 MW, which are currently in operation. The additional 6 MW of the repowering will be commissioned during the first month of 2026, with ready for service set for the first half of 2026. As a curiosity, these additional 6 MW of repowering will be with liquid cooling systems, while the first 16 MW are air-cooled equipment. In Bilbao- Arasur, what we call Building 3, which was the first one we have built, the 22 MW are already equipped.
10 of those, 10 MW, will be air-cooled and 10 MW will be liquid cooled, and the 12 MW originally is air-cooled. We are now working on the fit-out of the client, which from now in June, we have already given the first rooms, and there are different plans until they are in fully operation by the end of Q4 2025. Finally, in Getafe 1, as of six months, as of 30th of June 2025, as we described here in this slide, we had 4 MW equipped. Right now, this figure has jumped to 6 MW. It's what we have equipped right now, with the remaining 14 MW to be commissioned by the end of this year. In terms of commercialization of Madrid- Getafe 1, we are in well-advanced conversation, as I was commenting before, with one client.
This is what we define booking, considering the level of both technical and commercial involvement that we have already achieved with this client. For the available capacity that we have of this original 6 MW, which in this case is 5 MW of lease. Regarding the second phase of power, the additional 14 MW that we will get next year, we have also booked for them another 5 MW , that will increase basically that letting with that client up to 10 MW in Madrid- Getafe 1. Finally, we give them basically the option that if, when, or when the repowering of 6 MW that we are foreseeing in this asset, once we get it, they have also booked that capacity as future growth in the next years. As you know, we have been holding this capacity in Madrid- Getafe 1 until we have some visibility on the power delivery.
Now we are seeing a little bit more clarity on the timing to get the power in the recent week. We have included this in the negotiations of current availability. Now moving to page 35, we are showing you on a year-by-year the expected GRI generation of our operating assets until 2027, where, as mentioned before, we forecast EUR 92 million of GRI. Out of these EUR 92 million, EUR 66 million have been already contracted so far. With Madrid- Getafe, once it's fully let, we will jump to this magnitude. In terms of value creation of phase I, which is shown in page 36, the total investment remains at EUR 608 million, valued as of June at EUR 718 million, implying basically for the capital already invested another EUR 255 million of value captured as of June.
Considering the expected value of the assets as per our appraisals, there will be another EUR 293 million of estimated value to be captured, which, if you add also the rent that has been generated all over the periods, this will convert this phase I investment in a very profitable project for our shareholders. Moving to the update of our WIP phase II in page 37, both Bilbao- Arasur Building 2 and Lisbon Data Center Campus Buildings 1 and 2 are already under development. In the case of Lisbon, we will see basically at an early stage. In the case of Bilbao- Arasur Building 2, we will see in the following slides the progress in construction, which is evident because the building is already almost, you know, raised. All equipment regarding this building has been already ordered to guarantee its delivery date by Q4 2026.
Regarding Building 1, which is the third building that we are constructing in Bilbao- Arasur, which is the largest one once the repowering is obtained, we expect it to start construction by the end of the year. Equipment orders are well on progress to guarantee as well the delivery date by the end of 2027. The particularity of this building is its connection to an onsite photovoltaic project that will feed renewable energy into the site, which also improves even more the sustainability character of these developments. In terms of commercialization, we have two initiatives launched. One with a client interested in taking most or, you know, with different ramp-ups, even all of this capacity of Building 2. Another initiative that I will give you more details at the end of this section, which will comprise both Building 2 and 1.
In Lisbon, although its construction started last September, right after the capital increase, the conditions of the Lisbon area obliged us, as commented several times in several calls, to carry out soil compaction and special piloting works, as we will see later on the presentation. News in this project is now the inclusion of Building 2 in the same first phase of construction for the two reasons I commented before. Also taking advantage of the power ability we have on site, which covers the first 180 MW of IT in one of the feeds. We have also secured the second step to reach maximum capacity of the first phase without the upsizing.
In addition to this power availability, we have also signed an agreement with EDP to provide, in the same case like Arasur, another onsite photovoltaic plant up to 100 MW, which will be physically connected to the data center campus and also will generate a significant part of the energy consumption of this building. In terms of commercialization, it's still a bit too early to enter conversation with future customers as the targeted completion date is the end of Q4 2027. We have included this capacity as well in the European initiative that I will cover at the end of this section. Regarding Madrid- Getafe 2, we are awaiting to have green light from the administration to start the demolition works on the site. Those works will be carried out by the seller of the land.
We are finishing our design project to submit it to the municipality in the following months. Finally, on Madrid Tres Cantos, the licensing process is advancing and urbanization of the land should start within the first half of 2026. Regarding the CapEx of this WIP, I'm just jumping to page 38. We are showing you the update figure of the total CapEx expected for this phase II, which has increased from our former EUR 2.1 billion to the current EUR 2.5 billion due to the incorporation of Building 2 in Lisbon campus. We highlight here that the CapEx in a data center, as we have several times commented, is around 20%- 25% on civil construction, where payments usually are more linearized, while the remaining 75% is equipment, where payments are more back-ended.
That's the reason why we always present CapEx commitments because, you know, when the timing of payment is a little bit different from what we show here. The pace, as you can see, basically, is that we expect to commit EUR 836 million in 2025, out of which 49%, EUR 411 million, has been already signed, committed as of 30th of June 2026. In page 39, you can see some pictures of the construction works in Bilbao- Arasur Building 2. Also, on the top right photo, you can see in the background the building we have in operation, which is our Building 3. In page 40, we are showing different homes where you can see the soil compaction and piling process at different stages. The final one is on the right, on the bottom, on the right side of the slide.
As I said, basically, construction above plan will start right after the summer break. Regarding phase three or upsizing projects in page 41, the news there are the update of the remaining capacity in Lisbon campus, as in including Building 2 in the first phase of construction. In Bilbao- Arasur, we have included the potential repowering of 12 MW IT in Building 1 that I was commenting before. Also in Getafe, we have maintained the 6 MW of repowering as upsizing until we confirm timings of this power upgrade. Going back to one of these initiatives in terms of commercialization for Bilbao- Arasur and Lisbon campus is the possibility of being selected as one of the gigafactories that the European Union has launched in April 2025.
As you can see in page 42, the European Union aims to become an AI continent with large-scale AI data and compute infrastructure across Europe by setting up at least 13 AI factories. There are some existing ones like the Supercomputing Center in Barcelona, but also establishing five AI gigafactories to which the European Union wants to devote EUR 20 billion through different loans and grants. With this objective, in April 2025, the EU published its call for expression of interest of AI gigafactories. Marine Edge submitted to this EU a consortium capable of delivering what we believe is a unique AI gigafactory. The reasons why we believe this is unique is for, I mean, the different reasons. The first one is that we have not only permitted land with power access, but that land is currently under construction.
It fits with the EU objectives of having capacity ready for service in years 2026 and 2027. To achieve these timings, unless you have already started, it's almost impossible that you can meet those deadlines. As you have seen before, both of our Bilbao- Arasur and Lisbon campuses meet these deadlines and will provide 180 MW of IT capacity. They are looking for projects with capacity of expansion within the same sites. Both Bilbao-Arasur and Lisbon offer additional 358 MW of IT capacity to go there. Finally, they are seeking technical capacity of buildings to support the levels of densities mentioned as kW per rack that the artificial intelligence type of computing is requiring. This needs to, of course, maintain sustainable parameters. In our case, as you know, we don't use water consumption and we have a very low PUE, which basically matches what they are looking for.
After this inspection of interest, the different consortiums across Europe, because as I said, this is a European competition, will need to submit binding proposals by October. The European Commission expects to decide the final locations of their gigafactories by the end of December 2025. As I said before, this is an initiative from a commercialization point of view. We are competing with other countries and with other projects. After seeing the timing that the EU is looking for and our ready-for-service capacity and the reasons I mentioned before, we decide to apply to it. Unfortunately, I'm not allowed to provide you with much more details of the nature of our structure or members of the consortium, first because of confidentiality reasons, but also because we are in a competitive process. If there is news regarding this potential initiative, we will keep you posted. That's all from my side.
Ismael, closing remarks?
Thank you, Fran. Just closing our part of the conversation today, I'm opening the Q&A simply to stress what I commented at the beginning. We are seeing strong organic rental growth at the company. We are seeing a strong momentum in offices in Madrid, a little bit of weakness in Barcelona, and good performance continued in Lisbon. We are generating significant FFO in the company. The company continues to be a highly cash-flowing one with very healthy margins, which is always a nice thing to see from a managerial perspective that we don't lose the tension and we don't become gigantistic and, you know, sclerotic like happens in many other companies. We continue stressing our teams to work towards high occupancy levels. Also, we are enjoying a certain tailwind because Southern European economies seem to be having a good momentum and Spain is clearly not an exception.
Regarding value creation, what is to me particularly satisfactory is that we are generating a lot of alpha, basically by moving projects into WIP and WIP into assets in operation. We are meeting that with a very significant success in commercialization. In data centers, you know what we have been doing with CoreWeave. In offices, we let two big headquarter leases to Técnicas Reunidas and another big Spanish energy company. In logistics, we delivered 33,000 sq m just two weeks ago to Worten and Noatum in Lisbon Park B. We let almost 73,000 sq m to Mercedes-Benz in Vitoria. What is important, the long-term non-committed CapEx GLA is only 190,000 sq m. We keep reducing the land bank that we acquired in 2016, 2017, 2018 at very good prices. We keep reducing that land bank and adding cash-flowing assets to our inventory.
In shopping centers, I believe the Marineda Extension is a remarkable achievement. The leasing teams have done a fantastic job. By pre-letting in record time, close to 93% of the very significant GLA addition, which is close to 27,000 sq m, is a lot. As a very quick outlook, we see an improving investment market. We see also an improving underlying market in leases, particularly in offices. In shopping centers, a little bit business as usual for the moment. The evolution of private consumption in Spain keeps us absolutely amazed. I believe it's a mix of very low household indebtedness, a little bit of doping from fiscal deficit, but clearly, spending capacity of people continues to surprise us. As a consequence, we have decided to raise a little bit the FFO guidance for 2025 to EUR 0.56.
Many of you will take the EUR 0.30 of the first semester and multiply by two. Please don't do that because we will have less EUR 700 million and change working in cash at bank for seven, eight months of the year because we repaid the bond on the 26th of May. That will subtract about EUR 0.02 of that theoretical calculation of EUR 0.60. We are also counting on tapping the bond market between the end of August and October. I mean, we will, of course, be quick and benefit from the very good momentum we are seeing in pricing in the market and in volumes and also in the maturities. That additional cash will, of course, drag FFO because the remuneration we will obtain in cash at banks will be a point and a half lower than the cost of that money to us.
That will subtract another EUR 0.02 easily of cash flow to the theoretical calculation of EUR 0.60. I mean, EUR 0.56 is okay. I know some of you are now expecting EUR 0.57. Please, I mean, bear with us. I mean, I don't believe it's super important that cent, but we will, of course, do whatever is in our hands to excel the guidance that we are giving to you. You know, it's pretty much accurate at this point is what we see. Regarding translation into dividend, as you know, we were a little bit below the 80% payout ratio. Going back to 80%, that increase of EUR 0.02 in cash flow per share allows us to recommend to the board another EUR 0.02 of extra dividend per share. We will propose to the board raising the dividend from EUR 0.40, that was our initial estimate at the beginning of the year, to EUR 0.42.
That is basically it. We can move into Q&A. We are here to answer your questions.
Thank you, Ismael. We will now start with the Q&A session, please. Remember that in order to raise the questions, you need to press star five. Star five. The first question comes from the line of Marios Pastou. Marios, the floor is yours.
Great. Thank you very much. Thank you for taking my questions and for the presentation. I've got three questions from my side. Preference to answer them one by one or all in one go?
If you make one by one as you wish, we are simply, we will take note.
Okay. Fantastic. They're all related to data centers. I think maybe we'll do them in one go. I think maybe we start with slide 35 where you've now provided the GRI build-up of phase I. Can I just check how you're including Madrid-Getafe in there and how this is being included in the build-up of, say, 2026 and into 2027 based on the discussions you're having? Secondly, on the data center values, I think you mentioned that you're now revaluing both operational assets and those under construction. Can I just check, has there been any upside taken across phase II? If not, when will this likely start?
Finally, on the timing of the value creation of phase I that you provide in slide 36, how should we think about it in terms of the remaining EUR 293 million to be captured, split, say, between the second half of this year and into 2026? Thank you.
Okay. Regarding the timing of value creation, in principle, we should be running at full cash flow around 2027. End of 2027, if you multiply December by 12, probably we will already be at, let's say, cruise speed. Starting from that point, I believe the appraisers will start, let's say, normalizing the appraisals of those data centers in phase I. I believe they will start lowering significantly the discount rates because at present, between 9% and 11% looks to me a little high. If you can buy data centers in the market at between 9% and 11%, give them all to me because you know we wouldn't take the risk of building if we were able to buy data centers in the open market at those rates.
I believe that if you calculate the gross rental income, which is 92, and you multiply by an NOI margin of, say, 70%, 70 change percent, you will be at an NOI of between 60 and 65. It looks very clear to me that that warrants a valuation in the region of $1.2 billion- $1.25 billion, even $1.3 billion, given the hype in the market and the fixed escalations, which, of course, play a role, particularly on very, very long contracts like the ones we are signing. I believe, let's say, starting end of 2027, the improvement. Starting end of 2027, probably in the valuation of end 2027 or in 2028, we will probably be able to rip the benefits of most of those $300 million that we believe are still pending to be recognized in phase I.
Regarding the value of phase II, at present, the only thing that has been recognized is a little bit of value in Bilbao 2 because it's already with construction license and being built. The two buildings, the first building in, because we have not yet taken the decision to start the second building, the first building in Lisbon. This is the only thing that has been appraised and has captured a very little value because the discount rates which are applied by the appraisers are very high. The cash flow projections are also very high. The PV, as you can imagine, suffers as a consequence of that, and very little value is recognized.
We had a doctrinal discussion with the auditor, and their stance is that it's good to be prudent, but if you are too prudent, sometimes you are not transmitting to the market the fair image of value of your company. We came at a kind of a middle ground, which is, okay, we are not going to reappraise our land bank as such, even though we might have obtained power. We will only start appraising when we start building. Upon obtention of the license of construction, when we start building, when we start erecting columns, we start appraising or reappraising that building, which up to then is carried out in our books at cost, including land cost plus whatever CapEx we have incurred as a consequence of land compaction or foundations or similar.
Regarding the data center in Getafe, as commented, we are in discussion with a client for taking, in different steps, capacity within the building. Right now, what we have available is 5 MW of capacity. As we commented several times, the clients, when they were coming, want to see growth. 5 MW used to be a very decent amount. Now, normally, this type of client wants to have capacity to expand within the same asset. We were waiting and holding a little bit those conversations until we have more clarity on the additional jump in power up to the maximum capacity of the 20 IT that we designed originally.
Out of that additional capacity that we expect to receive in the first half of 2026, if you add several months of the fit-out for the client until this is ready for service, probably we will be by the end of 2026, beginning of 2027, ready for service for the client. That's exactly what you were mentioning. 5 MW would be like 2026, 5 MW would be beginning of 2027. They are also reserving the option to take the capacity in case of repowering. Of course, at the time that comes, we need to equip that, that we are not equipping in advance. Once it comes, there will be other options as well to complete that. That's basically the current status of Madrid-Getafe 1. The client is a cloud operator, which is bringing not only pure IT capacity, but also telecommunications or interconnection equipment.
That is important because that normally drives farther expansion of capacities in the future. It's very, very important to make the initial movement. Normally, you are blessed with additional extensions of capacity. This is what we are negotiating at present.
Okay. Thank you, Marios.
Thank you for the additional caller. Thank you.
Thank you.
Thank you. Next question comes from the line of Florian Lagos. Florian, the floor is yours.
Yes. Good afternoon. Thank you for this presentation. I would have two questions. Maybe the first one, a follow-up question on the data centers and maybe the slide 35. You have provided an expectation in terms of revenue for the next three years. In which way is this very accurate or in which way maybe you could be able to improve these expected revenues in the coming months? That would be my first question. My second question would be on logistics. We can see that your occupancy rate can be very high, sometimes at 99% and come back lower at 96% today. Have you any major leases that would come to end shortly and for which you could expect the departure of tenants? Thank you very much.
Okay. Regarding the question about logistics, the reason why we went down from 99% to 96% was due to the departure of a big client, GXO, former XPO in Cabanillas at 47,000 sq m, which is, of course, a big shed. It's a very significant shed. Of course, now what we are doing is first waiting for the effective exit of the client, which will still take some time to clear up completely the shed. We will take possession. Of course, we will repair in case there are little damages or things that need to be looked after. We will start the commercialization. For the moment, it's business as usual. Regarding big leases that can depart in the coming months, we have one or two negotiations identified. It's part of our usual portfolio management. We don't see anything which is noteworthy that requires calling your attention.
If we can replace the GXO departure before year-end, which is not super likely, but we are working on it, that is not easy, then the occupancy, as commented by Inés, will go to the region of 98%. If we cannot replace, the occupancy will stay flat at around 96% as of year-end. Probably next year, we will replace the tenant and life goes on. On improvement of the cash flow of phase I.
phase I, I mean, considering that we have a building in Barcelona with repowering already let, and we have Arasur already let, the only capacity we have in order to improve that is Madrid. The only thing, basically, that if you want to have some hope, basically, of improvement is the fact that part of this capacity in Madrid will come as well, not only air-cooled but also liquid-cooled. Normally, when liquid-cooled is entering into, normally, we charge a little bit of a higher rent. It would be pretty accurate. There's no little range of movement to improve that. As I said, either because of liquid-cooled or the part that we are not discussing, this capacity that we are not discussing with this client, which would be basically 9 MW of this jump of additional until the 20 MW.
On that 9 MW, of course, we are more or less forecasting that we will obtain similar rents to the one we are obtaining in the building. If somebody comes, of course, at the last minute, then we have probably some sort of negotiation capacity that would be pretty in line with the numbers we have shown you.
Okay, thank you very much.
Next question comes from the line of Adam Chapman. Adam, the floor is yours.
Good afternoon, team. Just one from me, just thinking about development pipeline and funding. You obviously raised equity a good way below where the share price is today. How are you about,
funding the remaining data center CapEx over time in terms of the mix between equity and debt, let's say. I'm also just wondering if you've taken any lessons from what Equinix has experienced with the public market in its own funding of its pipeline.
Okay. For the moment, our preoccupation is basically concentrated in debt, because we need to raise a significant amount of debt over the coming, you know, 24 months, to continue funding our CapEx effort. We have, in principle, no need for equity. I mean, being completely frank and open, I believe we will have our tank full till at least, you know, second semester, end of 2027. We shouldn't be needing equity till then. There are the recent things that we have seen with Equinix, you know, there is very little similarity between Equinix, which is a very big company and a very serious company, and us. We are, you know, an absolute beginner. A little nuance, a little difference is also the business in which they are, which is they are more colocation.
We are more hyperscale, and that, being hyperscale allows us to reduce a little bit the lag between spending the CapEx and obtaining some returns and an impact on our earnings. More notably, we are now working from a research and development standpoint in a new technology that could come to market at the end of 2027, beginning of 2028, that will allow us to be even more modular in the way we construct our data centers in order to fine-tune even better the time lag between spending and obtaining returns. Because, with traditional construction, of course, we build, we equip, and there is always, you know, relatively reduced or significant, I mean, compared to the new construction technique, time lag between spending and obtaining the returns.
We, with the help of Endeavour, are working on a new way to construct that will allow us to obtain a little cost efficiency, which is very much welcome, plus a particularly more accuracy in the way we spend. What can I say? I mean, of course, in retrospective terms, I feel sorry for having raised money at end. What could I do? I mean, at the time, that was my only option, was basically raise money in a market exercise at the then prevailing market price because we had CapEx commitments that were about to be, you know, ordered. Our main two shareholders were not very much in favor of incorporating a big shareholder or a new big shareholder into the company in one shot. They preferred to do a market exercise. We raised the equity at the price we could.
Through performance, underlying performance of the company, now we have closed a little bit farther the gap between our stock price and our NTA per share. As you can imagine, I feel only half happy that our NTA is running so fast because, although of course, I love the value recognition that this implies and the fact that we are working in your favor as shareholders, that increases again a little bit the gap between stock price and NTA per share. Our endeavor now, our obsession is to try to continue closing the gap between stock price and NTA per share because that would open a brand new world in terms of options to finance our continued CapEx, like, for example, convertibles. Convertibles these days are couponing very, very low and are paying very significant premiums upon conversion.
Paradoxically enough, the premium and the coupon do not vary a lot between being trading at - 30% to NTA and being trading at - 10% or at NTA spot. Of course, the closer we can come to NTA, the more options we will have in terms of raising additional equity if and when the situation comes. One important piece of information is that we have been advised by our two main shareholders that they would support capital raising or further capital raising exercise in their pro-rata share. That is always very, very important because that gives you a very significant support when you go to market. When you go to open market, if you have 33%, 34% of your placement already secured, that gives a lot of confidence to the market.
If you look in retrospective to the capital raising exercise we did last year, at the end of the day, we placed 84.5% of the capital increase with existing shareholders. That allayed the fears, a lot of dilutions, more dilution, less dilution because, at the end, the people who are buying your stock are the same that are already your shareholders. The new shareholders that you bring into the book are very, very minimal. In fact, in many cases, it's people that were already shareholders a number of months ago, etc. This is what I can tell you. Of course, I know what has happened with Equinix. I take note of it. Anyway, I wish I was Equinix. Equinix is a monster company. We are no fucking body in this world. We are just starting.
Despite what has happened, I would exchange my position for their position any day of the year because, you know, they are an incredible company that can fund as much CapEx as they want.
That's very clear. Just to be clear, it wasn't intended as a criticism of the previous equity raising from it. The opposite. That's useful as a look forward view. Thank you.
Thank you for that. That much appreciated.
Thank you, Adam. Next question comes from the line of Véronique Meertens . Veronique, the floor is yours.
Hey, good afternoon all. Thank you for taking my question. Maybe first one question on phase II. You mentioned that you upped Portugal on the back of probably needing less funds due to the high evaluation gain. What's holding you back on not fully restoring the full megawatt? Is it purely funding? A follow-up question on that is what kind of development gains do you now still take into account for phase II?
That's a very interesting question. The very simple explanation, Veronique, is that we didn't dare. We didn't dare. We have construction licenses for the five buildings, and we could develop the 180 MW in one go. We only raised 36 MW because, you know, otherwise, we would be stretching too much our financial capacity. If we were rich, if we were Equinix, we could do the 180 MW in Lisbon in one go, which, of course, would bring to the surface very significant value because that land was acquired many, many years ago. All the value was attributed to the logistics land plots, so the residual value for that land in our books is very close to zero. If we were to reappraise all that land now with power, of course, we would obtain very interesting value appreciation in that project. We want to be prudent.
We are new kids in the block. We have to be very, very prudent in what we do. This is why we decided to do all phase I with our own self-funding capacities. We only dared to raise money in the market when we saw that we were meeting commercial success in the market, sufficient commercial success to predict successful commercialization of phase II. We have always tried to reduce the number of construction sites. It would be very cool on our side to tell you that we are opening 20 data centers in Spain in every possible province or region and another 20 across Europe. That would be very cool, but not very realistic because then you need to send construction managers, procurement managers, a lot of staffing to all those data centers. It's not easy.
We have decided to be relatively concentrated in very few construction sites, and we want to keep that relatively prudent stance. If by any chance, imagine we are awarded the European Union Gigafactory status, then it's a different thing because with the advancements and the grants awarded by the European Union, we can realistically think about building the whole thing because that extra money, of course, is a very welcome help to our financial stance. This is what I can tell you. We did it out of prudency.
Maybe one question. Did I understand correctly that you get clarity on that EU part before the end of the year?
In principle, yes, although with the public clerks, you never know. In principle, by the end of October, we should firm up the proposal from the consortia, and the decision should be taken towards year-end. End of December, in principle, is the date in which the European Union has decided to meet and take the decisions regarding the location of the five gigafactories.
Okay. Thank you. One question on logistics. You're also working, obviously, on your pipeline. There's still some pre-letting to do. Can you elaborate a bit on how your discussions in terms of pre-lets are going and how the appetite is in the market for these logistics assets at the moment?
The part which keeps us more occupied at present is Valencia. In Valencia, conversations are going well. I mean, it's a city and it's a region which is now experiencing very significant strength and industrial activity. We are happy with what we see there. In San Fernando three and Azuqueca, we are significantly prelet, and it's mainly Lisbon part fully prelet. Sevilla Zal is 8,000 speculative. There are only two little modules. We believe that we will be okay. At the end, is Cabanillas part two, which is, you know, we are entertaining conversations for a 25,000 sq m shed in there out of the 58. For the moment, business as usual. I know the reason for your question because elsewhere in Europe, logistics is starting to cool off a little bit. For the moment, we don't see that in the market.
If that happens, of course, we will be happy to report. This is why we are pretty much concentrated in killing off our land bank before the tide turns. This is what keeps us busy at present.
Okay, thank you. Very clear.
You're welcome.
Thank you, Veronique. Next and last question comes from the line of Stéphanie Dossmann. Stéphanie, the floor is yours. Stéphanie?
Hello. Can you hear me?
Yes, we can.
Sorry, I was on mute still. Sorry, hello, everyone. Thank you for taking my questions. Actually, I have a couple of them. Maybe the first one is a follow-up on the evaluation of data centers. It's a bit tricky to understand how it's, how the appraisers approach it. Just to clarify, could you maybe give a bit of breakdown of how much is the value taking into account in the GAV currently, related to the land and construction, and how much is equipment? As I understand that you start to reevaluate the land when you start the work and so on. Could you give a bit more of what pace they recognize the value of a typical development and what is included currently in the EUR 720 million? The second one would be, you mentioned disposal program all over the plan.
How much would you target to sell in total and maybe next year, for instance, please?
Okay.
I'll take the evaluation one. Again, just to remind you how methodology appraisers use for data centers, it's a 10-year DCF. Basically, what they take into account is the cash flows. The estimated cash flow before now for phase I is the contracts, okay? That has moved, obviously, those cash flows to a sooner time, which derives in a higher valuation. They take the 10-year DCF. They use to calculate an exit value, they use a CAP rate. Again, the ranges that we provided you with are also in the accounts. It's still a range. They don't value yet Madrid the same as they're valuing Barcelona or Bilbao. Remember, we are in a ramp-up mode in phase I. For that exit value, they discount all those cash flows with a discount rate, again, they use a range.
As Ismael was mentioning, for the operating ones, so the three data centers that we already have in operations, one providing rents from January 1st, which is Barcelona, the one in Bilbao that will be providing rents at the fourth key of this year, and then Madrid, which is the laggard, the values are different. They're using different discount rates, but that's exactly what they're doing. For the operating data centers, still value to be captured, as Fran mentioned before. Obviously, as the commercialization stage in Madrid comes, they will be using different discount rates, we hope, because, obviously, once you've derisked completely an operating asset, it makes no sense to be using discount rates that are not market prevailing rents. Let's put it that way. That's for the operating side.
For the work in progress side, which, again, before it was not valued, we've always maintained a very, very prudent approach to valuing work in progress. For anything that is already under construction, and obviously, something is under construction because it has a license. Otherwise, you cannot start building. Whenever anything is already under construction, then the appraisers come and do give a value for that particular side. They don't do a valuation as if this was already fully done, and then they discount the CAP, so on and so forth. They're just saying this land that before was at cost, it has a higher value because it has power, it has license, and you're already starting with all of this. They do provide you with a value. Now, is this a big value that they provide you with? No. It has a longer lease, longer time period.
For DCF, the cash flows are obviously much, you know, they're delayed within the cash flow statement, if you wish, like the line. Fran mentioned about this. If the exit value is one thing, but even the cash flow that you will be receiving once you've finished with this development is not expected for the near term. All that cash flow, put it in the future, discounted at a higher discount rate, much higher discount rate to today, brings you a, obviously, higher value of what you have in books, but still negligible, I'll say, compared to what you are generating in an operating asset. This is a bifurcation of valuation, and that's why we are providing you, and this is in the executive summary, the valuation table.
You have the value for the operating one, $719 million, and then you have the value for what we call data center with land. Again, land at cost with at an appraised value.
Regarding disposals, Stéphanie, in 2025, we had an internal objective of reaching around EUR 110 million- EUR 120 million or less, and it will be done. For 2026, our objective was a little higher, I mean, EUR 120 million +. We believe we are also going to be there comfortably because of what we have already signed and what now is in DD or in advanced negotiations. I believe we will be there. I don't have yet a lot of visibility on 2027, but you can rest assured. We are no longer selling low-value kind of things or empty buildings. We are now selling things which are good ones. We will make sure that we obtain the funding needed in order to comply with our capital increase plus internal capital recycling objectives towards funding the data center expansion and delaying as much as possible capital raising exercises.
Thank you so much.
It's a pleasure.
Thank you, Stéphanie. There is an additional question coming from the line of Eleanor Crews. Eleanor, the floor is yours.
Thank you very much for the presentation. Quick one from me. Thinking about next year's FFO for sure, you previously said you thought that 2026 would be positive compared to 2025 but relatively flattish. Is that still true, or is the strong performance so far this year giving you more confidence next year will bring good growth too?
I think the guidance will provide it in February, right?
The guidance for this year and next?
The guidance for this year has been revised that way.
A little bit, but it will, I mean, we will provide you guidance in the future. We will provide guidance in due course next year. Eleanor, in all frankness, next year is going to be relatively flattish. I mean, we will do whatever we can in order to improve it, but it's going to be relatively flattish because the reality is that we don't start seeing a jump in the income from data centers phase I till 2027. In 2027, we will have two tailwinds that will be absolutely differential, which is a full year of the new logistics developments, which will add another EUR 17 million, EUR 18 million to the cash flow of the company, and then full cash flow from data centers that will jump from EUR 60 million to EUR 90 million, so another EUR 30 million, and no significant increases in cost.
That will be the beginning of the good thing because some of phase II will also be kicking in, particularly if we are lucky with the commercialization of Bilbao 2. We could also kick in a little bit of cash flow in 2027. Of course, the party starts in 2028, 2029 when we start reaping the benefits of phase II, which is the real game changer for the company, the volume that phase II will bring of additional rent to the company that will, of course, make a big difference in terms of cash flow per share and DPS.
That's helpful. Thanks very much.
It's a pleasure.
Thank you, Eleanor, and thank you, everyone. The IR team will remain at your disposal for any further clarifications that you may need. In the meantime, enjoy the summertime. Thank you.