Good day, and thank you for standing by. Welcome to First Half twenty twenty one Results. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I would like to hand the conference over our first speaker today, Ines Aureliano. Please go ahead, ma'am. Thank you. Good afternoon, ladies and gentlemen. Welcome, and thank you for joining MERLE's First Half twenty twenty one Results Presentation.
First of all, we kindly ask you to provide an disclaimer contained in the presentation. As usual, Ignacio Gimento, CEO and Ignacio Gimento, COO, will walk you through the presentation, and thereafter, we will open the floor for Q and A. With no further delay, I'll pass the floor to Ignacio. Thank you.
Thank you, Ines. Good afternoon, everybody. The 2021 has been, in a relatively uneventful period, very similar to the one of last year. However, there has been a notorious improvement pattern over the period, with the first quarter delivering around $0.13 free cash flow versus $0.14 on the second, and we expect that growing pattern to continue in the third and the fourth as a couple of big buildings that we're having with will come into operation, and we start producing rents, plus we expect to continue reducing little by little the incentives applied to the shopping center activity. Valuations have come out flat versus December 2020.
Offices is slightly up, 0.4% and logistics, well, better with plus 4%. Those on the positive territory and then retail down 1.5% and hotels, although an exotical in our portfolio, significantly down as well. In shopping centers, the accumulated adjustment taking into account this past year exceeds now 10%, which so far seems relatively commensurate with the behavior we are seeing in the rents in net rents after incentives in the reletting that we are conducting so far. We have distributed EUR 0.3 to shareholders, and that has driven our LTV to EUR 40.5. It should normalize a little bit towards year end as we accumulate more cash flow of the period.
We have continued actively managing our balance sheet, having issued a 500,000,000 overall bond with a maturity of nine years that will serve for the repayment of the bond originally Metro Faiza bond maturing in 2022, but we will be saving around 100 basis points starting in the maturity date of the bond. We will probably pay it in February. In terms of operating performance, after significant decline in occupancy, offices, we expect them to start showing some signs of recovery in the second half. In fact, you might remember, last year, we ended up at 91.1%, having lost in the year 1.7% occupancy. The first quarter was negative, with minus 1.9%.
In the second quarter, we have had a further 0.2% adjustment, which basically takes us exactly to the point we sign out to the market as the maximum deterioration in occupancy. We said we expected occupancy to fall this year between one hundred and fifty and two hundred basis points. Those 200 basis points are exactly the point in which we are now. We expect to slightly recover in the third and, more importantly, in the fourth quarter and bounce back to something in the region of between 89.5% to 90% at the end of the year. The lead and activity in the market are clearly improving.
This is no wonder. It's simply a reflection of what is happening in the economy. There is employment growth now. Of course, the first employments to be created are the most, let's say, unskilled or unspecific ones that it will follow suit with managerial jobs. And of course, two, three quarters afterwards, you start immediately picking that up into the occupancy of the portfolio.
In logistics, the performance has been very strong, particularly in lease up. It continues to be a market, which is very, very active, with lots of people looking for a new, shed. Rents are relatively stable, however, and this is a consequence of a chain effect. Online retailers are all in negative territory. They are losing their share in their activity.
As a consequence, they impose a tremendous, sometimes exaggerated pressure on the logistic operators. And logistic operators, therefore, cannot afford to pay $01 extra rent in the facilities they occupy. It's a vicious circle that let's see what type of food it bears in the future. But certainly, this is a consequence of the what we are seeing in terms of online growth. We have improved significantly the occupancy, more than 1.5%.
As we commented in the last conference call, it was simply the consequence of a number of contracts that we have done last year on a temporary basis in order to give a hand to our tenants, to our clients because they were very wrong in their calculations of online activity in 2020, and they desperately needed extra space to store the goods. So we provided help to everybody on a temporary basis. And during the first half, we have been regulating that activity and extending the contracts to a normal lease law standard. In shopping centers, the performance and the resiliency of the segment is probably surprising even us. I mean, of course, all of you, but even us because the asset class is performing slightly better than we could have hoped.
The release spread has been 5.9%. This is not so important because approximately three, three point five points of that is contractual step ups. So the rest is in and out. The re tenanting rate of spaces vacated as a consequence of evictions since March 2020 now stands at close to 98%. I know this is mind boggling for many of you.
How can people be interested in retailing, in shopping centers? Because they make positive margin in their sales. So we are seeing now a growing pattern of not only small and medium tenants, but also the big name expanding the format of their successful shops in order to capture more sales with positive margin, and this is throughout the portfolio. We are seeing that in the portfolio. So what we are doing now is a little bit the Tetris of making sure that we move to the evicted shop, we move somebody else, which is contiguous to a shop which is operated by one of the big names so that the big name can expand the activity into the other shop.
But having said all that, probably the most important activity that we have conducted during the half has been making sure that we tackled with enough anticipation the maturity world that we were facing in 2022. As you might know, as a consequence of our commercial quality, we provided help to our tenants that we requested in exchange, extending their contracts till 2022. As a consequence of that, we were facing a renewal low in 2022 in the region of 44% of our contracts. So of course, that was something we should start tapping anticipatedly, and this is what we have been doing. So there are around 10% rolling breaks in which we have confirmation that there will be no break, Plus, there are 11% new contracts that are in final phases of negotiation, draft exchange or similar.
So we consider out of the 44%, we consider around 21% to be out of risk. And as a consequence, the remainder, which is 23%, is more similar, more aiding to what is our normal renewal rate in any given year. So we will continue working on the remainder of our renewals for 2022. Regarding value creation activity, it is important to note that Landmark 1, our office building program, is now almost complete. We have delivered fully occupied Castellan 85 and Monumental in Lisbon.
And the only width which continues in place is Plaza With Picasso in Madrid, which works are basically starting right now. So it will be delivered '23. Flagship is completed with the deliveries of Porto B and El Saler on track with their respective business plans. And in terms of days two and three, we have taken a significant dent into our land bank. We used to have 900,000 square meters.
We currently have less than 600,000 square the activity has been frantic over the past one years. Point And just in this half, we have delivered a lot of assets, 100% led and have pre led for constructions that we can start now another 90,000 square meters in the period. So given that the pending CapEx is now flattening, I mean, of course, we could always launch a Landmark two or a flagship two project that this is something that we are not necessarily going to be doing right now because in some cases, as you all know, construction costs are slightly going up. So for things that are going to be in relatively normal cap rate in the 6%, 6.5, that may take a dent on the returns. So we are going to flatten significantly our CapEx needs for the immediate future, and we are going to use that CapEx capacity to basically fund our data center program.
This program, as commented in a number of occasions, was originally, let's say, by product of our logistics effort. In every big logistics development, you always have a corner plot where maneuver for trucks is not ideal, etcetera. And we started thinking about alternative uses for those plots, taking into account that normally, the places where big logistic parts are located are in places highly regulated by fiber cables and with ample availability of electric power. So with that in mind, we started looking at the possibility of developing data centers in there. And what started as a niche activity for the company, looks like might become a mainstream source of revenue for the future with outsized returns that exceed even the ones we are getting in our logistics program, no matter the fact that in logistics, as you all know, the land bank was accumulated 2016, twenty seventeen, eighteen when prices were still reasonable in terms of land acquisition.
So this is all as in terms of introduction. I will pass the floor to Miguel Ollero, who will elaborate on the financial results for the semester. Thank you, Ismail. Good afternoon, everybody. Going back to the financial statements for the first half of the year.
Just to highlight that, as Ismail was mentioning, in the first half of the year, the growth rents have been growing a little bit with regards to the prior assessment in 2020, just 3.2% to 2 and €48,500,000 mainly driven by the office segment on the shopping center segment. In offices, as we have been commenting, there has been a drop in occupancy in the first semester of the year, 2%, that in addition to some assets that we already have had under works during the semester, they have been doing this reduction in rents in the office segment. In shopping centers, it's more related to the fact that we were selling down three shopping centers last year in the month of February, so they have not been with us anymore, and they have been affecting also the rent generation in that side. On the contrary side, you have logistics. We have been increasing our the number of rents collected.
And now in the semester, they have been growing 11.9% with regards to the prior semester last year. Looking at the net trends, we were 196,100,000 which represents a margin of close to 79%. The difference in margin in terms of net rent, That went down to EBITDA level, 178.2%, also a same 2.1% margin, quite in line and even better than the one we were able to get last year in the same period. Finally, in terms of flow through, FFO was €129,200,000 It is a 52% margin on rent, and it is at a level of 0.27 per share. As it was commenting, first quarter was 13%, second quarter has been 14%, and we are aiming to go up in the second half of the year to achieve a guidance of $0.56 per share for the whole year.
In terms of EPS, we were $0.41 per kilo, which is a big growth with regards to the prior period, close to double. And finally, on the E Prime TA, we were advancing 0.6% with regards to the one we were publishing at the end of last year, it is at €15.55 Moving forward, in terms of DRI, as we were commenting, the main reason behind is that we have a like for like negative of 2.2 mainly driven by offices of 2.9. So the impact was at a level of two point zero, but the listing was positive. And then this is what we have the main impact of some deflation in terms of intersection in the Catravo assets, not in the ABS, which are the main part of the main business portfolio of the company. In terms of occupancy, just to highlight that we think we are bottoming out from in terms of occupancy of reduction of occupancy in the office portfolio.
We are at 89.1%. There was a drop of 20 basis points only in the second quarter. As a whole, we saw two zero six points for the whole period and bottoming up out for the next semester. In terms of logistics, as Gismarck was pointing out, we were recovering 151 basis points during the quarter, going up to 96.2. And also more important to say, as he was commenting, we are rotating payments, which were on a temporary basis to with tenants, which are not reaching up on a long term basis.
And then Service Center, despite the good turmoil that we have been in the first half of the year because, as you may know, it is not a problem in the restrictions that we have been suffering in different shopping centers all across Spain with decisions taken by regional authorities. Also, Portugal has been largely affected with some with dealing with lockdowns. That was not the case last year and has been in this year. So despite that, we have been increasing our occupancy in the quarter up to 93.3%, 42 basis points up. And finally, and this is another fuel opportunity.
Now we're moving into the specific details of the internal asset divisions, and Hislana is going to be commenting further. Thank you, Miguel. Moving to Offices, Page 10 of the presentation. During the period, as commented before, we have suffered a like for like decline in rents. This is mainly due to three effects, the increased vacancy in the period, the negative CPI indexation that we have experienced in the first quarter, relatively flat in the second, and we expect highly positive in the third and the fourth.
And the out of stock, which mainly Plaza with Picasso, including the planned Landmark 1 and then two small buildings in two of our business parks, Attica and Federal Los Gams, which we have emptied and have started refurbished them in anticipation of pre rents in the future. So in Madrid and Barcelona, we have experienced a negative like for like. In Lisbon, positive. Lisbon continues to perform very, very well as a city and as a business hub. In Madrid, we are now bottoming out in terms of occupancy drop, 87% to 86.8%.
In Barcelona, we suffered one reduction of space of French multinational that was canceling two new business lines in Barcelona and vacated part of one of our buildings. And also, we also had an exit in Torre De Orelles, which has now been replaced and will revert the occupancy drop in the third and fourth quarters. In lease bond, very similar with 20 basis points or a little less, 14 basis points up. Regarding leasing activity, well, the number in the period, no matter how difficult the period has been, remains extremely high compared to all of our peers, close to 150,000 square meters, which, to the best of my knowledge, almost triples what other people is doing in the market. So we continue to have an industrial dimension and continue to be a very good proxy to what is really happening in the market.
We have been capturing a significant chunk of our reversionary potential in the portfolio. The latest appraisal by JLL, CVRE and Savvy's point at 11%. I mean remember, we were 13%, then 12%, now 11% delta on passing rent versus market. But we continue successfully capturing that in our new leases and renewals. In Madrid, we signed 110 contracts with some very big names, new contracts with Accenture and Eleknor and renewals with Tecnikas Remidas and Bass, new contract with Inetim, former Informatica Corte Nieves in the A1 Corridor in San Chinaro.
In Barcelona, we renewed with Capgemini and Genitale Catalunya, but signed new leases with Lazer and Facebook. In the case of Facebook, it was an extension with a very significant release spread on a reasonable sample of 36 contracts. In New Braun, the sample was very small, but we achieved a very high risk spread in the renewal with Credel Rico and the new leases with DPI and SAP. So it's been a very, very active period for the leasing teams in the company. On Page 12, you have an idea of what is happening with LUM, our flex space division.
We see the demand for flex space recovering very fast in preparation for the comeback to office, which for particularly for the biggest corporations, we believe should happen after the summer. In Madrid, in our operating facilities, we have achieved an occupancy of 47% now coming from less than 30% at the trough of the crisis, but the forecast for end of the year could be more in the region of 55 to 60%. So certainly, it is a very benign, very positive recovering pattern. We are adding new stock mainly in 2022 with three new openings and will be followed by an additional one in 2023 when we opened Plaza Del Picasso. In Barcelona, in the operating spaces, we have reached 61% occupancy coming from, again, 35% to 40 at the trough.
And we will be opening in 2022 very early in 2022, three new spaces in Torre Glorious Ferreteria, which is 22 up and Plaza Catalonia 9. In the case of Torregoire, in fact, we have reduced the size of the space because we needed one extra floor for one of the demands we have from the ordinary clients. In logistics, Page 14 of the presentation, we have continued delivering a very good performance, both organic, 1.1% up in like for like despite negative indexation in the first quarter and the increased vacancy that we suffered in the first four months of the year clearly, we started recovering occupancy in April with a number of leases we signed. But also, inorganically, we have seen very significant activity. In Madrid, occupancy has gone up by two sixty basis points, very significant activity.
In Barcelona, it's gone down by 150 basis but it's now on the verge of being recovered. It's simply the end of period effect. And in other locations, we are absolutely flat. The activity that you can see on Page 15, The sample is significant with 11 contracts, big contracts, and almost 200,000 square meters are transacted with a release rate of 3.3%, which is notable for logistics. The tenants continue to be first rate.
Most salient transaction in the period was the delivery of the national distribution hub of Carrefour, which was a turnkey. But also important has been the leases two leases signed with 4PX, which is one of the two, three operators that operate logistics for Alibaba. So this is a case in which, of course, we are also the landlords of Alibaba in Madrid, and we have started capturing synergies and signing with the operators that they have for their logistics activity. Also very important, as you all know, we started an En Blanc, a speculative development in Livon that was in the middle of construction during the pandemic. So we have prayed a lot because for many months, we have 0% occupancy and the works going on.
So we will invest in CapEx and have zero occupancy. Thanks, God. Towards the end of the construction period, we started receiving interest for that share. And we are now 85% occupied immediately following the inauguration, and we expect to lease the remaining module within by September, maybe October, we should be leasing the remaining modules. So we will be 100% occupied there.
And in fact, we have started already the landscaping and precharging works in because this is March land, and we have started precharging, one extra, landfloat, in order to to start another, development, which could be pre let. We might also embark into some further spec development there because we see that the demand is really intense for that location, which is particularly good as regards serving Lisbon from Villafanca De Chile. In Page 16, you have the activity in our participated company, FISA, which is FAL Barcelona. There has been an outstanding increase in FFO, close to 27% extra FFO, but this has been simply the result of WIP moving into operation. So the stock now has been almost maximized with close to seven and thirty thousand square meters.
The width is now only 8,000. So basically, we have finished with the availability of land in Sao Barcelona, having delivered in the second quarter 96,000 square meters of a state of the art new facility that will serve as the Southern European logistic hubs for French retailer, Decathlon, which is also our client in shopping centers. So we have basically terminated with the land that we found at the beginning of our activity in this operation. When we took over here, there were close to 400,000 square meters of land undeveloped, which have been since then successfully developed and delivered with a very high level of occupancy. Occupancy in the period has gone from 97.6% to 97%.
So virtually, we remain in full occupancy with a flat release spread on 325,000 contracted square meters. As for shopping centers, Page 18 of the presentation. As commented, the footfall and tenant sales are recovering. We could easily compare numbers to 2020, but this is absolutely pointless. I mean it will only lead to showing very high growth on every aspect of our operation.
We have decided to take 2019 as the positive year in which we are going to be comparing our activity going forward because we believe this was the last unaffected year prior to COVID, and it will serve to determine which part of the damage inflicted to retail has been caused by the pandemic itself and which part is the growth in sales induced by the pandemic in the online commerce. So this will help us to determine what is the new normal, let's say, in retail. The like for like decrease has been 2%, has been relatively small, mainly again by negative CPI indexation and slightly lower occupancy in the first quarter that has seen significantly recovered. As compared to 2019, we are minus 30%, but this is very interesting because we have seen little by little a growing pattern. I mean we have troughed at minus 14%, minus 45% in some months, particularly concerning at the end of last year, beginning of this.
And we have seen that this has significantly moved up, and we expect that this upwards movement will continue during the second semester of the year. As commented before, on Page 19, we render information about the twenty twenty two Xperis, which we know were a reason for concern for many of the analyst community in the market. So as you might remember, we had 42% then moving to 44% ex period when new people signed the commercial policy, 44% ex period in 2022. That looks a normal year in which our ex periods oscillates between 2228%, normally in the region of 24%, 26%. Those are the experience we normally have in shopping centers.
So in 11% of those 14%, we are in advanced negotiations for the early renewal of the lease contracts. In most cases, we are exchanging drafts of agenda. And the economic impact, which I know, again, is of a significant concern to many of you, is flat to slightly positive risk spread. You might say, okay, that is on the gross rental income line. What about net rental income line?
Prior to COVID, we were running at around 4% average incentive in shopping centers. And what we have seen in the new contract, in this 11% sample of new contract is that we have moved into around 14% incentive. So the delta between pre COVID and post COVID situation is around 10%, which should, I mean, looks at least commensurate with what we have seen in terms of adjustment of value of shopping centers. The rolling brakes, as you know, they are one or two big super important clients that work on a rolling break basis. Those have already redefined their footprint in Spain.
And as commented in previous conference calls, we have been left aside. We have been left uncapped. So we have seeked from them assurance as for the intentions they have in the future. And what they say basically is that if we have not been included in the redefinition of the footprint in Spain, we can be tranquil as the fact as you know, to the fact that there will be no exercise of rolling brakes in our portfolio. So in principle, we seem to be out of risk in those contracts as well.
The remainder, 23%, is normal tenants with contracts expiring in 2022, and we are in an early stage of renewal negotiations. We will provide more color, more info during the year. Very, very importantly, because I know this could be a little bit mind blowing for some people, that out of the 31,610 square meters that we have already vacated as a consequence of basically eviction of zombie population, which, by the way, remember, we informed about considering between 3.530.7% of our shopping center clientele zone B, that level has now been reduced to 2.1%, 2.2%. So we have been, of course, actively managing and rotating the long delays of our shopping centers. So out of the 30,600 square meters vacated, 30.875 have been left already.
So the activity continues to be relatively healthy, as mind blowing as it might look for some external service. On Page 20, you will see that we have actually increased a little bit the occupancy around 70 basis points, 67 basis and release spread has been 5.9%. As I commented, part of or most part of that release spread is explained by contractual step ups. But anyway, I mean, it's been a relatively active period, which once added to the very active period we also had on the first on the second half of last year, has delivered the results we were commenting. I will pass the floor to Miguel for comments on valuation and debt position.
Thank you, Ismail. Regarding valuation, as commented already at the beginning, it has been flattish in this first half of the year, slightly up, 0.5%. Mainly driven there by office and logistics. Office, 0.4% and logistics, 4%. It continues to be the asset class that is performing better than any other one, not only in the company but also within the market.
This increase in logistics implies also a 16 basis points deal compression as well as in office fees, there is a three basis points of deal compression as well. Offices continues to be an asset class, very mandate by investors. And we keep monitoring the market, and the market continues to be bullish. And some transactions are happening and we're switching record deals or NPGs up 4% or even below. With regards to net leases, it was slightly up 1%.
And then in terms of shopping center, it was 1.5% down. As Hizmar was commenting, we have had previous year valuation reduction. We are right now at a 10% area of countdown of valuation for the shopping centers of the company. Moving forward, with regards to the position of the company, the main action during the year has been have been leasing a nine year 500,000,000 bond. It was in this year.
This is for the replacement or repayment of the bond maturing in May year. We have been reducing the cost of this bond with regard to the target that was our five years bond by 100 basis points, so it was outstanding execution. And we do so helping us to further reduce the average cost of the debt while enhancing or enlarging the maturity profile of the company from the best position. Our average cost today all in is $2.6 On a spot basis, it's 1,760,000,000.00 And our average maturity is close to six years. From the rating standpoint, we got continuation from S and P and of the current rating of the company in the BBB stable and Baa2 negative on the two rating agencies.
But we are thinking that we'll be improving over time as we see that not only the company performance but also the behavior of the economy in Spain and Portugal will be improving in the trailing twelve to eighteen months. So from that standpoint, I think, this is it. On Page 26 of the presentation, we are giving you a report on how we are collecting the rents when invoicing every single month. As you can see, in offices and logistics, there is no news or as it is in the case of non leases because in office, we are only zero or 2% of rents uncollected, which are mainly related to one payment that is in the recent process, which appear in the following months. The leases have reached 0% through collection.
And then this is full collection in shopping centers. We have been introducing with regards to the prior reporting increase at 3.2%. Consequently, we should say that collection rate of French is coming now to a standard basis. So in principle, we are going to be stopping reporting for the following quarters, and if something is changing, but we see that this has been now in a stabilized situation, and we should stop reporting. Finally, we should highlight that for the first half of the year, 19,600,000 have been the cause of the second or the third stage of the commercial policy put in place for this semester.
It is well behind prior year, 29% below. And totally in line with the guidance we were providing to in total this that we were already taking to know that this should be at €19,600,000 for the first half of the year, so bank loan with the prediction. Now we are moving on in the following questions, and that is now going be calling, starting by sustainability. Thank you, Miguel. Well, in terms of sustainability, we have been asked by a number of you on the analyst community but also on the Investor Day to start including a utility section about sustainability.
Therefore, we have decided to include a first picture in terms of what we have been doing in the certification program because that one is also coming to an end. In future presentations, we will comment about, for example, the solar photovoltaic program, which is, we believe, is one of the most interesting things we are doing and very interlinked with the future activity in data centers. In terms of energy certification, what started as a white sheet of paper in 2016 because taking the twenty fifteen numbers, we only have 4% of office building certified, zero shopping and zero logistics. We have now achieved what I believe is a quite outstanding result, which have, for example, moved Spain for two consecutive years to the leadership in bringing certification in Europe and position number six, number eight globally, given the relative small size of the country, that is very remarkable. But what has been lying behind that is the big size of our portfolio.
So we have been liter by liter certifying close to 1,100,000 square meters of offices. We have been solving for nothing but silver in need and nothing but wood in bream. We have 2% pass. So this has been extremely useful exercise for us because, as you know, every time you certify a building, you have to determine the mid lead. And together with the mid lease, you have the CapEx associated with moving that mid lease into DON status.
So certainly, that certification has helped us to make a self introspection exercise and improve the hardware quality of our buildings. I'm not sure we are capturing that in rents, frankly speaking, but certainly, we are capturing that in liquidity of the buildings and probably in terms of loyalty by clients because more and more people now need to be in buildings which have a minimum certification. In logistics, well, we moved from actually a blank sheet of paper again in 2015 to having certified close to 1,200,000 square meters. In weighing, we have some passes here that most of our staff, 85% of our staff is good or very good. And in lead, we have 12% silver, but 88% is either gold or platinum.
And in shopping centers, we have now certified most of our portfolio. I think we are just missing one shopping center we have in co ownership. And we have an 11% pass, but the rest is good, very good or excellent, which is close to 90% of our shopping center base. We have also tried to standardize the company with what we see on an international basis. And the IR department working with the engineers of the company have been trying to position ourselves in Redmi, where we got a very good score of 78%.
Of course, many people compare us with pure play office operators, but it's not that easy to obtain certain rate when you operate also shopping centers and logistics shares. Likewise, in CDP, we got a B. In Medra, we have been obtaining gold since 2017. And now we are embarked in a very ambitious program of ISO certification, which, again, from an operating standpoint, is also giving us very interesting guidance as to how operational, how useful the buildings are. We conducted a specific certification in the COVID with Spanish certification authority in all.
And we developed, together with the Spanish Association for Offices and now are applying throughout all of our portfolio the IO certification of technical perfection of buildings. So we have 24 assets already certified and have an extensive pipeline of 65 extra office buildings, representing close to MXN 800,000. So our intention is to pass the IO certification through all of our buildings to determine whether they are A, B, C or D and also act accordingly in order to improve to the maximum possible their performances in that certification. As commented, we will continue informing about sustainability capsules in future presentations. Let's move into value creation, Page 31 and following in the presentation.
We have made no new investments in the period. We have carried out divestments for 109,000,000 with a premium to gross asset value of 3.4%. Besides the logistics proposal in the first quarter and one PBA branch we also sold in the first quarter, in the second quarter, we have sold two supermarkets out of the Ca ravo sale and leaseback portfolio, and we have sold one of its buildings in Madrid for residential reconversion to a value added fund. Besides that, we have also sold our stake in Airdas to private investors. Together with the divestments we expect for the second half of the year, currently, we are matching perfectly sources and uses in terms of divestments and CapEx, and we will continue to match sources and uses towards end of the year, in fact, slightly skewed towards more sources and uses.
We said at the beginning of the year that our target was to divest between 150,000,000 and 200,000,000 in 2021. We believe the final number is going to be towards the upper end of that range and will, therefore, more than exceed our CapEx needs. On Page 32, you see two buildings that have been delivered during the quarter, Catiana 85 and Monumental in Lisbon. I think we have a touch base on those two in other presentations. So there is no need to make more emphasis on those, simply to say that they are now operating to the satisfactions of their respective clients.
On Page 33, you will see that the landmark program is now coming to an end. It's almost completed with only Plaza with Picasso pending. So, the figures you see at the bottom of the page, including the deal on cost, are, now real figures. It is no longer forecast. On Page 34, we comment on the best two and three programs.
As commented before, we have delivered a 96,000 square meter share to Decathlon in Barcelona. We have also inaugurated and led Lisbon Park in Villafanca De Chida. And more importantly, we have led the pending shares we have in Cavanias one, number J or letter J, to DSV, Norwegian operator of logistics, close to 45,000 square meters total size of the compound. Very important for us, we have also moved from priority three to priority one and have started. We have just opened the Caramillas Part two with the pre led to Lohista of a 47,000 square meter shed plus the option for another 47,000.
So that park enjoys 210,000 more or less square meters of GLA, and close to half of that could eventually be pre led to one very important operator in Spain, which would certainly open for good the rest of the park for new users. So little by little, we are moving that part into first line of rent production as well. On Page 35, you have what remains of these two, which is basically Cavanila, one having led the J. We are just pending HH, and I think it's going to be gone in the second half of the year. And in Cavanidas Part two, as commented, we have simply now opened the development with an anchor client and expect to continue delivering product in the coming years.
As for BEST three, in Ferrilla five, we have now pre let all the work. So everything that comes into operation will come into operation fully let. And in Lisbon Park, as commented, we have reached a pre letting of 85% in the speculative share we built there, but hope to be 100% by year end. So again, as commented before, that yield on cost and the total numbers you see at the bottom of the page are more real now than forecast. Flag sheet on Page 37, simply to say that both El Salerim, Valencia, Fiola and Ceciatientia and Porto T have been delivered and are now working to the satisfaction of all of our clients with very significant market attention and very significant activity.
On Page 38, you will see that flagship plan is now behind us. So water under the bridge at a 7% yield on cost, taking into account that in some cases, there was a defensive component in those CapExes, I believe, has been a very remarkable achievement for and a good test of the quality of our asset management, construction and leasing teams. Let's move into the digital infrastructure plan. Pending finding a better name, we will call it, PLAC one MIGA. As commented before, that used to be initially was conceived more as a byproduct of our logistic activity.
However, we have been liking more and more that segment of activity as we knew better what we have in our hands and as our engineers move deeper into what existed in Spain, what were the prospects for the market and what could be our role in providing our clients with data storage together with storage of goods as we are doing in our logistic activity. Basically, well, on the first bullet point, the move to cloud computing, everything, you are perfectly familiar with that. So there is no need in explaining. But for those of you that might or might not know, what is important to note is that the location of the Iberian Peninsula is fantastic in terms of strategic importance because it is the landing site for most of the cable that comes from North And South America plus some other projects that link North And South America with The UK and Mainland Europe plus the extension of those cables into Africa. So Project Marea, which was funded by Facebook and Microsoft, was completed in 2017, connects Europe with The U.
S. And enter the European region through the Basque campaign in Spain. So this is why we have placed one specific data campus right next to where it lands. Project ELA Link is a project that connects Europe with South America and enters European territory through Siemens in Portugal, then moves on into Madrid, split into part of it goes to Africa, and part of it moves into European Mainland through, Barcelona. Then Grace Hopper, should be completed in 02/2022, by Google, And this one is connecting, again, The U.
S. And Europe. And Project to Africa, which used European territory through Kari in Spain, is connecting Europe and Africa. So looking at our logistics portfolio and looking at our existing plots and analyzing them with the perspective of presence of abundant power supply, including substations and availability of cable fiber fiber cable, we decided to move forward with four locations that were vetted by our, US, technology partner, Edge. And, you know, those, locations basically are in Madrid, Barcelona and two big locations for data campuses in Lisbon and, the Basque Country.
So we are, spending, significant time and effort now in this program. We will start with our technology demonstrator that will immediately thereafter roll over into what we call Phase one, in which we will move to around 70 megahertz. But then this program could add another 150 megahertz, or we could triple the capacity of that program in the future through a specific turnkey development in our data campuses with specific clients. We will comment on the development time line and the returns later on during the presentation. On Page 41, we explain the fundamentals of our joint venture with Edge.
Edge is a subsidiary of Endeavor. Endeavor is a company of U. S. Origin that used to be associated with a company that was sold in The U. S.
Called Align and has now moved into operations in Europe with us. In the framework of that partnership, we will fund and own the assets in the propco, and there will be an operating company in which we will act in the indenture with Edge. There will be a right to call that participation with the liquidation of a certain earn out to our technology provider based on the success and results of the program. What we like about Edge is that after doing some extensive research of the market, they bring to the table proven expertise of many years of data center construction and operation. And they also brought to the table what we consider, particularly for the features of the Spanish and Portuguese geography, the most innovative technology available in the market because it's not only very efficient, I mean very, very efficient, but also is highly sustainable.
Efficiency can be measured in the 1.15 ratio of power utilization effectiveness compared to 1.46% in Europe and 1.59% globally measured with the uptime institutes metrics. But sustainability is tested is attested by the fact that they have developed a system which uses net zero water for cooling of the facilities, and the facilities also work 100% with renewable energy, which is also the reason why in anticipation we launched roof and ground mounted PV installation within modeling that we call Project SAN, no wonder. The on Page 42, you will have details of two of the first locations. One is the former headquarters of Ampere Defense in Getapre, Madrid, with a total GLA of 22,500 square meters and a maximum capacity of 20 megawatts. This one now is fully demolished, and the land has been completely flattened.
And we are just working waiting for the obtaining of the municipal license from the municipality of Gedase in order to start construction. We are also doing the accumulation of most of the power, software and materials needed for the construction of the data center. The other one is in Parcolais Tic Fauna Franca, in the office component of Parcolais Tic Fauna Franca in Barcelona, with a total GLA of 22,100 square meters and a capacity in principle of in the region of 16 megawatts. Those two developments are going to be started en blanc. I will explain in the following page what this means for the company.
But we are going to start construction of those two as part of our technology demonstration to the market because this is a market in which there is a lot of noise, there is a lot of chatter, but very few people is really developing product. And we, of course, want to take advantage of that and move relatively fast and move first in order to make sure that we put our money where we put our mouth. The characteristics of those two plots are very easy and very understandable for people familiar with the data center business. They sit in locations with very low latency because they sit in very close proximity to two big cities and the corresponding infrastructures. They are also highly interconnected in terms of fiber and or cable.
We have researched that with the corresponding tools of edge and are very impressed. I mean, they are very impressed about the interconnectability of those two plots. And then they are also very close to power supply in terms of network grid substations together with PV energy that we can supply from our roof and ground mounted photovoltaic installations. On Page 43, you have sketches of two data campuses we are planning to develop in Alaba, in the Basque Country and in Lisbon, in Villafanca De Chile. Those are strategically fit for very large cloud players.
They can move from 22 to 100 megawatt or more in the case of Alaba and from 24 to 100 megawatts or more in the case of Villafanca De Chida in Lisbon. Very deeply interconnected with the fact that they sit right next to the landing stations of the subsea cables coming from the other side of the pond. On Page 44, we provide some color on the time line for development of this project and the returns that we expect. We expect to start work in 2022. In the Phase one, we will, as commented, develop Madrid and Barcelona.
If you look at the bottom of the page, that means building 44,000 square meters for only 12 megawatts because we are not filling up, we are not bringing those two facilities to the maximum. We are simply building the container, and we are also starting or we are building the first module that can be led to the market. The CapEx is EUR 147,000,000. That excludes land cost because land cost sits within our value, within our balance sheet, and it's not very significant, by the way. And gross rental income is expected to be in the region of EUR 14,000,000.
So the yield on cost in this case is a little substandard as compared to the rest of the program, but this is simply a reason of building a little bit of overcapacity because we build the whole container with only the first module of racks and poles. On the Phase two, once we have demonstrated to the market that the technology works, we will move into the expansion of that program. That can go in phases up to 2026, but could also be significantly accelerated in case of need. Because once you have built the two facilities and you have built the first building in Bilbao and Lisbon, you can really run faster in case of need. The new square meterage that needs to be built in the long Barcelona will be in the region of 32,000 square meters, But the megawatts that can be installed, including filling up on the capacity of Madrid and Barcelona, plus starting in Lisbon and the last country, could be 58 megawatts with a CapEx of EUR $428,000,000 and new rent in the region of 59,000,000 for us.
So and then Phase three will be developed on demand and consist basically in filling up the maximum capacity installed in the Basque Country and Lisbon that could add another 150 megawatts of capacity to the program. With all that into consideration, we are obtaining low double digit yield on cost in the region of 11.2%, which is more competitive than the one we are normally obtaining in logistic development. In very plain language terms, that means that selling any given noncore office building at 4%, 4.5% and reinvesting in here with onethree of the divestiture proceeds, you fund equivalent rent in data centers. So as you can imagine, this is highly accretive for shareholders while reducing or continuing to work in the reduction of the total leverage of the company measured as LTV. So this is what we will continue to do over the coming years, making sure that we match sources and uses in terms of noncore to development of data centers now that the need of our CapEx program linked to landmark flagship and BEST two and three is now fading down.
Only BEST two and three are up and running. As a wrap up, for closing remarks on Page 47. We see that the COVID-nineteen impact on our business is easing a little bit. In the absence of new restrictions imposed by the pandemic, and we fear, of course, new restrictions like you do, particularly in Portugal, which has been relatively anti business. And every time there is a new surge in contagions, the immediate measure is closing the shopping centers, like in Catalonia or Valencia, although that has proven to not result in lower contagion rates.
But for some reason, they do that. So in the absence of new restrictions imposed by the pandemic, we believe that incentives will continue reducing towards year end. This, together with the two buildings that are significant ones that have now moved into operation, will help our FFO. And collection rates are now minimal. So this is why we are convinced that we are going to meet or slightly, very slightly exceed our FFO indication of zero five six for the year, taking into account also that in reality, that EUR $0.05 6 compared to last year will be more like EUR $0.05 8 because there are zero two this year of staff compensation that needs to be added back.
I mean last year, there was no staff compensation. It was a retail this year. There will be about $02 of staff compensation. After a challenging first half, we see that the occupancy is starting to bottom out in our offices. And why we believe we should be at the lower end of the indication provided to the market in the full year 2020 results.
That was going down between 150 bps and 200 bps compared to the ninety one point one we closed 2020 at. So we expect to be in the lower end of that range or slightly better towards the end of 2021, and we are working in that regard. Very good performance in logistics. Our super high quality portfolio is clearly paying back. And we have been the clear protagonist of the market in this semester with close to 50% of the market activity just attributable to our listing managers.
Very positive signs in shopping centers. The returning rates are extremely good. We have significantly derisked the 2022 renewal wall. So we look through to 2022 with relative confidence. And in terms of value creation, as commented before, after many years implementing the plan, landmark is almost complete, flagship is complete.
The returns, therefore, are now returns achieved, are real and no longer forecast. And Vets two and three continue their execution. We need to have 1,100,000 square meters of pipeline, of which three thirty thousand have already been delivered, 100% led. 180 square meters are now under construction with an 82% degree of pre let and five and ninety thousand square to 600,000 square meters remain in our belly, in our balance sheet. And this is land bank that will be developed strategically in order to suit market needs.
So we are taking advantage of that flattening of our CapEx requirement. We are launching the digital infrastructure plan to use our logistic blocks to develop and process and store data, And we expect returns that will be outsized as compared to conventional logistics, and therefore, will be a very significant avenue of value creation for the future together with our logistics greenfield program and some refurbishment, very selective refurbishment of offices that we might do in order to capture reversionary potential. This is all for today. Thanks for attending NERLY's first half twenty twenty one Conference Call. And we now open the mic for Q and A, and we are at your disposal.
Operator, could you please open the line for Q and A? Thank you. Thank you. And your first question comes from the line of Jack Yapun from Kempen. Please go ahead.
Your line is open.
Hi. Good afternoon. Thanks. So, yeah, thanks a lot on the elaboration on data centers. Very much appreciate that.
Just for clarification, in terms of the construction process and the ownership of the asset, will you construct yourself? And what part of the asset will you own? Will you own, for example, will you also own a fit out? That's my first question.
That one is very easy job. Yes, out of what we consider the three steps of ownership of a data center. First one is simply the the envelope, the container. The second one is all the equipment, everything, including refrigeration, heat extraction, racks and ports, and basic mix security. We will also construct and operate all that.
And we also we will only be relinquishing, taking any protagonism on the third step, which is servers and, cloud consultancy and, infrastructure, because we want to be neutral in terms of operators. So we will be compatible with all possible operators serving all clients in our data centers.
Okay, great. That's very clear. And then because I think in terms of the split, obviously, of construction cost in kind of what you normally have a few €100 per square meter and the bulk of the investment will go towards the equipment. Is there any sense you could give us on what the kind of the cost per I'm not sure how you calculate it, probably not per square meter, but per per something else. Can you kind of clarify what kind of the unit cost of that equipment is?
I will give you very, I would say, ballpark figures. The cost of building just infrastructure is about four times the average cost of, normal, logistics. And the cost of everything once, fully equipped is more than 7,000, euro per per square meter. So yes, as you correctly pointed out, you will be in a little more than €1,000 €1,000 and €1,500 for the brick and mortar, let's say, and $7,000 to $7,500 in total. So in American terms, 7,500,000.0 per net.
Yeah. Okay. And in terms of kind of because obviously, high yield, but also kind of a write down recovery requirement on that equipment. What do you see as the kind of lifetime for that equipment?
This is one of the reasons why we are not entering into the server business. I mean, we are providing Russian ports on the rest, but we don't want to enter into the server business because this is not our cup of tea. And this is where most of the industrial obsolescence of data centers is concentrated. Look, we don't know what is going to be the technical obsolescence or when technical obsolescence will fit those facilities, what the technicians are telling us is that they could be fit for around twenty years.
Okay. Thanks. That's very helpful. Then just a few other questions. I think ProLogistix stated that, for example, for other countries in Europe, construction cost inflation, lack of steel has lengthened construction plans for logistics by basically doubling it from eight to sixteen months.
Could you comment on the situation in Spain? And then like the last question will be on the offers that you sold. Can you comment on the price versus book?
Okay. In terms of construction costs, we witnessing a surge in construction costs like everywhere else in Europe. This is why we have decided to take a hold in the CapEx program. So we will not rush into making a Landmark two or a Flagship two because when you are getting realistic returns, you can easily absorb a surge in construction cost. But when you are a little bit tighter on returns because you are developing prime product, those increased construction costs might significantly damage your profitability.
So this is why we are taking a little bit of a breath in our construction activity. We will continue doing so in logistics. I can tell you that steel has almost doubled. So that means an increase in the construction cost of any given share between 1520%. But that is it for the moment.
And then the concrete, etcetera, well, with much more moderate increases in cost. What was the other question? Was in the office asset that we sold, it was a five percent point premium to gross asset value.
Thank you. And the yield on that, could you
The yield, yes, the yield was a little bit meaningless because the building was 50% occupied, but it was let's say, the pro form a yield to full occupancy was in the region of 3.5%.
Okay, great. Well, thanks for the answers.
Okay, thank you. Thanks.
Your next question comes from the line of Pedro Alves from Tietnam. Please go ahead. Your line is open.
Hi. Good afternoon, everyone. Thank you for the presentation. I have two questions. First one, in offices, your your Spanish peer highlighted the increasing polarization between CBD and and secondary location.
And that when it comes to locations outside the M 30, there is less time on using an income of take up and some pressure on rent. So my my question here is whether you are seeing the same trend. And out of the range that we'll have a break option next year, which I think is 17%, how much does it come from assets outside the M30? And my second question, in shopping centers. So you were able to give it close to 50% of leases of of May 3 next year.
So based on on the conversations that you you are having with with tenants, how much do you expect to to be able to to give it at the end of the year? And whether the 10% cut in effective rent through higher incentives could be a good reference for the remainder of the portfolio that will be renewed? Thank you very much.
Well, on the first one, which is life beyond the M30, look, we will not spend any time and effort explaining. We have recently occupied building that we would count in third quarter, and it was in the A1 Corridor. We are working, and that was 5,000 square meters. We have recently led one full building to Nettun close to 9,000 square meters, and we continue seeing normal activity. As you know, we are not a company based on NAV.
We are a company based on cash flow. As such, we don't need to oversell the quality of our buildings. So we can be more frank with in terms of what we do because we continue doing it anyway. And there is life in TVD and outside TVD as always was. So it depends on whether you believe on the Magic Kings or not.
We continue having a satisfactory performance outside the M30 with all the corresponding problems, I mean, particularly in terms of traffic, etcetera. But as you know, Opera Fientia Martin works for the north interchanger of, let's say, network of highways has already been started. So there will be increased traffic problems till the 2022. But following that, we believe the whole area will benefit from much, much better infrastructure. We'll continue to renew.
I mean, we have just this year renewed 45,000 square meters headquartered with Tecnica de Miras. With a flat, I think it was like plus 0.5% release spread. So I will comment no further on whether the extra 30 offices are counting and going to the bottom and being destroyed, and I will not continue on that bullshit. The other one, is what is our perspective for shopping centers in the future, I think, although the sample is not really, really big, we think our it is sufficient to understand, where the market is heading to, because the clients with whom we have been, renewing or extending are a very good sample of a little bit everything in small, medium and big clients within our P and L universe. So for the time being, Pedro, and and I, of course, I have to be prudent on this, but for the time being, I consider that that delta of minus four to minus 14, so that that 10% delta, which you should consider if if incentive, so that incentive will be removed over time.
Of course, you are free to say this will stay. I mean, will not be removed, etcetera. But if that was the case, the client would have asked a lower rent in the contract. However, they have accepted an incentive that will be removed over time. I have to tell you that this has been better than our expectations.
You have heard me in past calls with investors pointing towards something in the region of 20% or minus 20% new normal in shopping centers. For the moment, what we are seeing is minus 10%. And of course, I will continue informing in case we see a deterioration of that in the future or whatever. But for the moment, that minus 10% is a good proxy. This is today.
This is what is happening as we speak.
Thank you,
Your next question comes from the line of Lovanda Kruggelder from ODDO. Please go ahead. Your line is open.
Hi. Thank you very much for for the presentation. I would have maybe two questions. The first one is on your commercial policy. So I understand that there will be no no further commercial policy in Ashtouwena.
We hope that this will be okay. But if we make the assumption that we have an increase of, for example, the Delta variant, so would you put it again your commercial policy in place? So that would be my first question. And so as a result, what could be the impact on the FFO? And my second question, so would be on the December.
Would it be possible maybe to have an update on your discussion with BBVA for buying with your stake within the company?
Okay. Thank you, Florent. Look, in terms of commercial policy, there is one part of the commercial policy that remains and will remain, which is the fact that we will continue protecting 100% our clients in case they are obliged to close by whatever authority, whether with real authority or not. Because in some cases, many shopping centers in Spain are being closed by people who have zero authority on the possibility of closing a facility of that size and importance for the economy. But anyway, we are not arguing with the politicians.
So we will continue protecting our clients in case they are obliged to close. We have made a provision for the second half. I will not disclose the amount that we have made a provision for that. But outside that, there is no commercial policy being applied as we speak. Everybody is now paying naked rent, the rent that they agreed with us, in whatever time in the past.
So till there is a renewal next year or in the following. So if if you see, or or if you add up numbers, you will see that with the two buildings that have moved from WIP into operation. And with zero, let's say, help to our tenant, we should be slightly beating our FFO objective. The reason why we are saying that we are going to try to meet that objective or very slightly dated is because we remain prudent on whether there could be some further noise in the second part of the year with the Delta variant or with the Delta or with the Echo or the Kappa. I mean, there could be other variants of the virus that could come into fruition and eventually screw up completely our projections.
We get a little bit of comprehension. I mean we have been very accurate so far even in the 2020 when the whole shift erupted. But sometimes we could be wrong. I mean, particularly for this second half of the year, we are assuming that there are no further restrictions that as we speak right now, we have Lisbon almost closed. I mean, they are closing at two 2PM on the weekend, we need to close the the the shopping center.
Apparently, they are going to reopen in the August 1. And then in the northeastern autonomous communities in Spain, namely Catalonia and Valencia, for some reason, it seems that all the population is public clerk. So they are closing the shopping centers every time they want. So and we need to continue protecting our tenants there. But in the rest of Spain, activity is now the new normal.
And therefore, we are not spending money protecting our tenants because our tenants, thanks God, are now able to protect themselves. And in fact, you could look at the OCR numbers, and you will see that the OCR is at 12.7%. So we remain relatively stable in OCR because people is little by little coming back to normal in terms of sales per square meter and attendance to shopping centers is also improving. So well, I beg your pardon. If I cannot be super specific and provide you with the numbers we have in our model because I believe this is sensitive information.
But towards the end of the year, we are expecting progressive normalization. And if there is a deterioration, we will stand by our word and continue protecting our clients.
Okay. That's very clear.
As for the other aspects of your question, Faham, with DVA regarding DCN, there have been no new conversations. So we remain subject to arbitration. The arbitration court has this will appoint the arbitrators in principle in September, September, and that will take the resolution of the arbitration to February, I consider probably in the region of February, maybe March, there will be a resolution of the arbitration. We need to wait. Of course, there is nothing we can do.
I mean we have simply defended our rights because, of course, the right of acquisition is important for us. It's, I would say, a very, very important feature and one of the reasons why we decided to get into that project. It is true that we can survive without that, but I believe I am convinced that we are on our own right. And in fact, in the injection, we seek and obtain from the arbitration court. The injection ruling was pretty harsh against, our counterparty, including the imposition of all costs and expenses, to them, including ours.
So, you know, we we need to wait. Of course, they are super mighty, institution. They have, you know, thousands of people working in every possible department that you can imagine, including security and whether physical or computer or everything. And we have to be careful. But we believe we are in our own right, and we'll try to defend it.
Thank you very much.
Sir, we don't have any question at this moment, and I will pass the callback to Ines. It's okay. Thank you very much. Well, thank you all for attending today's presentation. For those of you going on holidays, we hope you have a nice summer break.
We always I mean, know we will manage the disclosure for any questions that you may have, and we hope to see you soon. Have a nice holiday. Goodbye. Thank you. That concludes our conference for today.
Thank you for participating. You may now all disconnect.