Merlin Properties Stock

Good afternoon, ladies and gentlemen. Thank you for joining MERLIN 6M '26 results presentation. You can find all the materials that will be presented in today's call on our website. I will please ask you to be advised by the disclaimer contained in it.

Our CEO is Ismael Clemente, along with the 2 directors, Ines Arellano and Francisco Rivas, who'll walk you through the main highlights of the first 6 months of 2026. We'll then open the line for Q&A [Operator Instructions]. With no further delay, I pass the floor to Ismael.

Thank you, Teresa. Thank you for attending MERLIN Properties First Half 2026 results. I will be following the presentation that we have prepared for the occasion. So regarding the main highlights in operating performance, financial performance and value creation for the period, I would like to remark that we continue enjoying a strong operation in all of our traditional asset classes with a 3.3% like-for-like rental growth. We continue to enjoy a very high overall occupancy with a 94.7%, pending the incorporation of data centers as of 31st December 2026.

In the 3 traditional asset classes, the one that showed the strongest performance was, once again, shopping centers with a 6.4% like-for-like growth because in logistics, we had a relatively good risk spread, but we lost occupancy. And in offices, we had a good occupancy performance, but we had a relatively low release spread owing to a string of in and outs in a number of peripheral buildings.

In terms of financial performance, we enjoyed double-digit revenue growth, plus 11.7%, which translated into a very solid bottom line performance in FFO, plus 8% and despite the unavoidable increase in financial expenses. That means basically that on a per share basis, we are very close to recover the dilution caused by the capital increase, which is, I think, a remarkable achievement.

In terms of value creation, we increased the GAV by 3.7% with most of that growth coming from data centers because actually, [ international ] asset classes, there was a very slight yield expansion, which probably will follow in coming months and years, owing to the interest rate environment that we are going through. We strengthened our balance sheet with EUR 768 million capital increase, as you all know. And we reduced the loan-to-value to 24.5% and with a liquidity of EUR 2.6 billion that will basically takes care of the most immediate maturities together with bank syndicate refinancing that we are preparing for the second half of the year.

We maintained our investment grade rating, both with S&P and Moody's. And most importantly, because that brings a little bit more color to the table in terms of value creation, the most salient feature of the quarter or half of the year was a good execution in Mega Plan. In the past quarter, we were at 112 megawatts commercialized. We have now reached 160 because we converted the Arasur 1 situation that in the first quarter was in advanced negotiations. We have signed ahead of terms, and we had attached technical and financial documentation that was now -- it is now signed. And as a consequence, we are 160 megawatts let.

We provided to you an indication on the full year results presentation of commercializing this year in the region of 200 megawatts. We believe that we are in a position to far exceed that mark because we have like 3 different avenues that we can explore. The most immediate, I believe, is the conversion into a full format lease of the head of terms and exchange of documentation taking place in Lisbon, where we had significant demand. We had like 4 different tracks open, 2 of them are very well advanced. And we believe that with 1 of the 2, we are going to finish soon documentation and therefore, end up having a full format lease that we can report.

But beyond that, we have 48 megawatts in Getafe, which are booked that eventually we can also work between now and end of the year to convert. And we are recently working on a combined pack of 30 and 20 interest [ counters and a moral ] that eventually could result also in a significant lease, although I believe that will probably extend more into 2027 because we are just starting to entertain those conversations.

As commented, Bilbao-Arasur 1 and Bilbao-Arasur 2 fully let which is very important because for many years, all of you have been asking whether we were able to sign through pre-lets. And now we are clearly in that situation. My colleague, Fran will comment later on that it's -- we are reaching a situation now in which, in reality, we are going after commercialization. So we are finishing a product behind our commercialization pace, which is a very nice place to be because we are enlarging and strengthening our dominance in the Iberian Peninsula, while we gained a lot of visibility on future cash flow through very advanced releases.

If the lease on -- lease is to be converted, the interesting summary is that 100% of Phase 1 will be let, 70% Phase II and yet 25% of Phase III, which I believe will be a remarkable achievement, particularly for those of you who attended our Capital Markets Day in Arasur in March because, clearly, this is exceeding the projections that we internally had and that we conveyed to you on that occasion.

And all that, while maintaining a disciplined capital recycling, we have sold EUR 75 million as of July, and we still have EUR 90 million of divestments signed that we will be converting between end of this year and beginning of next. Those thus reinforcing our internal capital recycling and helping the funding of particularly Phase III as we speak. The NTA stands at EUR 15.99 per share, which is very interesting. That puts our shares at a 4% to 5% NAV discount, which eventually, I hope, will be overcome during the week because for some reason today, our trading has been weak.

But frankly speaking, I don't know why. This is important because that brings to the table a very significant value creation, which has been always our obsession since we went public in 2014. We have distributed close to EUR 2.5 billion in dividends. But despite that, we have also sent our share beyond 100% above the initial floating price. So we are -- I think we are complying with our social mission in terms of value creation vis-a-vis our shareholders.

In terms of key financial and operating metrics, the gross rental income stood at EUR 292 million, plus 10% like-for-like. The total income has been like EUR 307 million. So this year, for the first time, our history, we are likely to exceed the EUR 600 million mark in terms of total income, the top line of the company. FFO-wise, we converted EUR 180 million, plus 8% year-on-year. We cannot simply multiply these by 2 because there are a number of things that are different in first and second half, but that gives us confidence to send or to rephrase our guidance in terms of total cash flow for the year from the previous EUR 327 million to EUR 340 million, that will mean around EUR 0.55 per share, above the EUR 0.53 that we gave you in February.

Yes, the FFO per share is minus 1.8% year-on-year. But again, that is because we calculate the per share metrics based on the total shares outstanding of EUR 620 million, which we believe is the correct way to do it because if we were to pay a dividend today, it would need to be calculated on the basis of that number of shares. But if we were to use the weighted metric as many of our rivals do, the increase would have been 2.6% on the per share metric, 0.30.

Our loan-to-value continues to be very low, 24.5%. And the increase in GAV like-for-like 3.7%, that basically, together with the operating FFO brings our total shareholder return year-on-year to plus 9% -- 9.1%, which is, I believe, a very interesting mark.

And that's basically for the key financial and operating remarks. I will pass the floor to my colleague, Ines Arellano, that will discuss traditional asset classes. And then Fran will talk about data centers.

Thank you, Ismael. So moving to offices. Our portfolio were EUR 6.7 billion that generates 4.8% on gross passing yield and 4.1% net initial yield. It represents 53% of our portfolio. The momentum is quite positive, demonstrated by 1x high occupancy level in Madrid. Barcelona still suffering, reaching our lowest occupancy level at 84.4% due to the exit of a big tenant in [indiscernible] that you are all aware of, while listen continues to be a very solid market.

Demand is very healthy, although clearly concentrated on the very best buildings, which is exactly where MERLIN is invested. And as for Alfonso also perfectly illustrates this opportunity funding more than 10,000 square meters of refurbished office space inside Madrid 1030 has become almost impossible New supply is extremely limited, and there are quite a large number of occupiers looking for flagship headquarters. That explains why leasing is progressing so well. 70% of its space is under advanced negotiations with a leading financial institution well ahead of completion, while the remaining 30% is already leased to LOOM.

For us, this is value creation in purest form, transforming an existing asset into one of the most desirable office billing [indiscernible] while substantially reducing leasing risk before delivery. And Liberdade 201 is exactly the same logic but in this win. in Liberdade has become one of the most prestigious business locations in Southern Europe, attracting financial institutions, technology companies [ auntinational ] occupiers. Supply is extremely limited, which is explained by the retail component is already fully pre-let to a leading luxury operator, while around half of the office space is already pre-let or under head of terms. By delivery, we expect this to become one of the benchmark office buildings in the Lisbon market.

And Adequa represents another very different but equally very attractive opportunity. As you all know, the Northern [indiscernible] Madrid will increasingly become one of the CT's main business hubs at Madrid Nuevo Norte develops. It is a turnkey for project for [indiscernible], who is the main occupier of the current business park. That validates both the location and the quality of the product while allowing us to achieve an expected yield on cost above 12%. We continue to apply the same discipline to future phases, including Adequa 7 where we'll only pursue returns remain attractive.

Moving into Plaza Ruiz Picasso 11. This process is slightly different because it's not only about the building itself. It's about participating in complete transformation of AZCA through the Renazca project, creating much cleaner, more open and more attractive financial district. Today's occupiers increasingly value the experience around the office as much as the pit itself and projects like this one helps to import our disposition as Madrid Premier EBD.

For us, that translates into stronger long-term rental growth and better asset quality. So overall, the office portfolio continues to deliver exactly what we'd expect resilient operating performance today, combined with the development pipeline that's already attracting significant tenant interest well ahead of completion.

Moving to logistics, which is EUR 1.4 billion in portfolio, generating 5.7% gross starting rents and 4.9% net initial yield I would describe the market as being normalizing rather than slowing. Occupancy stands at 95%. The lease spread, as commented by Ismael reached almost 4% and we signed around 39,000 square meters during the semester. Rental growth remains positive, while valuations also continue to edge towards.

What's particularly encouraging is that leasing activity remains broad-based. Barcelona delivered particularly strong rent growth while our diversified portfolio across the main Spanish decoders continue to provide resilient. Texas shows a healthy mix of tenants and positive real spread across virtually every geography. Performance here in South Boris not in extension. It continues to be very robust with 97.3% occupancy with more than 200,000 square meters contracted. So overall, logistics has become a mature income-generating business for MERLIN with consistent cash flow today and an attractive development pipeline for tomorrow.

Looking at the oral commitment pipeline, this is where future growth becomes very visible. We already have 275,000 square meters under development. Representing only EUR 96 million remaining investments that will generate approximately EUR 17 million of a stabilized gross rent. And importantly, these are not speculative ambitious overall.

These projects have already been committed because they have sufficiently commercial visibility and are attractive expected returns around 7% yield on cost. Delivery will take place over the next 18 months, meaning that the pipeline should progressively contribute to rental income from late 2026 onwards.

And the next page of growth is within our land bank. This represents another 184,000 square meters of future development capacity require around EUR 110 million of investment and capable of generating over EUR 11 million of stabilized rent. The important point here is flexibility. Unlike the committed pipeline, this project can be faced depending on market demand. We don't need to build this because we own the land. We build because occupiers demand justifies the investment. And this discipline again has always been one of MERLIN's competitive advantage, and it becomes even more valuable in today's environment.

So logistics continues to provide exactly what we want from this asset class, stable operating performance today, together with a very attractive embedded growth pipeline. The true growth is going to come from data centers.

So I'll leave to my colleague, Fran to explain a little bit more about data centers -- sorry, about shopping centers. I though it was going to be data center. I think the shopping centers business continues to surprise many investors is a EUR 2.2 billion portfolio, generating 6.6% passing yield and 5.9% in net initial yield. For several years, there's been a perception that physical retail would struggle structurally because of the e-commerce. What we've seen actually is something quite different. Best shopping centers have become destinations rather than simply places to shop retailers increasingly concentrate their investment in dominant assets with high occupancies, high footfall and while weaker schemes continue to lose relevance.

Our portfolio is firmly positioned in the first category. During the first half, tenant sales increased by 8.4%, comfortably ahead of inflation, while footfall grew by almost 2%. That combination translated into 6.4% like-for-like rental growth, the strongest performance of any -- of all our traditional asset classes. As Ismael said, the strongest asset class of the traditional portfolio.

At the same time, acuity remains exceptionally high, 96.9%. [indiscernible] exceeded 5.5%. And perhaps most importantly, occupancy costs remain extremely affordable at only 10.8%. And that last figure is critical. It means retailers continue to enjoy healthy profitability within our centers, giving us confidence that rental growth remained sustainable rather than being driven by excessive rent pressure. It also gives us comfort to carry on our yield management strategy. So overall, shopping centers remain one of the strongest contributors to MERLIN's recurring earnings.

And now yes, I do pass the floor to Fran. Thank you.

Thanks, Ines, and good afternoon, everyone. I'm pleased to provide an update on our data center business and the key achievements delivered during the first half of 2026 across all the 3 phases of our platform.

First of all, I would like to congratulate our data center team once again for an outstanding first half of the year. thanks to their excellent execution and a very strong level of activity across the platform, we have been able to secure several significant contracts across our portfolio, which I will cover in more detail in a moment.

As in previous presentations, let me begin by summarizing the current position of our data center portfolio across the Iberian Peninsula, as shown on the map on Page 19 and in the table on Page 20. Besides in Page 20, we provide additional details of our 724 meg portfolio, where we include both operational and development assets and show the progress achieved across each of the 3 phases. The perimeter of the 3 phases remain unchanged, as you can see, with the only adjustment being a reduction of 4 megawatts in Zaragoza wind 1, from the previous 150 meg to 144 meg in exchange of significantly advancing our ready-for-service dates that we'll see in a moment. Anyway, we expect as well to recover that capacity through the plant power of Madrid-Getafe 01 and in the following months.

Moving to Page 21, let me review each phase individually. Phase I, 64 megawatts are comprising 3 assets, Madrid-Getafe 1, Barcelona PLZF and BIO-ARA 03, all of them now fully fitted out and fully let. Barcelona PLZF 1 and BIO-ARA 03 are fully operational and generating cash flow, including in Barcelona repowering project that has been delivered to the client in this month of July.

In Madrid-Getafe 1, which is also fully let, is expected to generate full cash flow once final power connection works are completed during the fourth quarter of 2026, and where we have right now, great visibility. At the same time, we continue to advance discussions regarding a potential report opportunity that will add approximately 6 megawatts of IT capacity in this building. In total, Phase I GRI is estimated at EUR 68 million for 2026.

From a valuation perspective, I'm now in Page 22, the successful commercialization of these 2 assets, particularly in Madrid and following the [indiscernible] powering has reinforced the significant value creation achieved to date. Rental levels have exceeded, as Ismael has commented before our initial projections, resulting those in higher expected valuations based on the independent appraisals. From an accounting perspective, we have also recognized the promote accrued to date, reflecting the value created during this period in EUR 101 million.

And for those who you have previously asked about the promote mechanism, as we have explained before, it is linked to the profitability of each phase over a 10-year investment period. In this case, in Phase I from 2021 to a potential exit in 2031. However, the accrual is calculated in each quarter, assuming what will be the valuation at the moment in time, in this case, June 2026 and consider this at the hypothetical exit date. As a result, the demand will continue to evolve until the final decoration in 2031, depending, of course, the impact that based on the IRR calculation, moving towards the final 2031 implies on the number. It's also worth noting that part of this promote is paid in advance in year 5 and 7 as it has been the case in March 2026, where we have resulted in a payment close to EUR 20 million.

Moving now into Phase 2, which comprises 254 megawatts of IT, the construction across our work in product portfolio continue to progress according to plan. More importantly, leasing activity significantly ahead of our original expectations, reflecting the transition from the mainly speculative development approach that we have in Phase I to a predominantly pre-let near Turkey development model in Phase II and subsequently in Phase III.

Looking at each project individually in BIO-ARA 02, it was fully let at the beginning of the year with its full 48 megawatts IT contracted, implying approximately 12 months ahead of the delivery date scheduled for this December 2026. Out of those, the first 20 meg are expected to begin generating cash flow in January '27 with the remaining 28 megawatts following in June 2027. And thus those different dates referred to the client and deploying their fit out.

In BIO-ARA 01, which has been also fully let during this second quarter, we have secured entire 48 megawatts again, approximately 18 months before its expected delivery in December 2027. Construction at least on Building 1 and Building 2 representing [indiscernible] of IT capacity is progressing very well. At the same time, work is advancing on the campus of stations, generator buildings and an administrative building, all of which are being developed simultaneously, saving time for Phase III lesson assets. As we have consistently stated, commercialization is now driving construction.

Accordingly, we are already in advanced negotiations regarding the IT capacity of the entire [ discon ] campus including not only building 1 and 2 that we reported in last quarter, but also the 3 assets of Phase II building 3, 4 and 5. Madrid is progressing well with demolition work expected to be completed by year-end 2026 and the construction license anticipated during the first quarter of 2027. Importantly, capacity has been already reserved ahead of the start of the construction.

Finally, at Madrid [indiscernible] 01 following completion of the planning process, organization works are now underway and we expect to obtain construction license by the end of the year, allowing construction to begin during the first quarter of 2027. [ AGS ] 24, 25 and 26 illustrated the significant progress achieved in BIO-ARA 1 and 2. Many of you will recell recognize difference compared to the site visit during our Capital Markets Day in March as well as the progress in Lisbon, [indiscernible] 01 and 02.

Moving now into Phase III, where we have 406 mg under development. At BIO-ARA 4 and 5, where we have power capacity already being secured. The execution of the transmission line by the [indiscernible] company is depending. But meanwhile, the construction license application has been already submitted and is progressing.

At the same time, in Lisbon buildings 3, 4 and 5, construction has commenced initially across all 3 buildings following the granting of the construction license, and this decision reflects the advanced stage of our commercialization negotiations for the full campus. As a result, the expected ready-for-sale date of these 3 assets has significantly accelerated. Instead of deliveries originally scheduled for the first half of 2029, building 3, first half of 2030 for building for and first half of building 31, all 3 buildings are now expected to be ready for service during the first half of 2029, just making a quick number under the rents disclosed during the Capital Markets Day, we are talking that we are advancing probably EUR 150 million forward just of this accelerating this construction.

Finally, at Zaragoza Wind 01, where the power capacity again has been already secured, we obtained the declaration of regional interest called [ Viga ] approval in July. The next milestone will be the minimum submission of the [ Viga ] which is the declaration of real interest for this specific project, and it will be imminent in submission or obtain construction license expected in third quarter -- sorry, first half of 2027, so we can start construction in the third quarter of 2027.

The change as well that we have executed in this project is to move from the regional 2 buildings into 1 single building of 144 megawatts IT that we expect that we expect to have it ready for service during the second half of 2029. Again, the fact that we have a space on that project is moving our initial second ready for service for the first building in fourth quarter 2029 and second building in 2031. So right now, we have set a significant timing during that project.

Finally, as a result of the progress achieved in both Phases 2 and 3, we have updated the profile of our capital expenditure commitments. This now reflects higher CapEx deployment during 2026, 2027 and 2028, while at the same time, bringing forward the site rental income and cash flow generation. And now Ismael will close this presentation with the closing remarks and outlook before entering into Q&A.

Thank you, Fran. Well, once again, just to stress that we saw a relatively strong semester in terms of operations. with double-digit revenue growth, good FFO growth despite higher financial expenses that we have been anticipating to the market for months or years now and probably will continue in the future. That means basically that the portfolio of quality that has been significantly refined over the course of the past 2, 3 years is now clearly supporting the Brazilian performance of the traditional asset classes.

We continue creating value through development pipeline even in the traditional portfolio in offices. We have 2, 3 very interesting redevelopment now going up, and we think we are going to obtain very interesting yields on those. We continue developing some logistics, although it is true that the construction costs are now more difficult to overcome when it comes to justifying the -- going forward with certain projects in certain corridors because between the increase in land prices, which, in our case, is not a factor because we have our own land bank.

Second, the increase in urban charges by the municipalities and third, the increase in construction costs. It is now a relatively difficult to justify doing a development of logistics from scratch. Likewise, it starts to happen also in offices, I mean, except in cases where the building is clearly ours, and there is a big delta between the passion rent and the market rent, which is achievable.

However, data centers continue to be our main growth factor. [indiscernible] the cycle of data centers is -- seems to be completely dissociated from the consumption GDP cycle that affects offices, logistics and shopping centers. We seem to be affected more by the worries or hypes that the market feels in every moment about the AI, which by way, I believe, is a false debate because those worries or hypes should be broadly associated with the valuations of AI, but not with the adoption cycle because in terms of adoption, as we can evidence every day, the adoption continues to sky rocket.

And now we are trailing behind our own commercialization efforts. I mean we are commercializing much quicker than we can deliver product to market because there is now a very significant sample of potential clients. All of them are now looking for actively for IT capacity across the world and particularly in the Iberian Peninsula. So at least, we know that we are in a sector which -- where the demand at present seems to be endless. At some point, it will probably stall, but I believe this is still relatively far in time.

And the continued worries about the CapEx expenditure of the hyperscalers. I believe you know my theory, I believe that eventually will end up helping us because at some point, the market is clearly not rewarding high ROE firms like the technology firms in the U.S. entering into very significant CapEx investments. But eventually, I believe this will favor a specialization of capital. And those who are specialized in building data centers will be the data center builders. And those who are specialized in silicon operation will be the silicon operators.

So I believe this is a trend which is will help us in the future. In terms of the different phases, the Phase I is clearly fully derisked and cash flowing. The Phase II, well, depending on how you measure. It could be between 20% and 70% derisk or 30% and 70% derisk. And we have started now entertaining conversations for a number of assets on Phase III. Regarding performance for the year, which is the most immediate future, we have slightly increased our FFO guidance by EUR 0.02 per share. I know many of you believe that this is still very conservative, and we can still beat that number, not so sure because the 2 halves of the year are very different in terms of cash flow profile. But anyway, we will do our best to try and bid that new guidance.

As commented, I believe, the most salient message for today is that we are very much on track to far exceed the full year 2026 200 megawatts IT leasing guidance. we could perfectly end the year at 340 million, which will be a very significant achievement. And with our current low LTV, high liquidity and no debt maturities on site, we remain uniquely positioned to continue funding our growth pipeline. And delivering growth to all of you while maintaining a conservative risk profile.

So without further preamble, I think we should move into Q&A, and we are at your disposal for any questions you might have.

The first line -- the first question comes from the line of Jonathan from Goldman Sachs.

Great progress on the data center. Not to push you further even. Can you highlight what your progress is on Phase 4 in terms of getting the [indiscernible]. So that would be the first question. More generally, I think you've given already quite a lot of color, but the second one is, can you give us a bit more color in terms of the discussions with potential tenants and what is competition doing currently is being pushed back. Last question, just construction pot. Are you seeing any increase?

Okay. Well, regarding construction costs, we continue to keep them more or less under control, although it is clear that particularly in equipment, we are starting to see a number of bottlenecks in terms of delivery times that might eventually end up also pushing up the cost lines in that respect.

What we are doing now is everything that we have announced to you everything that we have now under construction. We have already done all the procurement of all the equipment for those buildings. And we are seriously considering also anticipating a little bit the unspecific equipment a little bit, particularly transformers, although this is a little bit specific to every design.

And as Ines said, we are considering about pit of anticipating also some purchases and storing them in preparation of the most immediate future pipeline that we are handling. Regarding Phase 4 and more electricity, well, in [ Nuevo Norte ], as you know, we have been granted 29 megawatts of electricity, which are good for around 20 megawatts of IT capacity.

Our intention is to start construction of 196 -- [indiscernible] 96 building as soon as we receive the construction license. And the reason why we haven't mentioned it specifically today is simply because we are finishing the environmental impact assessment phase. We have received a number of comments to the dossier by mainly echo activists, and we need to basically reply or the authority needs to reply to those questions.

And only when this phase is duly cleared, we will be in a position to receive a clean environmental impact assessment. And therefore, that will be communicated to the municipality so that they can issue the construction license. So all that in normal world should happen before end of September, but you never know when you are dealing with administrative procedures, it may take a little bit longer. But in principle, we should start constructing at the end of September there.

But again, stressing the concept is a big box with just a partial equipment because we are anticipating RFS in case during the 2-year construction period, we get the significant power that has been requested in that substation, which, by the way, has it. So this is a little bit repeating what we did in Phase 1 because we are very conscious that our biggest -- not problem, but our biggest challenge at present is to be able to cope with demand. So this is why -- I mean, eventually, it will be even better to start 2 buildings, but I don't dare, I don't dare to start 2 buildings, which is 2 boxes for 200 megawatts, which with only 20 of granted capacity.

So we are a little bit at the mercy of the National Grid Authority. There is a power contest. We are ranking first. We were the ones that provoked the power contest with deposited our down payments in February 2025, that situation in Spain regarding grid is always complicated, not so much in Portugal that we can discuss. And then regarding tenants, what I can say is that we have discussed always in the past about two sources of tenants, hyperscalers and neo clouds. I think at present, we are starting to see a third type of tenants, which is Chinese for those who are good with them and then a fourth type of tenant, which is big model companies.

Some of them now in the middle of IPO processes, trying to secure IT capacity so that they can make good their own IT operation forecast to the market, and they are trying to get IT capacity is straight. I mean without depending on neoclouds or hyperscalers alike. So I believe now there is significant depth in the market compared to the past when we started doing data centers, the depth of the market was limited, now it's starting to be much deeper. And I think this is all.

So very interesting. Can you follow up on the new demand, like the change demand and for model companies, it's fine, but also like are you seeing corporate amount like some of these Chinese models that are appearing there need to be run on data centers to, no?

Yes. I mean the Chinese demand that we have seen in recent months -- we have seen [ Alibaba ]. We have seen a Cloud, mainly cloud at present, not so much Chinese model makers. We have seen TikTok I think that [ Tencent Weibo ], I think this is the Chinese demand that we have recently seen in the market.

The next question comes from the line of Marios.

I have 3 questions from my side. So maybe kick them 1 by one. The first is on [indiscernible]. I think at the Q1, you commented there were some hesitations around you signing a full lease, there was some uncertainty around the fulfillment of contractual obligations. So what has changed there for this to result in a full pre-let versus the advanced negotiations?

Okay. So on that one, Marios, thank you for the question. What we commented is that we have always this debate whether how advanced we can sign a contract, what is the visibility we have on the construction, how it evolves on the procurement of equipment, et cetera, on the permitting of different lines, station, et cetera. That's one topic on our side. And the other one is as well how the client is seen to secure capacity to in advance while they try to match reservation of capacity, acquisition of equipment and final clients that will take that computing capacity in the future.

So that debate was agreed at the very beginning in first quarter with a keen agreement, which meant that we agreed that we have a contract not yet signed, and then we will look for the right moment to sign it. So both parties, we have enough visibility as said, on the different topics moving forward.

We have agreed that we have reached that visibility by 30th of June this year. If you see in the pictures, we are advancing pretty significantly on the building all capacity, all as Ismael said, all the different equipment from our side is already procured. And in terms of connectivity with the utility as well, this is all the different main transformers and lines and equipment has been already ordered. So the level of risk is more and more limited on our side.

And from the client perspective, it's exactly the same. So they have seen more visibility probably signing already the final client. And therefore, basically, we agreed to transform that booking agreement into a real pre-let asset still 18 months ahead of ready-for-service dates but with that more visibility as which we have at the beginning of the year. This is a trend that is matter was saying this one is another example, we are seeing more and more that conversation is moving forward and moving quicker that even our development capacities, and it's always this balance between advancing too much in commercialization and preletting almost Turkey projects to people versus how the research we are facing in case of any delay.

And as soon as we are seeing more visibility and of course, we're getting more confidence on what we are doing then is when we transform this in real the releases.

Okay. Very clear. And then just secondly, on Lisbon, with now all the phases classified as under negotiation. Is this part of the Gigafactory project or the separate negotiations that you're doing on your own? And if you could provide any color on the types of tenants that are looking at this space would be helpful.

Okay. Well, it's -- we are trying to make it compatible with the Portuguese Gigafactory project. I mean we remain committed to providing the Portuguese Gigafactory home. And we are exploring the possibility of making both situations compatible through a direct dialogue between the potential client and the Portuguese government, but I believe eventually, it might be the same and one single thing. So very, very interesting.

Okay. Clear. So similar that we've seen in the past, if maybe this project doesn't go ahead, you've then got your own agreements in place to then push forward with a lease we like this project going ahead. Is that the case?

Yes. I mean it's exactly, as you said, basically, we have a private deal with a private client, a private counterparty. However, we are trying to make it compatible with including the public side in the equation, assigning to the public side part of the capacity to be recovered in the future through an increase in power in the same campus that we are, of course, requesting power from the National Grid Authority in Portugal. So there are a number of ways in which that can be achieved, and this is what we are trying to get.

Okay. And then just finally, apologies going back to Slide 22, I know we've discussed the promote fee a few times. But can I just make absolutely certain that the EUR 101 million that has been accrued to date is based on the kind of total exit value. So you're not expecting another similar EUR 100 million or so to be accrued based on the estimated value you captured to come ,for example, what are your expectations around that total today on Phase I?

Yes. So the promote what covers is the value created over this 10-year period, which means it's not only an exit value itself is also basically the rents we are considering all over the years. as I explained before, right now, we are in the, let's say, more treated spot of that calculation because we have all the Phase I already completed, 100% let and that is basically capture, as you have seen significantly by the appraisals because right now, what we have is an asset up and running and with a huge market that could be after it.

So right now is, let's say, we are achieving the highest level of return. And therefore, the sharing of value is higher going forward because this calculation will be made on a 10-year basis, meaning that we are in year 5 right now. So we need to move on to year 10. What will happen is that we expect to consolidate that value. We also expect that the market will appreciate and convert this asset category in more in a mature market, which means that we will have basically some uplift there in the exit value in 2031. That's, of course, our expectation.

And in the meantime, we will receive rents over the period. Which, apart from delivering more margin to our projects at the same time is, of course, reducing IRR from this calculation perspective because we are moving forward from a 5-year calculation to a 10-year calculation. So I think the number right now is always accounted from an outdoor perspective, on the most conservative way, which is assuming that we have a sale. So we have this effective year 10 in every quarter that we are publicly making public our results.

So our expectation is if you have -- if you compare for something June 2025, December 2025, there was no reappraised since replace because we were no commercialization at that moment in time and promote decline slightly because of the more timing on that calculation. Same could happen from now 2031 because of the lapse of timing, okay? So that is the way how we are calculating it and what we will expect going forward.

The next question comes from the line of Florent Laroche from ODDO. [Operator Instructions]

So we have 2 questions you can answer one by one. So the first 1 is linked to the data centers and capsules. So we can see that you are quite optimistic to -- to continue to sign [indiscernible] in data centers? And maybe at the end, in which way the fact that you are funded at this stage only partially the development of data centers, so with capital increase can be maybe a blocking point to sink further leases for Phase III for Phase III, yes.

Okay. Well, we are perfectly conscious, Florent, that we are partially funded for the development of Phase III. And we can assure you that we are trying to explore any potential avenues to continue completing our funding. We will we will be active in the market. We will make sure that we have our Phase III completely funded or at least 2/3 funded for the moment. so that if the sheet hits the fan, at least, we can proceed with Phase III, just with a little bit more of debt. But we need to achieve that point of certainty of execution, which I'm sure the market is expecting from us. So I mean, we will be active during the rest of the year.

Okay. That's very interesting. And maybe a second question on shopping centers. So we can see that you are very, very good again this quarter. So how is that sustainable for you the optional performance of your shopping centers at this level?

I am the first to be surprised sometimes about the robustness of the shopping center performance we have been in the business for many, many years, and we thought that the numbers we had achieved in 2019 were more or less repeatable, that we exceeded 2003 probably already in 2023, and then we beat '23 and '24, and then we bid '24 and '25. And this year, again, we are bidding '25.

So is this sustainable probably more a question for Bank of Spain, macroeconomics than for me. I believe it is difficult that we can sustain this rate of operation for many, many years. But it is true that for good or for bad, we have a number of factors which are helping data shopping centers in Spain. One is mainly increasing population. Spain is one of the few countries in Europe that without judging whether this is right or wrong, it's importing population from mainly Africa and South American countries. That population increase, of course, that goes to shopping centers.

Second, there is the average salaries are going up as a consequence of inflation, although so are going taxes, et cetera. And this is just a factor the average indebtedness of Spanish households is very low. I mean about 41% of GDP. So in reality, we are not in a position like in the U.S. where you have your card debts, piling up, student that credit card, many different types of debt in Spain is mainly mortgage and mortgage is going down, the total stock of mortgages is going down time lapses because the average Spanish mortgage is calculated on a French payment system.

So normally, the monthly payment is equal. And at the beginning, it pay is mainly interest starting, I mean, reaching approximately half of the life of the mortgage, you start paying significant amount of capital. As a consequence, the mortgage stock in Spanish banks has been going down for a number of years. Now it's a little bit more stable. And then there is always the factor of informal economy. I mean household services have now completely moved into Informa even residential rents, residential leases have moved into informal because people doesn't want to be under the radar of the legal system because under the legal system, if you have a noncompliant tenant it will be in Europe power forever.

But in the informal system, you take it out with other methods very quickly. And that motivates a lot of cash in the system that, of course, is appearing in shopping centers. how sustainable is that? I don't really know. The good thing in our case is that the increase in -- per square meter sales of our tenants has not resulted in us elevating or increasing our rents on a commensurated basis. So this is why the OCR is going down. which means basically we have an ample room for maneuver, where the shopping center industry hit a wall at some point and it wouldn't find us with OCR at 16%, 18%, in which case, we will clearly have a problem.

The next question comes from the line of Ana Escalante from Morgan Stanley.

So my first question is on the type of tenants. Ismael, I think you've mentioned earlier during the call that you are seeing demand arising from other type of tenants, not just new cloud and hyperscalers. But based on your pre-lets, I know that there is some information that you can disclose, of course, but I wonder, how are you looking at that split at the moment in terms of the pre-lets and the bookings that you are signing right now to what extent you are prioritizing whoever is early or ready to move in or whether you have already started to try to diversify a little bit away from some of the new cloud into other companies to minimize counterparty risk.

Thank you, Ana. So as Ismael said, we are seeing -- for the type of assets we are developing 3 different type of potential clients. Everyone have the traditional hyperscalers, clearly moving from a more cloud type of request to AI. Still, they are in that process, sometimes securing capacity a little bit ahead of what they will need in the future.

But considering the type of clients, they are -- I mean they tend to standardize all the different equipment, all the different assets they have or they will let and therefore, the time to market is not as quick as probably others. But still, they are in the market and they continue representing still a small amount of our client base. I'm counting on, as you said, on pre-lets. And bookings as well, but they're becoming more actively, and we are seeing this because the amounts of capacity requested is a little bit increasing and the debt and the time line and the ramp-up that they were considering is clearly moving forward.

The second type of clients that we mentioned several times are the new cloud companies that were created in the last years, seen a lack of product of computing capacity between what happens scale is normally contracted and the users, final uses of that computing capacity. So what they have taken basically is the opportunity of jumping into the sector, more difficulties, of course, because of the capital barrier, but little by little, we are seeing different categories between new clouds that they are becoming a little by little bit hyperscalers in terms of size with very good access to capital and debt and more importantly, normally taking capacity as quick as they secure final contracts.

So hyperscalers can in a way, take more risk of securing capacity ahead of what they would expect to have in the future. But these new cloud normally because of their financing requirements, equity requirements, they normally take capacity completely simultaneously to the final clients acquiring that competing capacity. So this is something good to know that the risk is more limited.

As said, there are 2 categories. There are some of the clients listed companies, coworker examples of those listed on the American Stock Exchange. And there are others that they are trying to jump into that list, and we are pretty sure that in the near term, they will be there as well increasing the amount of potential clients in this classification.

And then the third one, [indiscernible] approaching is those that are technically clients of these new cloud hyperscalers but seen or in light of the different of the scarcity of capacity that they are foreseen in the future, what they're trying to do is to move a little bit outward in the chain trying to secure that capacity so they can guarantee their computing services in the future. And then whether they operate themselves or they were subsequently contract somebody to operate that stack for them is a different question, but they want to secure that capacity.

All of this remains a little bit what we have seen in logistics. Years ago, where some of the company's operators, they were seeing no capacity available, so they first secure that capacity and then later on, whether they operate themselves or they contract other service providers. But at the end, they are securing those type of locations and we have several examples in our portfolio where we have final clients taking capacity despite the fact that when you go to the warehouse, you see the name of an operator instead of the final client.

How this is moving, what initially in a market represented almost everything is hyperscalers and some raising a force from new clouds, in our case, because we are more plan new, new clouds are presented a significant amount of our capacity far above the one requested by hyperscalers. And what we are seeing right now is precisely that these AI models specialists are trying to catch up with this new cloud.

So what we are foreseeing is that I would not say 1/3, 1/3, 1/3, but probably [indiscernible] and final clients will represent a little bit higher than hyperscalers, but it's also true that they are trying to catch up. So at some point in time, not yet with us, but at a moment in time, these massive hyperscalers, we'll probably try to jump and in a way, diversify a little bit more our portfolio.

And also an understand we're seeing an analyst with that is that originally, we have several other clients within the same building. As you have seen, the blocks of capacity that is being contracted by clients is increasing very, very significantly, and we have more modules to buildings and from buildings to campuses. And that is moving us in order to diversify that [indiscernible] to add more buildings into our portfolio. So what we are doing with the different phases is to bring more buildings and with that diversify the type of client -- clientele and the type of tenants that we will have.

Another interesting thing is that the neo cloud at the beginning, they used to compute mainly for other hyperscalers or large language model companies. And now more and more, we are seeing direct computing for final corporate clients.

I mean, big industrial European industrial companies. computing inferencing, basically influencing the models they have already trained, and they are using the services of the new cloud for that kind of inference. So it's very, very interesting because that gives also a new layer of reality to the market, which is very much welcome.

Very clear. And then my second question is again on the promote. I know that cash flows matter a lot, but as Ismael said once, data center is a cash-draining division and destabilization. However, in the meantime, you are creating a lot of value through development profits or revaluations that come earlier than these future cash flows that the data centers will eventually generate. Therefore, for the market, it's quite important to understand how much of those embedded revaluations, you might give away in the form of a fee to a third party?

And I'm not sure I have understood yet how much that could be especially for Phase II and Phase III. My understanding is that, that changes, of course, over time because it's dependent on the profitability of the project. But if you could give us a range of I don't know whether that could be 20% of the potential revaluation or to be around 15% to 30% of the potential revaluation of data centers plus 10% of the rents over 10 years, something like that. would be very helpful for us to understand how to think about how much value Merlin is going to take from these super value-accretive story.

Thanks. So as I said before, the way that the promoter is calculated is based on profitability. There are some marginal profitability that we consider that the technology pros and the capacity brought in a way is not improving what we could have found in the sector, and there is some profitability within the 10 years that deserves to share that profit with our partner.

So the exit value, of course, in a 10-year discount cash flow has an impact and having an exit value, whether it's much higher or higher or on average, of course, has an impact, but also that's the rent over the period. And you can more or less the timing that if we are getting to a net genocost roughly on the range of 11% out of this 15%, if you apply more or less a gross to net, then it means that every year, what you're getting in reality knowing that the uplift in valuation is at the very end in year 10 is more or less an 11% that will be updated.

So -- that is more or less what you should consider that will be the range of appropriation, which will be more in line to the rents than to the exit value. Of course, if we are -- if we are seeing a market that all the sudden matures very significantly and after year -- 10 years of investment and management provokes an uplift in values. Of course, it will have an impact on the total number. But I will say that over a 10-year period, the rent has a lot of things to say during that calculation.

In a nutshell, more or less, this is more or less defined to be between the 10% and 15% of the total profit of the portfolio over time. We will be on the low end. If for whatever reason, the market is not appreciating the assets and the conversation we are doing all over the period. and would be on the upper end in the case that the market has set matures, it stabilizes and then all the sudden the Capital Markets Day out there that will price the assets higher than they are right now. So that is more or less the range.

I don't know if -- that I have probably answered your question.

The next question comes from the line of [ Paul May ] from Barclays.

Just wondered, firstly, what is the lowest level of ICR on a quarterly basis that you're willing to go to as you accelerate the DC rollout?

Lowest is level of ICR. Yes, on a quarterly basis, just as you roll out the development. Just wonder what you're willing to go to in terms of how low.

Let us check right now. We are at 3.7x, if I'm not mistaken. And which basically drives as well the 25% roughly of loan-to-value that we have right now. as we commented and we have been very open on that, we are not willing to exceed above the 32%, maximum 35% loan-to-value. And on that sense, even if rents is or even interests are raising and cost of debt is going pretty high.

With this low leverage, we will never be we have a covenant of 2.5x ICR and I think we have been ever below 3x. And so that's a little bit the spirit of the company that is more linked to the low loan-to-value target we have than to the interest rates. We are less affected by interest volatility as compared to probably other companies were highly levered.

We also take a look at Paul as net debt to EBITDA. So those things, LTV -- 10x exactly way below that.

Below 35%. I mean our model, our initial model was giving us temporary breaking of that LTV ratio at around 37%, but the new versions of the model have gone significantly down because the value creation in data centers is being bigger than we expected and is coming earlier.

So the model is now giving 34s max, which is good. And in terms of net debt to EBITDA, in the original versions of the model we were going as high as 11.7%, close to 12x. But now it's also coming down and it's going to be more between 10% and 11-ish during a certain peak but then it will go down to as low as the model is giving us like 7% at the end of the period.

So it's -- this is the way we look at it. I mean, of course, I will check into the ICR for a moment. Are you a credit person, -- are you trying to price our debt? Or are you calculating the amount of capital we need are you calculating the amount of capital, right?

No, no, it's clear on the equity side, but just is on those things as you obviously increased CapEx ahead of revenue recognition. Then there could be an impact that comes through. So it would be great if you get back to me on the -- on where that ACR goes on those models that you mentioned rating the LTV and the net debt would be great.

We check with the model and go back to you. But 1 thing is important, I mean, in current times, debt is not so much accretive I mean, with the current cost of issuing debt, particularly if you follow a real benchmark, which is the 10-year unsecured loan of your company, if you take that as a benchmark, I mean there are 2 things that I, of course, come to my mind. First is that debt is not that accretive. So do not play too much with debt because it's delicate.

And second, I believe or later, particularly in traditional asset classes, valuations will start to suffer. So particularly LTV might suffer from a completely unexpected factor, which is the decrease of the because the will be constant or slightly growing, but the V will go down. So we be assured that we are a debt conscious company, and we will try to keep debt at bay because debt in reality is the only thing that can kill a success story in the real world. indeed, you're reaching some converters very much an equity plan here.

Just on the -- a few questions on the neo accounts, if you wouldn't mind. Apologies, what proportion of the DC revenue at the moment is exposed to Neoclouds, including a pre-let is it 100% or do you have a spread of tenants? And then how do you feel about the quality or the credit quality of the neo clouds?

Obviously, debts been increasing in those businesses and their credit spreads have been widening. So I just wonder what your thoughts are and probably plays into the comments earlier around the spread of tenants. And then I just wondered if you could give any details on the contract terms, I think a 10-year duration. I just wonder what extension and termination terms there are within those would be great.

So considering basically what we have on our books right now, 45% represent are represented by neo clouds. [indiscernible] Represented by hyperscalers and growing and roughly another 45% to 50% are represented by other.

That considering I mean, that considering 340 commercialization, we are taking the political license of considering the 180 let, which is not yet what impurity we should do. I mean it will take time to convert. But yes, considering 340, what Fran told you is the proportion for the 45 neo cloud, about 5, maybe 5 to 10 hyper scalers and 45 to 50 other.

I said this as soon as we are opening new compasses of big size in certain areas, can change because, I mean, if one of the other food comps is taken by hyperscale then all the mix changes dramatically. So I mean, as soon as we are having a larger portfolio than you can extract a little bit more conclusions from our tenant base. In terms of conditions, we normally tend to sign on a 10-year basis, mandatory client some reserve significant amount of expansions, extensions or renewal options on -- for them and mandatory for us. And the more or less across all different type of clients. technically or initially, hyperscales tend to be a little bit more longer.

We have some of them but more based on previous times. And lend a little bit little more or less, they are more coming to be more on the 10-year time of Walt, okay? This is what we are seeing right now, whether one category or the other. I said, it depends a little bit as well, whether they want to make sure that the capacity is blocked for a certain period of time, if they have any special infrastructure there or they're being in some very well advanced or they're foreseen to come to bring very well advanced media type of equipment. Sometimes they go a bit further, but then I would say it's a well-established role in the market right now.

Okay. And then just on the credit quality, just recently, obviously, a slight deterioration there in the spread widening if you got any issues on the neo cloud side? Or would you still be comfortable signing some new contracts with them?

I said, there are different -- I think they are now setting different categories, these new cloud operators. And we are, in a way, ranking them and the market is ranking them. linked to the access they have to equity and debt markets.

So in the ones that they have -- they are listed companies and equity market is available for them, normally now trading with higher levels as compared to IPOs times or if they have betting access to bond market in different formats, that is basically in a way, rating for us that capacity, if they are debt involved in 100% of the cases, there is a final client sign. This is what the requirement is that Board bondholders and financials are requesting from this type of clients.

So you know that, that capacity is sold at the time that they're signing with you. And the way we can -- the way check that is on the power consumption that these kinds are having as soon as they take possession of the different rooms and it's what we are experiencing right now. Why they are not rated, sometimes they are rated on the different issuances they are doing, but not rated on a corporate level because the rating ages, of course, are not so happy with investing a significant amount of cash flow into new CapEx and not keeping a little bit some money for reducing debt.

They are more focused on getting better terms on debt. So they are more in the safe harbor on that basis, but they are still in a growth mode and reinvesting a significant amount of free cash flow into new CapEx. And this is what prepares them to get rating right now. But if you see the margins, which is an important thing from the top line to the EBITDA, what or the margins that they are doing, all of them are extremely healthy.

And this is what may we look at compared to the traditional hyperscale, which is a much easier way of measuring that increased capacity.

I'm sorry, -- sorry to repeat your question or to ask again on the promote side of things and apologies again, I'm relatively new to this. It seems relatively amount on Phase 1. I think it's 27% of current revaluation, 14% as the total expected revalue. Just wondered what we should expect on Phases 2 and 3, is it a similar structure on Phases 2 and 3? Or is Phase I a sort of larger promoter, and then it tails off through Phases 1 and 2 and 3.

And also linked to this, the yield on cost that you quoted, does that include effectively the cost of the promote? Or is that pre any promote payments in terms of the yield on cost.

Yes. So the figure that you are now calculating asset for instead of calculating over a 10-year period of time, you are calculating only over a 5-year period of time. And only applying this to the valuation itself. So that's the reason why you get to these percentages. But as soon as you are expanding this over a 10-year period of time where the rents will be more significant and with a significant amount of it. then that percentage will decline because I said that promote is calculated on an IRR basis. And the longest you calculate the smaller -- the IR is, of course, over a higher margin. So they will get a lower percentage with a high amount, and that's one thing compensates there is the reason why we believe for Phase I, we are more or less in the level that should be at the very end.

Regarding other phases, the way that we are structuring it is pretty similar to that. We are always having a look at what is the percentage representing the total profit of -- and the value that is being created and to be commensurate with the size and the value-added brought into the table. So I would say that as soon as you're seeing more evolving, you will, let's say, more have a more concrete number, but between as said before, between 10%, 15% of total profit is a good rule of thumb if things are going as they are doing right now, which are -- we are happy with it.

And does the yield on costs include that cost of the promoter or should we account for that separately?

[indiscernible]. I mean, we have the regional number because we have no -- generate any promote we were reporting on a gross basis. And now little later, we are -- you would need to make that calculation separately.

The next question comes from the line from Thomas from Deutsche Bank.

Two or three questions. The first is on the new Arasur lease. Wondering if you could comment on the lease terms, just roughly, I mean, would be very helpful. Do we see any deviation or do you see any deviations to your initial expectations?

No. I mean, as I said, the numbers I think we provide for this second phase we're more or less in the average of EUR 122.5 per megawatt per month. And the market continue being so intense and the demand has been so big. That these levels continue to be exceeding from every single country we are signing. It doesn't mean that they are there's no sensitivity to pricing on the counterparty, and we are competing not only within potential capacity in Spain.

We're competing from a European and even sometimes worldwide. Type of competition. So we need to know that we have sometimes competitive advantage. Sometimes, we need to be more conservative talking about the sizes that we're talking about is food building one single lease. It's, of course, always negotiating power from the client perspective, even the demand is pretty big.

So we're exceeding that what we're happy. We're above our initial projections. And in terms of length, we have -- we are signing, as I said before, 10 years is normally the average and with different renewal options for the client if they will, from year 10 onwards. Slitter Scale, we are updating normally the rent between 2% and 3%. That is normally the range that is market standard. Our average right now is more towards 3% than to 2%. But it's more or less the ballpark that we are moving on.

And then the second 1 is on the Zaragoza wind. I mean you plan a single large-scale building ready for service in the second half of -- maybe you could provide some color on current lease negotiations. It seems like given the size, this is something for hyperscaler? Is this correct?

This assumption well, the assumption is correct. We are adapting to a certain set of technical requirements, which are good for a number of hyperscalers. So we are, let's say, hyperscale area. And we have decided to go for 1 single building because we believe there is demand for that specific type of facility. I think more and more people is conscious about internal communications within the DC, I mean, not simply having the silicon, but having the silicon connected through InfiniBand, et cetera, and being able to synchronize the computing of all the different GPUs in 1 single, let's say, imaginary machine, which -- that gives you a J curve in terms of performance.

So with under those requirements, we have decided to go forward with that building, but we are still pending license. We hope we can be in a position to start building by around next summer in 2027 that only got now because when you deal with public administration, you never know, but we will try to be good around summer next year. And then about 2 years construction, which gives us second half end of first half, second half which is a good delivery date and shortens significantly the 2 building structure that we used to have on the basis of the increased amount of demand we are seeing in the market.

I mean what we are trying to do is ready more demand quicker because we see -- I mean, without sacrificing quality, of course, because we are operators. But we are trying to read as much demand as we can earlier than expected because we see that at present, the big bottleneck is construction is not so much commercialization.

Okay. The last question is like actually coming back on the data center property values. Again, just wondering to keep it simple. Wondering if you could provide a rough idea about what you expect regarding revaluations by the end of the year? I mean, should we expect a similar magnitude roughly as in the first half?

So the valuations are coming normally through or the revaluations are coming through 2 main impacts. The first one is when we are adding more capacity to be appraised and as you -- we have commented in previous calls, as much as we get a construction license, then that asset moves into our current WIP and then the appraisal basically values that property. We have other lands with power that because we are waiting to receive construction license, and we have not started yet on that construction, that capacity is kept at cost. So there is no appraised. That is what onsaleas happened now in June, where the 3 assets in Lisbon building 3, 4 and 5 because we are building, as we speak, those have entered into the scope of values.

And that also provoke that as compared to the regional valuation that this land has at the time, which was very low, now basically is properly appraised on by the appraisal. This is one of the impacts. The second 1 is once we are within construction or we are ready with a building starting construction, and we reduced the risk of that development by collecting the assets. So we have several examples as well during this first half where we have been let in advance capacity during the development time. And this, of course, has an impact because the risk.

So discount rate that approaches are applying to it, and it's been reduced because the risk assess is much lower once you have 100% of the commercialization risk already offset. So second half depends on whether we are -- when we are converting these bookings, advanced negotiations into lessons, and this we will move forward to have a higher or lower amount of revaluation.

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

I'll keep it very short. Two quick follow-ups. First on Lisbon where you mentioned that you're in advanced negotiation. Should I interpret it that if this closes, is a per pre-let? Or is this more sort of like a booked way to look at it?

No, it is a prelet. I mean, at present, it's already advanced negotiations because we had ahead of terms and this is accompanied by an exchange of technical shifts and legal -- basic legal documentation. So what we need to do now is move into full format lease agreement. And if we can move into full format lease agreement on signed, it will become a pellet, technically a pre-let.

Okay. That's clear. And sorry, one last follow-up on the promote fee. How much have you provisioned so far? And what's your strategy regarding that going forward?

Well, we are provisioning every year what the auditor tells us to provision, which is basically a function of modeling the cash flows of the different projects affected by the promote structure on a 10-year basis, but then calculating an equivalent exit on the year in which we are. So we -- this is the amount that we provision every year, and then that amount goes higher or lower depending on the year.

As Fran commented as time lapses, normally, the effect it smoothens a little bit the IR and therefore, promote goes slightly down, although multiple goes up and there is more money on the table okay? So it's a function of both things, I mean, for our partner. They get probably less appropriation but less appropriation of more money on a bigger pie, okay? It's the way it works. I mean we are and we are happy with it. I mean we are loyal people.

We have been working with them for a long period. We like to work with them. Of course, we need to be prepared the future, and we will be. But for the moment, we like this way of working because it helps us to get an external research and development department and not simply use off-the-shelf products available in the market, although it is true that sooner or later, the technology will end up commoditizing a little bit. and the value brought to the table by such research and development department will be slightly lower.

The next question comes from the line of Stéphanie from Jefferies.

So most of my questions have been answered. So maybe a last one, a follow-up on the funding. I was wondering, of course, you said your share were down today. And I suspect that investors are waiting or awaiting the next capture increase. And of course, the price will be under pressure as long as you are closer to your NAV. But -- and I appreciate it's a bit tricky to answer such questions, but what would be the trigger for the next capital increase? What are you waiting for in terms of, I don't know, getting it closer to the cash flow generation? Or how do you approach that?

Well, I think we have commented on a number of occasions that probably the funding method will be a combination of playing [indiscernible] capital increases and convertible bonds. The first 1 was a capital increase most likely, the second batch will come under the form of a convertible bond because a convertible bond delays the dilution and the dilution happens under much better share price terms. So Then, of course, the model is giving us certain peaks of equity needs, and we need to be mindful of those. But at present, most probably, we are going to go down the route of a convertible bond issuance.

The next question comes from the line of [ Michael Fine ] from [ Green Street ].

I'll be pretty quick. I have 2 questions, please. The first 1 is as you progress through the Phase I planning. I was just curious if you're seeing a major shift in the needs over time. Obviously, that is something that has changed quite a lot, and I suspect it will probably change more. And my second question is on the plan for tour or to the name of which is escaping me now, but the tower in...

You mean in Barcelona?

Yes, after [ metaling ]. Yes.

Toradories, I mean I wouldn't be that worried because Toraloris is say, iconic asset in its market. So clearly, it is a price maker rather than a price acre. Of course, the departure of Meta is a big hit. -- particularly because at present, the 22 at area in which that tower is located, is very weak. There is being a significant oversupply coming to market in recent years, and it's been really bad luck to have meta band from keeping fake news control centers in -- across the world. And as a consequence, losing that client. But sooner or later, we will start recovering occupancy we will start recovering occupancy in that asset. And I am not really, really worried. I mean, if it was another asset within the 22 at area, yes, because 22 is a tough market at present. It's really, really a Comanche area but not with total layers because tolerates a very, very, very special assets.

So sooner or later, we will start recovering that occupancy. Hopefully, within the year, we will already give you some pieces of good news. And then over 20 will continue reletting and eventually reaching close to full occupancy on that asset. And then on Phase III, you were commenting on what on MEP on the types of equipment for data centers.

Yes, exactly, yes. And how that has changed over time because obviously, the standard of the asset has obviously changed and the tenant base has changed a bit as well. So I'm just curious how has that changed over time? And what are you seeing going forward?

Actually, it is a very good question and one that motivates some internal discussions. I mean if you pay attention to what particularly American clients tell you, you would be building lower-quality assets. And that includes lower quality MEP fixtures. However, we are long-term operators, and we don't want to do that. So first, we are building assets with white rooms, which are larger than actually needed with the current densities of rack. That means basically that we are concentrating, I mean, very -- visibly, we are concentrating racks in one corner of the room and leaving the rest of the room empty, so you could play [ Palo ] in that side of the room.

But this is good because concrete and steel, although growing in cost are just little portion of the total cost of a data center. And we want to have data centers which are sufficiently flexible in case we need to go from higher density to lower density or more importantly, in case higher density compute in the future end up consuming less electricity and we can not repower, redensify or refill part of our white rooms with extra equipment. In case 1 day, someone discovers something, which makes the existing state-of-the-art racks a little bit less hard in terms of consumption.

The second thing, which sometimes particularly large language model trainers tell you to do is not to fit gen sets in -- on an [ N plus 1 ] basis mimicking the total IT capacity of the data center and they tell you to only fit like 20% of gensets needed equally, we don't want to do that because that is good for model trainer that can stop machinery and wait, but it wouldn't be good for an inference user that needs a firm power 24/7. So we try to do our things well done.

Yes, that takes a little bit longer to build the clients tell us that we build Rolls-Royces, maybe this is true, but we prefer to build Rolls-Royce's and keep them adapted to whatever might come in the future than build lower quality types of builds and then in the future, discover that we are no longer adapted to whatever is happening in the market. So far, we remain faithful to our original designs. We are fitting good quality gensets, although this is becoming now a real bottleneck in terms of purchasing. We are fitting dry transformers, which are really high quality rather than oil ones in terms of batteries we are faithful to the zinc nickel batteries because they have more happening, but less grade, in lithium, you have less avenues or less incidents, but if you have one, you better grade.

So we do -- I mean, we try to do things as best as we can in order to make sure that our facilities are adaptable to whatever comes in the future. We are ahead of the future in the way we build. But of course, we are always awake of the fact that new things come to market, and we are always -- we keep an eye on new suppliers. Particularly, we try always to make more European or build, I mean, bring on board many more Europeans and/or Spanish Portuguese suppliers because having your suppliers close to you is very important in terms of after-sales support in case you encounter any future problems. In the way your machinery works. And then there are also some radical changes coming in the future.

For example, our partners of Endeavour are developing a very interesting machinery called Turbo, which is already available. I mean, align data centers has a similar thing working in the U.S. already in operation. And it's very interesting, but it's very much U.S.-centric because it's good, particularly with gas, but gas in Europe is an expensive thing. So we have to be careful with that, but it's very interesting, particularly if you need to fuel data centers, which are located in relatively remote areas where it takes time to bring aerial lines with electricity and things like that. You might leave on turbo cells for a while.

So very interesting. Intellectual, very, very encouraging debate with the engineers. For the future designs and the future data centers that we are going to build. But for the moment, we remain relatively orthodox in the way we build.

The last question comes from the line of Marc Mozzi from Bank of America.

The first question is, can you just follow-up on the breakdown of your existing type of talent in data center, not on the 340 megawatts you mentioned just on the 180 megawatts you have prelet so far? What is the proportion of neocloud here? Any [ pacer ]?

Okay, 135. So 85% approximately is neocloud, 15% hyperscaler.

And then as data center will become the largest part of your business, when do you think we should expect some guidance on the depreciation impact of the data center equipment going to impact your earnings? I think we are already depreciating our equipment and talking by heart. I think we are depreciating the rule is 15%. We are depreciating generators 20. We are depreciating batteries 10 but skis and high tension, mid-tension, low-tension gear at least we are depreciating mean Fran can give you more updated numbers because batteries depend also on the technology in nickel versus lithium ion. Fran can give you more accurate numbers.

Yes. All items we have, you have, first, as you know, 25%, 30% is the construction itself. So that is the procedure over time, like a normal building over 30 years. Then you have all the long -- the big equipments, transformers, skis, cable generator, et cetera, that normally last for between 15 and 20 years. So this is basically long term. And then you have other components which are more exigent. And that one, I will include mainly the batteries.

Why is that? Because the batteries, as you know, what he does -- they do in a data center is to offset a shortage of power anti-generators are up and running. But at the same time, they are also very active right now with different picks of the computing that AI is doing.

So this is the system that the infrastructure uses to offset or harmonize part of these [indiscernible]. So therefore, the usage of a bar right now in the data center of is having more work. So originally, their life expectancy was more on the 3-year time and technology has a very, very significant to move that to the 10 years that small was mentioning depending on the usage you are doing on those equipments, it would be more shorter on that period and the value of that particular item within the big data center is not big, but all of that is properly calculated, and we are right now, of course, everything is brand new, but we are assuming some protection or some escrow in a way of money for potential contingencies on this type of equipment going forward.

It is something that, as you said, right now everything is brand new, and we have in several assets certain ramp-ups of capacity. And so from 2027 onwards is when we will see and we can provide you with more detail on how we are treating all these elements as soon as we're moving more in operations.

Excellent. And the final one, ones, what sort of pricing did you get me on your next convertible dollar?

Whatever pricing?

Yes, but sort of pricing or price range should we expect as a couple just as a coupon just to assume what sort of refinancing costs we're going to -- you're going to face? Are you going to go for unconvertible bond like we did -- like you've seen we've seen with. Hello?

Marc, yes. Okay. Sorry. I mean the line went off probably because there was an alarm of confidential information. Look, we are not in a position yet to decide how we will structure. But you know the principles, I think because we have openly commented with you on some occasions, we prefer a shorter-term rather than a longer term because we want to do it more equity-like than debt like.

I mean, we are not simply trying to lower our passing cost of debt by issuing very cheap financing. What we want to do is issue something that will with the premium will resemble very much with where we believe our NAV will land in 3 years from now. And in a way, make sure it converts. That will be the idea and the principle under which we are considering the convertible exercise.

Excellent. I just wanted to help everyone to be capable to improve their forecast on the basis of a new CapEx plan and so on.

Thank you very much. There are no further questions. We appreciate it. It's been a long call. But if you have any other questions, you know where we are. Hopefully, you enjoy a good summer break for sure, we will. Thank you very much, and goodbye for all.

Good afternoon, everyone. Thank you for joining MERLIN's 3M '26 trading update. As we always do on quarterly results, our CEO, Ismael Clemente, will briefly walk you through the main highlights of the period, and we will then open the line for Q&A.

Without further delay, I pass the word on to Ismael.

Thank you, Teresa. Well, MERLIN is off to a very good start of the year with total revenues up 11.2%, owing to basically a 3.5% increase in gross rents like-for-like and the additional revenue brought by data centers as compared to the same period last year.

The FFO, however, is only up 3.9%, still better than what we predicted. It was slightly lower than last year, but it's only 3.9%. And as warned already at the full year results, it's a combination of more financial expense, a 10% increase, and much less financial income because in the same period last year, we were still enjoying a significant amount of cash in our bank, so 40% less income, financial income. That puts the company at 8.8% total shareholder return per share year-on-year comparing the same periods. We have seen a very strong activity in all of our divisions, but particularly in traditional asset classes.

Of course, Spain continues enjoying good macro, but I would not take out importance to the asset management effort carried out by my colleagues. The -- occupancy remains very high at 95% and quite stable despite the fact that in the first quarter, about 60% of renewals come due, and this is Spanish idiosyncratic. Everything is done either in January or February. So most of our renewals come due in the first 2 months of the year. But the erosion in occupancy of close to 60 bps, I believe, is quite acceptable. We will discuss the guidance for next year probably in the next quarter. But what we said at the end of the financial year 2025 remains true.

In offices, we said between 93% and 94% and our models are giving us now midpoint in that range in shopping centers, full stability, so between 90 -- around 96.5%, something like that. Remember, in shopping centers, we are starting to yield manage a little bit the portfolio. You have seen it in the release spread. So we are starting to fight in a good way, the occupancy cost ratio, which now stands at the lowest I have ever seen in my professional life at 10.8%.

And in logistics and some of you, I know, are worried about logistics because you are kind of assuming that there is some sort of underperformance in the portfolio. The truth is that simply is the GXO share, which is a big one, it's 48,000 square meters, and it will take time to lease it up. I mean, because it's a relatively big deal to swallow for the taker, we are in negotiations with more than one party. So we are negotiating with multiple parties. And that will basically move the needle of occupancy as of year-end. I mean, if we cannot sign that share before year-end, occupancy will be more in the region of 96%. And if we are able to sign it, it will be 99%. Anyway, I already warned you that 99% is abnormal. So please do not bang on our head every time we go down from 99% because 99%, of course, is not reasonable.

More importantly, we continue executing the mega plan in a very satisfactory manner. I think it's -- all the assets under construction are on track to meet the delivery date. And the ones in which we were requesting licenses are now little by little achieving very interesting milestones in terms of construction licenses, et cetera. I will go in further detail in a minute.

Noncore sales, meaningless for the quarter, EUR 6.8 million at premium to GAV. But more importantly, we have been signing EUR 123 million for execution in '26 and '27, giving us optionality for receiving the cash flow. As you know, while we continue building data centers, it is critical for the company to keep cash flow. And as such, every time we sell an asset, we try to do it in a type of contract in which we keep a lot of optionality as to what is the moment of execution and what is the moment of loss of cash flow and receipt of the money.

At present, we don't need money. I mean we are overfunded. We have too much cash at banks. So what we are trying to do is drag a little bit our feet in terms of sales. And that EUR 122.9 million, it's also a premium to GAV. And I know some of you are not worried of making that question. It's at a premium to GAV. The NTA per share, it's EUR 15.32 with no valuation or no appraisal during the quarter. Another thing that has raised the eyebrows is we have said that we expect substantial revaluation of DCs in 1H. This is no nuclear science. It's simply that up to now, the scope of valuation of our appraisers has been a total potential of 240 megawatts of data centers.

And just with Lisbon, we moved into 340. So it's a very significant jump ahead, much more scope, and I'm sure this is going to have an effect in the valuation of the portfolio, together with the fact that there's been a near elimination of any leasing risk in Phase I and increasingly in Phase II. And as a consequence, I'm sure that the valuers will reflect that in the discount rates and also bringing the cash flows closer to present. So this is why we expect some jump in values in the first half.

As you all know, in March, we executed a capital increase and ABO to fund Phase III. It was a very good transaction, reflecting particularly your support to the company. It was heavily oversubscribed and executed at strike. Thanks for that. At the end, 100% of the paper was placed with existing shareholders. Of course, begging pardon to the super minority shareholders that, of course, cannot participate in ABOs because of their non-institutional nature. Even from a legal standpoint, you cannot address them.

The final distribution after the general approval of the General Shareholders' Meeting of 2022 will be paid on May 25.

Some of you have asked us about why the FFO goes down by 5.6%. As you know, we used the absolute number of shares of the company at the moment of reporting, which now includes the capital increase. We don't, we don't use the average. If we were to use the average, the FFO will have grown by 3.1% and the adjusted FFO by 3.5%. So, that we prefer to report what we see. And what we see is that now we have 620 million shares. And as such, if we have to divide the FFO by those -- by these number of shares, it's minus 5.6%, which anyway is already below the 10% theoretical dilution created by the capital increase. So with some probability maybe during the year, we will continue taking event eroding that dilution created by the capital increase.

In terms of behavior of the different asset classes, offices, as you know, ended up the period at 93.6% occupancy, down close more or less 60% compared to the 94.2% at which we closed the year. The like-for-like was 3.1% with a very interesting release spread of 2.8%. So offices continue to show some strength despite the fact that we have a problem in Barcelona, a problem that will aggravate in the second quarter because in the second quarter, as you know, we have a scheduled exit of the Meta fake news control center in Torre Glòries. So, that will further diminish the occupancy in Barcelona.

First, Barcelona has a relatively minimal weight in our portfolio. So no big thing. But Barcelona is, of course, a complicated city at present because of the relative oversupply that we are experiencing in the area of 22@. It will take some time to recover. We have commented on a number of occasions. Barcelona is a strong market. So sooner or later, it will recover, but it's -- we need a little bit of patience there.

In fact, even in rents, now Madrid is about to overtake Barcelona in average rents in the portfolio despite being more concentrated in prime CBD, the one in Barcelona. So very interesting in the performance we have observed in Madrid in recent times. Logistics, down about 60 basis points to 95.8% from the 96.4% we were at the end of the year. The like-for-like is weak, 0.6%, but this is mainly due to the net variation in occupancy because much to our surprise, the release spread has been super strong at 6.2%. We still need to see what happens in the second, third and fourth quarters to check whether this is a reflection of something or it simply -- it has happened a little bit randomly. I mean we need to check the consistency of this figure in the coming quarters.

Shopping centers is a rocket. I mean, 6.1% rent like-for-like and a lease spread of 7.4%. We told you that we would start managing yield and we are doing exactly that. Despite this, the sales have gone up so widely that at the end, the occupancy cost ratio continues going down. But anyway, we will continue pushing a little bit in rents and trying to normalize more the performance of the portfolio.

If we go very quickly through the different asset classes, and I will only stop in data centers because of its importance. In offices, what is -- what strikes the eye is basically the very good performance of Madrid, now reaching 94.6% with more than 1% change in the period and Barcelona, which has gone further down by about 3 percentage points. Lisbon has gone down by 4 percentage points, but don't take that as a reflection of anything. It's simply that we have suffered the conjunction of the exit of BNP Paribas in the Arts Tower and some of the consequences -- delayed consequence of the exit of Galp in Torre A. But at the pace we are reletting space there, this will be somehow normalized towards year-end.

I think the local team there is doing an excellent work in rebalancing the portfolio. In terms of as a curiosity, the once demeaned A1 corridor in Madrid is now doubling. I mean, it has moved from Cinderella into princess. So now it is occupied above the average occupancy of the portfolio, owing to the fact that part of the infrastructure problems that were endemic to that area, particularly the traffic jams because all the residential around have been built, but no changes have been made to the infrastructure.

Finally, the municipality of Madrid has carried out some changes in the North traffic hub, and this has reduced very significantly the traffic jams in the area. And the proximity of Operación Chamartín is also enticing more and more real estate managers in companies to find a slot there because at the end, it's going to be very close to where the music will play in Madrid for the coming 25 or 30 years.

In logistics, well, as commented, very good lease spread and pedestrian growth in like-for-like terms owing to GXO, is commented, as a big shed. We are now negotiating with three, four counterparties, but it will take time. I mean bear with us because it's a big shed and the market is not also -- is not in its best moment. So we need to make sure that we sign that back and go back to a super high occupancy, if at all possible.

Good news, however, is that we continue leasing well our work in progress. I mean we are 178,320 pre-let or ahead of terms. It is important to make the breakdown. It's 174 pre-let and 4 head of terms. So it's basically all pre-let, which is interesting. And even in the noncommitted, we are working on reducing the total number of 182 by about 60 because we are in conversation with the tenant and reduce the noncommitted to only 120, always with the idea that has been conveyed on many occasions to you of finishing our land bank in logistics and waiting for the next cycle comfortably full and cash flowing. This is what we want to do.

At the same time, in ZAL Port, we were able to get two additional plots there and one has been pre-let to Lidl and the other one, which is in the airport of Barcelona has been pre-let to Logista. So that will add capacity in the super prime location of ZAL Port in Barcelona.

In shopping centers, Spain is between the increase in population, the marginal propension to spend and the macro, it's really performing as like a rocket. The sales -- the increase in sales of 10.3%, which will strike some of you as too high. It's -- part of it is owing to the fact that Marineda, the extension of Marineda has been in operation in the period, and that has added about 4 points to the figure. If you want to do it like similar to like-for-like, it will be in the region of 6.2%, much more in line with the market statistics and what some of our peers are reporting in Spain.

Footfall, however, is only plus 1.5%, and this is owing to very small things, difficult to explain like, for example, in Barcelona, we have works in Plaça d'Espanya which are complicating the access to the shopping center. In Larios, the Spanish high-speed train got suspended for a long period. And therefore, access to Malaga was completely complicated by the public authorities. And I mean, we have a number of other situations in the portfolio. But we continue to see a very interesting footfall flow in our shopping centers.

Data centers. Well, for Phase I, Madrid Getafe 01, Barcelona Zona Franca, and Bilbao Arasur 03, the first buildings are now fully equipped and fully let, and they will reach EUR 97 million gross rental income in the year of stabilization, which is '27 as anticipated to you a long time ago.

Going into the details, Barcelona Zona Franca has been repowered or is being repowered. All the machinery has been received, and we are doing now fit out. There's been a change in layout of the client, and it's -- the fit-out is going like 15 days delay that's not relevant for cash flow, and we will start receiving cash flow in the third quarter of '26 this year.

Regarding Madrid Getafe 01, well, it's now fully let to 1 NeoCloud and two 2 Hyperscalers, which basically host in the data center POPs, I mean, cloud points of presence and are occupying an interesting part of the data center. There, we are finalizing the power connection works. I mean we are -- at present, we are big in trenches, I mean, in very plain language terms. And we expect to be ready in October '26. So by fourth quarter '26, the main client, the AI client of the center will start paying full rent. A repowering opportunity has arisen that will -- should allow us to go back to the 70 megawatts of Phase I that we told you in April 2022 in our Capital Markets Day. So if we have the opportunity to acquire 10 megawatts of electricity that will give us 6 megawatts extra in IT terms.

I know it's a small number, but it's symbolically important for us. If we can pinch it, the repowering should be ready by fourth quarter '27. And that means that in terms of gross rental income, this year, it's set. I mean, we will receive around EUR 66 million in rents. Next year should be EUR 97 million. But then in 2028, there will be a significant jump. If the repowering happens, we will go to circa EUR 110 million, including the fixed step-ups of the existing contracts. So very, very interesting for the company.

Then for Phase II, construction is progressing as commented, as planned. And the flow of pre-lets, it's promising. So in Arasur 2, it's fully let. The first batch, 20 megawatts should be producing money by beginning of '27. The second batch, 28 by mid-2027. Very cool machinery, I mean, really state-of-the-art, liquid cooled and what is more important, fully back to back by the client. So they have now final clients for all that power. I mean they are already sold in that.

For Arasur 01, construction is underway. Pre-leasing is in advanced negotiations. What this means, basically, that we have done something special in this occasion. We have signed a reservation agreement, which has as an exhibit all the technical documentation and the full form legal documentation, the lease contract. However, the lease contract contains bracketed terms for the delivery date.

So three things can happen. If nothing happens at a certain point next year, which I will keep for me, okay? The contract will become fully binding for both parties, and it will be let. If we have to change the delivery dates, and I will explain why, and the counterparty accepts, again, it will become fully binding on both -- for both parties.

And if we can find a language which is sufficiently flexible for delivery dates, which will need the collaboration of the final client of our power taker and NVIDIA for the delivery of the chips, if we can find something which is amenable for the four parties, then eventually, we will move into full, let's say, full form contract signing. So it's pretty much done, okay? So that is the situation there, and we are working.

Why are we worried? We are worried for a very simple reason because we have our own working morale. We have our own sense of fulfillment of contractual obligations. But when you are dealing with our public administration or other counterparties, when you depend on third parties, of course, you are exposed. And what we don't want to do is screw up. We don't want to screw up not only because we are going to be imposed a significant penalty.

Penalty at the end, you pay and that's it. The problem is that we are a relatively small company, and we are just starting in the world of data centers. We do not have the goodwill of the big American incumbents and screwing up on the delivery of one of our facilities is not going to be good for us.

So -- and particularly if it is owing to a third-party intervention, it will be a pity. So what we are doing is trying to make sure that we are pretty firm on the delivery dates. Remember that in this case, the electric line comes through a photovoltaic plant that needs to be built -- is being built or will start soon to be built by Iberdrola, by the utility provider, really next door to the data center. But the plant needs to be built and the line will come through the plant through the data center.

So two things need to be executed, the generation assets, the solar panels and the line. And this requires lots of authorizations from the Basque Country authorities, from the central government authorities, et cetera, plus the execution of the works itself. So this is why we have been a little bit very prudent in the way we have approached this potential pre-let.

Regarding Lisbon 01 and 02, well, basically, construction is advancing significantly. If any of you fly often to Lisbon, you will see that the two buildings are now with columns erected. They will start closing walls in the second half of the year and roofing. So works are advancing pretty well. after finishing all the preparation of the ground, which, as you know, is a complicated ground in Lisbon. So very happy with the way it is going.

For the IT capacity, the primary plan continues to be the adherence to the Portuguese gigafactory. However, this is now being delayed again. The RFP by the European Union might be sent to the different parties at the end of June or maybe July, and they expect to take a decision by year-end. Taking into account that we started in all this process in February 2025 with the intention to have everything decided by April, maybe May, maybe June, it's a 1.5- years delay and which is sometimes not compatible with private activities.

I mean we cannot do things in that way. So we are advancing in some alternative conversations pretty similar to what we did with Arasur that you will need to bear with us for long while because those happen to be hyperscalers, and that means basically very, very long conversations, very slow processes. It will take a lot of time to really get to a happy end. But statistics are in our favor. We are talking to multiple counterparties and sooner or later, one of them will end up concluding negotiations. So we are happy with the way it goes.

Plus, if at all possible, if we can enter a full lease of the whole campus, it's paradise for us. So if we can really lease the whole campus and accelerate the construction of 03, 04 and 05, that will be perfect. So this is why we are taking relatively long in Lisbon that the demand is very satisfactory.

In Madrid Getafe 02, the demolition works are underway, should be finished by year-end. Very happy with the way they are going. And the construction license has been submitted the request to the municipality, and we expect to have it or to get it immediately after demolition works are finished. So maybe with a little bit of luck, early next year. We want to rush in this case again because this data center enjoys a couple of bookings and highly credible.

So we believe it will go very well. The current finalization target, which is first 1H '29, it's about one half in advance of the one we told you about it's like 2 quarters ago when we feared that this will go to end of '29 with full cash flow in '30. With a little bit of luck, it should go to more like first half '29 and full cash flow -- well, again, for '30, full cash flow for '30, that partial cash flow already in '29.

And regarding Madrid Tres Cantos, it is a small data center, but planning has been completed. We got urbanization permit, and we are now moving around. And that's it because we expect to have this ready in the first half of 2029. And we haven't started commercialization conversations because first it's very small.

Second it is in Madrid. So I think it will lease relatively well. And then for Phase III, we are just starting in Bilbao 4 and 5. Well, we are waiting for the execution of the power infrastructure by our electricity provider, which, as you know, is Solaria. We have requested the construction license to the municipality, which in turn, will put in motion the different favorable reports that need to be received from the Basque government.

But we are already readying the project in case we need to accelerate it. I mean, in our presentation of Phase III, we said first half '30, first half '31. This is simply an estimate. If we need to accelerate, of course, eventually, we want to be ready in case for some reason, the client or one client wants to get this slightly earlier, I mean, we want to be ready.

Regarding Lisbon 3, 4, and 5, the construction license has been granted by the municipality. And we have started doing the groundworks very quickly. I mean we are piloting already, and we will go fast here. So again, we have delivery dates of 1H '29, 1H '30,1H '31. If we get a client, that can be significantly accelerated, but we prefer to keep the existing dates. I mean the guidance provided to you in our Investor Day in Arasur because we still -- we don't know what the future might hold.

And if we end up selling or leasing 01 and 02 to different clients on a retail basis or wholesale colocation, then eventually, we will not rush in starting 3, 4 and 5. But if we do just one single lease, campus lease, then yes. And then Zaragoza Wind, well, we have submitted already the DIGA, the Declaration of General Interest for the Community of Aragon. And we are now moving into the PIGA, the Project of General Interest of Community of Aragon. It might sound like Chinese to you, but the interesting thing about the PIGA is that it moves the land from rural status into full construction license in as short as between 9 and 12 months in theory, unless something happens or you find skeletons from the Stone Age in there.

But the idea is to continue progressing hand-in-hand with the local Aragon authorities, which are highly collaborative and have the PIGA submitted before summer for readiness of the project in 4Q '29 and the second building 2H '31. But again, it depends on whether we can find a client. And we have a lead for this one, so which is the -- because Bilbao and Lisbon probably have the same client that we have a lead, and we are working on the technical design specific to that lead. Outside the Phase I, II and III, we got the declaration of a project of regional interest for our Navalmoral project in Extremadura for Building 1 only.

And we have obtained a little bit of power in there, around 30 megawatts utility, which are good for about 20 megawatts IT. Remember, for those of you who attended the Capital Markets Day in Arasur, that was called Phase IV, okay? Interestingly enough, we got some electricity, not a lot. But given that civil construction is not the lion's share of the budget of a data center, we might perfectly start the construction of Building 1 being ready to equip 20 megawatts IT on it once finished because it's the only way to have an earlier ready for service date in case we get clients. And this Extremadura project is raising a lot of interest in the market because of the sheer size it has.

Of course, during the civil construction period, we might get the real electricity, the one that we have requested from the local authorities from the central source, central government authorities. We requested 2.0 gigawatts and good for around 1.4 IT. Whatever they give to us is going to be good. So we -- if we can electrify the first building and if we can electrify the second, because they are twins from a technical standpoint, we might start also the second if we get the electricity from the central government. And that's basically it. LTV, bond maturities, and this is all relatively plain vanilla stuff.

So let's move into Q&A. And I'm sure it's going to be much more interesting. I mean I'm sure you will have interesting questions.

[Operator Instructions] We have the first question coming from the line of Marios Pastou from Bernstein.

So just firstly, just on the broader FFO growth of...

Marios, you are breaking off, your voice is metallic. Can you check your line or eventually, if you want, if you send us in writing the questions, I will read in loud voice your question and reply to it. Do you agree with that method?

That's perfect. Apologies, my line is funny.

Okay. So questions. FFO growth, circa 4% in the first quarter. I appreciate that it is early days, but is there upside potential to the flat guidance?

Yes. Yes. Yes, there is upside potential. But I don't do this to me every year. I mean, the EUR 0.58 pre-capital increase are EUR 0.53 post capital increase. Let's stay with the EUR 0.53 for the moment. We will review the guidance in the second quarter. And in case we see that we are fine, yes, we will change it. But for the moment, let's keep the 53 because it is not easy. I mean this year from an interest rate perspective has been roller coaster, but it's a roller coaster that only goes up. I mean the 10-year swap rate is going up significantly, and let's see.

I mean, financial expenses might give us a headache. The good thing, however, is that however quick, however fast financial expenses grow in the coming years, the top line is going to run much, much faster. So we are -- that puts us in a very good situation. I mean it's compared to what I see around me, I think it's a very good situation. The company -- I mean, it's been fantastic, it's been a big luck to find this vector of growth of the data centers because it will simply send our top line to the roof, and this is going to go much faster than any potential increase in the financial costs.

Then an update on Portugal, how the dual track discussions are ongoing with tenants versus gigafactory project. I have already referred to that. I mean we are holding like a dual track through, and we might perfectly end up going through a private solution. The third building in Bilbao under advanced negotiation rather than booking able to provide details, yes, well, I have already given you the details. I will not be specific on who is the client, although it's relatively easy to guess.

And then Navalmoral, what this means for Phase III? Well, Navalmoral is Phase IV, as we commented in Arasur in the Capital Markets Day, Phase III, it's a little bit flexible at this time around, could be increased by some things coming from Phase IV, some things coming from Tier 1 pipeline or eventually, if we see that, for example, in Tres Cantos, if we see that it's going to be impossible to meet the deadlines given to market for Phase III, we will move it to Phase IV.

We need to get accustomed a little bit to the fact that having so many balls in the air, have so many things in execution, some things will happen. So you need to be prepared for that. Let's be adult in that respect. I mean if something happens, I will clearly inform all of you that we sometimes might need to do some adjustments.

So the next question comes from the line of Celine from Barclays.

Can I ask you two questions, please, on data centers? The first one is, can you give us an update on where you stand with the EU on your Portuguese scheme? And then secondly, what does that mean that Navalmoral has been declared project of regional interest? What does that mean effectively for you in your day-to-day?

Okay. Well, regarding the EU, as commented, Celine, the problem is permanent delays. I mean, as you know, the program was launched by the European Union. They called it gigafactories because they were trying to replicate the Stargate Program in the U.S., trying to find 1 gigawatt project across Europe. Then somebody raised their hand and said it's impossible, then they reduced to 200 megawatts, then to 100 megawatts.

So finally, it's a 100-megawatt program. Locations moved from 4 to 5 in order to please more countries within the European Union. Now they have moved from 5 to 7. So little by little, it's starting to look like the lottery of the parish in which I go to mass on Sundays. So the boys do a run. And then the one that ends up last still gets a medal because it's super sympathetic and has a very good smile.

So sooner or later, this program is going to be launched. Apparently, it's going to be launched around June, July for decision-making before year-end. Okay. We can no longer be super faithful on that. So in Spain, we are completely out of this. I mean, we were told that we were not needed. So we found our way in the private market. And in Portugal, we have remained loyal to the agreements, verbal agreements reached with the Portuguese government.

We remain there to provide them with digital infrastructure in case they need it. If they tell us they don't need it or the situation continues being delayed, we might move perfectly into a private execution because at the end, we have to manage frugally, your money. I mean -- and we cannot play with that.

Then regarding Extremadura, the declaration of regional interest basically means technically that all periods for licenses are reduced to half. And therefore, everything gets some sort of like a fast track, and it moves significantly quicker. But in practical terms, more importantly is that the Junta de Extremadura is now clearly trying to help the project, and they have allowed us to get some power, which is testimonial is not significant on 45 kVs. So it's not super high-quality power, but it's okay. And will give us the possibility to illuminate 1 block out of the 5, if we do a B100, if we do a W96, the blocks are 24, so partially 1 block, 4 blocks or 5 blocks.

I mean, depending on the type of building we finally build there. But we will have some electricity. And as such, we can start serving clients there, which is important because clients normally deploy system engineers in the site, et cetera. And once they are building -- they are working with you in a building, which is occupied only by 1/5, then the second fifth, third fifth, fourth fifth and five fifth is normally much easier to place with the same client. And Extremadura is raising a lot of interest among the clientele.

The next question comes from the line of Florent Laroche from ODDO.

I would have three questions, if I may. Maybe the first one, you mentioned the valuation of data centers, think that maybe we can expect some substantial revaluation. I understand this is maybe because of changing in the scope with the one. But maybe can you give us maybe more color on how we can anticipate that impact on the valuation for your data centers in Achuana? (sic) [ Arasur ]

Let me wait for 1 quarter. I mean, as you know, I mean we were carrying that land at cost in Lisbon was as close as you can get to 0. So yes, it will be a significant impact. It is not for me now to evaluate the impact. It will be the appraisers. The appraisers will do their job. They will tell us how much they believe.

But yes, there is -- clearly, it's going to be an improvement compared to current situation because current situation is 0. So very, very interestingly. And I believe also there will be some revaluations in existing assets because of certainty. I mean, clearly, the certainty now is full. And as such, I'm sure the discount rates, et cetera, might be modified in our favor. Regarding other asset classes, it remains to be seen because the performance is very good, which is -- should move valuations up.

However, interest rates are going up. So I don't know which of the 2 will prevail. I mean, only God knows, we will wait. But as commented with you on some occasions, whatever for the next 7 years, whatever happens to the traditional portfolio is going to pale in comparison to the value creation that you are about to witness in data centers. So don't be too worried about the traditional asset classes.

Okay. And -- so maybe my second question would be on Phase II and Phase III about the speed on how you spend the CapEx today. So you have provided us a very detailed review on all the assets. But in terms of CapEx spending, so how is it are you spending this faster? Or in line with your initial plans?

At present, faster. I mean last year, '25, I think we executed like EUR 900 and change million compared to EUR 800 million we had in our budget. So we were slightly faster. And in '20 -- talking -- very importantly, talking about committed, which, again, we have explained in some occasions, we consider committed CapEx like already spent because we don't want to run into the risk of insufficient funding.

We don't want to make an equipment request from Vertiv and then discover that we don't have the money at the time it arrives to pay for it. So we kind of block the money of every equipment request we make. And hence, why we have a relatively significant amount of cash. What we expect for '26 is a little bit of the same. I mean we expect '26 to be also fast in terms of CapEx deployment.

The cash at banks we have at present, which is like EUR 1.75 billion. If you take out the bond repayment, EUR 850 million change or less. And the speed of deployment of CapEx in data centers, we are going to finish the year -- if you talk about committed, more or less at 0. If you talk about real money at the banks, we will have money at the banks because part of it will be committed, but not yet spent, okay?

But yes, we are spending pretty fast. And in that respect, the arrival of David Martinez, it's helping us a lot because he's making a significant effort of industrialization of the construction processes, which is important in many aspects. One of them is, of course, speed of execution. But the other one is to combat potential cost inflation episodes we might see in the future.

At present, Europe is relatively tranquil for the moment because there is a lot of bulls***, a lot of noise, but very few people is really building things. But sooner or later, that situation will change, and that might strain a little bit the commitment queues with the main suppliers. So you need to be mindful of that and try to make sure you slot your things in the right moment and you get your equipment and you might need to equip part of your things in advance for which we are prepared. And we have lots of sheds everywhere in Spain. So we have a lot of storage capacity for equipment that we might receive.

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

Maybe first, I was hoping you could give any color on your stance towards the balcony portfolio. You mentioned you're not mentioned anymore in the last four bidders, but you were quite vocal on the past on your interest. So happy to hear if you can give any color on it.

Well, in principle, we couldn't agree on pricing. So we are technically out. And that's it. I mean they are running an investment banking process with long list, short list and et cetera, and we are not participating.

Okay. That's very clear. And then maybe second question, just curious, given what's currently happening in the Middle East, have you identified any new potential risk or already encountered delays or cost inflation for the data center pipeline?

Not for the moment, as I was commenting. The fact that most -- virtually all our supplies come from OECD countries. And the only thing that comes really from a far supplier is Japan, but it's made in Spain, in Zaragoza, the transformers. It's going well so far. Things -- I mean, collateral effects we are seeing from the Gulf crisis is more interest in Europe by hyperscalers because a number of data centers in the area have been hit.

Data centers are, of course, centered in many crisis because they host data, which are vital for today's society. So one, two, like three data centers have been hit. So nothing serious has happened, but that has sparked even more interest now in European locations. And that's basically it. I mean I think we are okay for the moment. Of course, we are not okay. I mean I hope the situation there is resolved sooner rather than later, and we can go back to a normal life.

Okay. And one last question. So you now received the 30 megawatts of power for Extremadura. Is it somehow linked? Or does that give you any view on when you can obtain the remainder that you requested? Or is it something completely separate?

It's completely separate. It's completely separate, Veronique. It's a pity, but it's completely separate. This is electricity obtained through the distribution network through Iberdrola, who is the electricity supplier there. And the one we have requested in Arañuelo 400 kV is electricity requested to the transport system to the national grid authority, to Redeia. So, two different sources of electricity, and one thing has nothing to do with the other. We hope the power contest is called sooner rather than later. We provoked it.

I mean we are ranking first. There is enough electricity in the substation. So we are hopeful that we are going to get a very significant chunk of electricity there. But the truth is that we deposited the bank guarantees on February 25, and we are still waiting. And hopefully, during the year, we should know more or the power contest should be called upon because it will be paradoxical that we end up receiving a lot of electricity earlier in Portugal than we are receiving in Spain. In, as a Spaniard, it kills me, but it is probably it's the situation.

The next question comes from the line of Ana Escalante from Morgan Stanley.

I'd like to ask a question specifically on construction cost inflation. I know that you said that so far, there's nothing especially that you should -- that you are seeing or that you think you should mention, but just thinking maybe a bit more long term. I was wondering if we were to see that inflation in oil prices feeling into construction costs, how does that impact your CapEx plans?

Would you rather increase of CapEx because probably you would be able to transfer that to higher rent for data centers, meaning -- or would you rather just do less megawatts and keep to your original CapEx commitments?

Well, it depends on the relative impact. I mean, so far, first, Phase I is completed. Phase II, I would say, 80% to 85% is ordered at fixed price and being received as we speak. And in Phase III, of course, yes, it will have an impact. That impact in our opinion, for the moment is confined to steel, but not significantly concrete.

And then the oil cost, I mean, our fuel costs for groundworks, et cetera. But as you know, the civil construction is around 25% of the total budget of a data center. So unless the movements are gigantic and we move into a 20% deviation, it shouldn't impact that much our total figures. And rents continue playing in our favor. I mean we are seeing our rents in the market above what we have underwritten for Phase II. So rents might give us a hand if that happens.

That's super clear. And maybe also on kind of supply chain bottlenecks. Based on the conversations that you're having with your prospective tenants, would you say that they are a little bit worried about not receiving their equipment in time or maybe the market just not being able to supply to all the demand for equipment that all these companies are placing in?

Not for the moment. In fact, NVIDIA, if any, they have normalized a little bit the delivery times that at some point were really, really long, particularly with the initial deliveries of GB200, there was a significant bottleneck. But now they are little by little normalizing. They have increased their production capacity. So this is good. What the clients are not getting is IT.

I mean, IT power, data center capacity. So we are seeing now that in some cases, they are trying to push for longer-term contracts, which is a clear sign that they are under certain stress to secure IT capacity. I don't surrender. I believe at some point in the future, we will be able to charge back some of the common expenses.

At present, as you know, the system is they pay you a lump sum and they forget. So there is a gross to net conversion, which is significant and much higher than in other asset classes. I believe this is -- eventually, this is one of the things that could change in the future because unless the rent inflation continues going up and up and up at some point, maybe the rent inflation stops, but they start accepting some chargeback of part of the expenses, which is the same.

I mean the net effect is an increase in NOI, which will be good for all parties. But the -- I mean, from what we see, there are no signs of abatement of the demand. In fact, up to now, everyone was saying, what do you have ready for '26? Because '27 and '28, I still need to see whether I get clients or not. Now people are starting to ask what do you have ready for '27, '28 because they already have visibility on back-to-back clientele up to '28. And I'm sure next year, that benchmark is going to move to '30 and eventually '32 because particularly in Europe, we are not building capacity at enough pace to cope with the current demand.

The next question comes from the line of Stéphanie from Jefferies.

I would have a couple of questions actually. The first one would be a follow-up question on shopping centers. We clearly see that there are great spots currently in Spain. I was wondering about your strategy for this segment going forward, looking at acquisitions. Do you contemplate more acquisitions, so more opportunities outside of the balcony portfolio there? And what about disposal in front of that? Do you have disposal budget?

Okay. Look, one thing in reality is pretty much tied to the other. In terms of shopping center, our strategy is very simple, is to try to manage our yield through rents. We are trying to push a little bit of rents in order to send back the occupancy cost ratios to, let's say, more normalized levels.

So we are trying to basically extract a little bit more cash flow from that portfolio, benefiting from the current federal situation in constructions. Regarding acquisitions, very difficult. I mean it's very difficult to find portfolios that really makes sense for us. Balcony, there were 2, 3, 4 assets that were really interesting for us.

But this is just one opportunity that we looked at on an opportunistic basis. It's -- I'm not sure there will be many more like this in the immediate foreseeable future. which again brings the question some of you make to me sometimes that why didn't you buy Unibail leftovers, et cetera, because we run a listed company. And in a listed company, you can be contrarian, but only this much contrarian -- because if you are super contrarian, people will kill you in a public place because you are shopping centers, they are about to disappear in the U.S.

And sometimes you need to take decisions a little bit delayed in time because you need to be cleaner than the cleanest. So -- but yes, I mean, we will -- if there is an acquisition opportunity in the market, we will have a look at it. If not, we will simply enjoy our portfolio. And there will be many more cycles in the future. There will be other situations in the future.

10 years from now, the online sales will start going up again. Now they are completely stalled at single-digit growth figures that maybe in 2035, online sales skyrocket again and people start being afraid of shopping centers disappearing, then maybe we venture into some acquisitions. And I will remind you of what you told me about buying more shopping centers because that would have been a good idea had we executed it like 3 years ago.

Anyway. And then disposals, we will continue disposing of around 1% of our portfolio per year. I mean the budget for this year is, say there is like 130 or something like that. We will try to comply with our internal disposal budget. And we will have accelerated a little bit in case we have bought the balcony portfolio. If we don't buy the Balcony portfolio, then why selling income?

I mean we will keep it. I know some of you say, why don't you sell all the traditional assets and become a mono-asset class pure-play data center company. That will be super cool. We will be the coolest managers in Europe for the next 10 years. But then one day, when data centers hit the wall because at some point, there will be maturity and there could even be oversupply, then what do we do? You get out of our shareholding list and our share price plummets, it will be a pity because the company at present is pretty well balanced, and we will endeavor to continue keeping that sort of balance in our income streams.

Okay. And my second question relates to logistics. So clearly, we can see that one departure can weigh much on operating KPIs. So I was wondering if you have any other tenants like GXO that will leave in the coming quarters. And actually, I will have the same question on offices. What are your main leasing challenges in the coming quarters in terms of tenant departures?

Okay. One very important point in this respect, Stéphanie, is that we calculate occupancy based on GLA square meterage. So as a consequence, any departure in logistics, of course, is meaningful for the total occupancy of the company.

However, from a rent perspective, it's like leasing 1,000 square meters of offices, okay? So don't be carried away by what happens in logistics in square meterage terms. We do not expect to have any further departures, particularly this year. But at some point, of course, the portfolio is a moving portfolio, and there could be in the future departures in logistics that we will try to replace.

When the cycle is helping us, it's easier to replace. When the cycle doesn't help you, it's more difficult to replace. But remember, always, we calculate occupancy it's not economical occupancy. It's not financial occupancy. It is space occupancy. We calculate based on the space. In fact, as of year-end, we will start reporting the occupancy in data centers.

And believe it or not, it will not move the needle that much because in the square meterage terms, the data centers are relatively minimal. So even though we bring into the equation at the end of the year, Barcelona 1, Arasur 3 and Madrid Getafe 1, that is like 60,000 square meters, 100% occupied. They will make up for the GXO share, but that's it. However, financially speaking, it is super important, okay?

So likewise with offices, I think in offices, -- the team did a wonderful preemptive work in the past years, securing extensions of the biggest leases we have in the portfolio because we still have like 70% of our portfolio is multi-tenant. -- about 30% of our portfolio in offices is headquarter leases. And of course, they can mean a lot in case you lose the client. But most of that job has been already done. I mean we renewed Pricewaterhouse.

We renewed Técnicas Reunidas. We renewed Técnicas Reunidas -- we renewed in due time Endesa. So we are in a relatively comfortable position. And we are pretty mindful of the fact that for some of those headquarter leases, there's a bilateral relationship with clients. So we highly value the bread and butter nature of their cash flow. So if at all possible, our first idea is always to renew unless we want to vacate the building for conversion into residential or things like that.

We normally -- our first intention, our first idea is always to renew. But we don't expect any exits this year in offices in our portfolio. For next year, we'll need to check the forward office report, but not for this year. I have been checking everything recently on the occasion of our Board yesterday, and there is nothing significant going out this year, neither in offices nor in logistics nor in shopping centers.

I think the year, as commented on the full year results should be a year of relative continuation of the performance of 2025, in which you will see a significant hike in top line that will not be matched by a significant hike in cash flow owing to the financial expenses line. But other than that, it's okay. Then next year, you will see a much more significant jump in the top line that will be accompanied by some cash flow growth.

Thank you very much. There are no more questions. We thank you all very much for being here with us in this 3M '26 trading update. You know where we are at your disposal if you have any additional questions. Thank you very much.

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

Thank you, Teresa. Good afternoon, everyone. We are in front of a very interesting set of results, certainly, the best I have seen since we have been leading this company. It's been almost perfect year because the fantastic performance of the data center division has been accompanied by very, very solid performance also on the traditional asset classes. And all that has been reinforced by an excellent behavior of the share.

So frankly speaking, what can I say? I mean the operating momentum is super strong. We are enjoying satisfactory rental growth in all asset classes, traditional and nontraditional, because in data centers, we are also achieving better rents than underwritten. We have a high occupancy, 95.6%, and continue solidly generating FFO with a plus 5.1% print in the year. In offices, we have a very remarkable like-for-like of 3.5%. But more importantly, an interesting release spread of 4.8%, which is probably the reflection of what we commented in past calls that the Madrid market particularly is now under a certain like short squeeze.

I mean, there is distraction on the offer side, which is causing, of course, an effect on the pricing of the demand. The occupancy stays at all-times high, 94.2%, and this is particularly noteworthy in a year in which Barcelona has been a relatively softer market than it was in the past, and has lost occupancy. So Madrid has been able to compensate Barcelona, which will continue for the coming years to be one of our weak spots that we will continue working because sooner or later, the market will digest the current situation of oversupply and will come back to normality.

In logistics, we have been positively surprised by the release spread, particularly because, as commented on a number of past calls, this is a market where we were seeing a little bit of less strength than we have been seeing in the past years. But this year has been extremely strong, particularly on the release spread. The reason why the like-for-like is low is simply because we have lost 3 points of occupancy, which is normal, because we were occupied at 99%. And we told you that there was only one way to go from there, which was down. And -- but we ended the year with a very good printing occupancy of 96.4%.

Shopping centers, another super strong year, surprising us on the upside with a very good like-for-like of 4.7% and still with very affordable rental levels for our clients at 11.0% in occupancy cost ratio. So very, very strong year in shopping centers.

On data centers, well, basically, we have achieved a full derisking of Phase 1. So Phase 1 is now water under the bridge. I mean, we will report it as assets in operation from now on in order to try also to simplify your lives, because if we continue reporting Phase 1, Phase 2 and soon Phase 3 is going to be -- is going to be a rubik cube. So that will convert into assets in operation with an occupancy of 100%. We have also achieved a very interesting derisking of Phase 2 with the lease-up of our Arasur 2 asset 48 megawatts, which is around 20% of the total capacity of Phase 2, but more importantly, it was the next Indian trying to attack the fort. I mean it was ready for service December 2026. And as such, now is done. The next ready for services are end of '27. So we have now plenty of time to work on those -- on the leads in which we are already working and starting exchanging technical documentation, and then we will need to come to terms in the economic side of the business and then move into documentation, which, in some cases, particularly with hyperscalers, can be a painful process.

In terms of financial performance, the value uplift has been very strong, but this has been mainly boosted by data centers who have contributed close to EUR 360 million increase to the total revaluation of the portfolio. 4.7% GAV increase in the year. The total shareholder return, 10.2% is fantastic. But more importantly, we believe it's relatively sustainable, because we know what is coming, and we think unless the world goes upside down, which is another possibility, if 2026 is a relatively simply flat year in terms of performance of traditional asset classes, we believe we can achieve very similar figures at the end of December.

Our financial situation remains very strong. The loan-to-value is low at 28.9%, 100% fixed rate. And we don't have maturities till November 2026, maturity which is already tackled. I mean with the existing cash at banks and a number of bond taps and bank lines that we are signing in the coming days, that maturity will be already tackled without affecting the CapEx needs of the data center department.

And we have been able to maintain our rating, both with S&P and Moody's, which is always interesting because at the end, that cost is one of our raw materials. And we need to continue keeping our competitiveness in terms of rating.

In terms of value creation, EUR 129 million in noncore divestments, as already disclosed to market, you were perfectly aware that we had this almost done. And then probably the most interesting thing is that we have another close to EUR 130 million already signed and to be executed in '26 and '27, which is very interesting because basically almost half of our targets for '26 and '27 are already covered in the absence of any accidents.

It's important to pay homage to the activity of our different business divisions. The year has been excellent in terms of pre-lets. In offices, we have signed more than 56,000 square meters beyond the daily trading, I mean, the ins and outs that happen every day in the portfolio. In logistics, 73,000 plus and Head of Terms, which we believe is going to become a reality of another 55,000. So significant progress also in logistics. And in shopping centers, to me, the most salient activity in the year has been the inauguration with an almost full pre-let of the Marineda extension, 26,000 square meters, which has made the Marineda concept in La Coruna even more dominant than ever. I mean it's a center, which is really rock solid and is one of the jewels in our little crown.

And in data centers, well, we are now at 112 megawatts IT versus 45 latest reporting. And therefore, when 66 new megawatts have been lit and the prospects for the derisking of the rest of the Phase 2 remain brilliant.

So in terms of main financial magnitudes, the GRI print was EUR 541.9 million, plus 3.5% like-for-like in the year. The FFO, what we broke our own record is better than the one of year 2019, EUR 326.7 million plus 5.1% year-on-year. But it is important to note that in 2019, we had EUR 84 million of BBVA rents in our belly. So with a little bit of help from data centers, around EUR 30 million, we have been able to overcome the sale of the BBVA portfolio, which, with hindsight, I believe, was an excellent decision because we delevered the company in anticipation of high interest rate cycle. And that gave us also a sufficient financial muscle to be able to develop Phase 1 of our data center deployment program, which was absolutely necessary because have we tapped the market to develop data centers starting from scratch and the market will have been a little bit incredulous about our capacity to do. So we had to do it with our own money, and BBVA was instrumental for that.

The EUR 0.58 achieved are plus 7% versus the initial guidance, although we updated to EUR 0.56 in -- I think it was in 3Q, we updated to EUR 0.56. In reality, we expected EUR 0.56, but in dataset, we have had little income from -- particularly from better margin in our data center operation and well, some income also from NRCs from the installation of machinery on behalf of our clients through remote hands agreements in our data center division.

The LTV stands at 28.9%, which is pretty low, but more interestingly, net debt-to-EBITDA stands at 9.0x. Of course, it is growing, but it is growing as we are spending in the construction of new units in our Data Center division. The NTA per share is EUR 15.36. And for the first time, we are very, very close in our share price to our NTA, which is incredible to see.

I mean, I'm really, really enjoying to see that when I shut on my computer, and I see the share price evolution, I am really humbled. The GAV like-for-like has gone up by 4.7%. But very importantly, with an EPRA net income yield of 4.6%, which is sound, because these days, improving NTA or improving GAV through asset revaluations is easy, but we have taken exactly the contrary way. I mean we have completely recalculated our prospects for particularly logistic pre-lets and part of the logistics division and we have decided to expand a little bit our yields in order to make sure that we repair the roof now that the sun is shining rather than doing it when the things start to get rough.

TSR, as commented, and leads us to propose dividend per share of EUR 0.44 for the year, which is slightly above the 80% threshold, but I think we have to share a little bit with our shareholders the good operating momentum of the company. In terms of EPS, we have, after careful reflection for the moment, we have taken the decision to continue to not capitalize interest expenses. We believe it is cleaner. We believe it reflects better the real operation of the company. And therefore, as a consequence of that, we are indicating for 2026, a relatively flat figure in terms of EPS and DPS. But we will, of course, endeavor to bid it if we can. It won't be easy because it is mainly attributable -- the reason why it's flat is mainly attributable to the fact that all the growth in top line is absorbed by more financial expenses as we continue basically building.

We continue building our inventory. And as a consequence, we continue employing our debt capacity. And this is, of course, raising the bar of our financial expenses. And for the moment, it is hitting in our top line growth. 2027 will be a different thing. I mean, in 2027, will be a year in which we will start seeing the first hints of what the DC division will bring in the future to this company and '28, '29 and '30 as commented on many other occasions, at least on the model, of course, you never know, but they look like a big party.

That is it. I mean I pass the floor to Ines Arellano who is going to comment on the different asset classes and Francisco Rivas will comment specifically on the Data Center Division.

Thank you, Ismael. So moving to what today represent 55% of our portfolio, offices. We've generated EUR 292 million of rents, and that is a 3.5% increase in like-for-like as commented by Ismael, very, very sound, with a very high release spread up 4.8%. It is true that if we were to take into account this one lease that we mentioned last year, it would have been 0.4%, but at least it's in the positive arena. The occupancy at 94.2% all-time high. Again, we'll watch very carefully how the evolution in Barcelona keeps ongoing, but we are confident that eventually this will be digested.

It's been a very healthy leasing activity market with more than 275,000 square meters contracted. And in terms of valuation, we see a 1.2% like-for-like increase with an implied gross yield of 4.9%, not reaching 5 yet, which as you know, it's always been the number that we thought should be the right one for office.

5.25%.

Okay. And a net initial yield of 4.2%, and this implies a 2 basis points yield expansion. And as said, the little momentum continues, as demonstrated in Slide 8 with five very good examples of standout leasing deals spread across not just CBD, but also key peripheral corridors, and they all have secured very high-profile tenants. You have three assets here that are still in the work-in-progress portfolio, meaning these are not in operations yet. But you also have two like Castellana 278 and Las Tablas where we've secured very high tenants, very high-quality tenants like a university and a bank.

Moving to Slide 9. We continue, again, to see a strong trend of reconversions. And we wanted to lay down what is the current stock of Madrid. You see a little bit of everything. So this number may seem a little bit big to you, depending on the source that you used to consider. We've taken the Belbex number -- this is not only made by pure office buildings. It's also taking into account the offices associated to industrial users, some residential buildings that are being used as offices as well and also administrative buildings.

What we see is that there's more than 1 million square meters expected to go back to their original residential use, because right now, as we stand, the highest and best use for a lot of these space is actually beds, beds, because this is both living, resi, hotels. And there is an additional 1.5 million square meters that could be reconverted again to these other uses out of the pure office building.

What are we doing? We have identified 7% of our stock in Madrid office, okay, not the whole stock, but just in Madrid whereby this doesn't mean that we're going to be selling the whole 7%. But we've identified 33,000 square meters that will be sold so that somebody else reconvert it plus another 27,000 square meters that we are going to suddenly refurbish or reconvert them for educational uses.

Moving to Slide 10. What we see is that -- well, we still believe that unique assets deserve to remain as offices. And this is a perfect example, Alfonso XI. There's a clear scarcity of good space, 10,000 square meter size buildings in prime CBD, and we are fortunate of having owning these unique assets, is right in the middle of Madrid, and we know that there are best-in-class tenants looking for space like this one. So we are going to refurbish this asset. We are actually refurbishing this asset, and the expected yield on CapEx will be around 9.6%.

So there's another example in Page 11. Again, super prime office building, Liberdade. As you know, this one we bought it on purpose to be converted into what it will soon be probably the best office building in the Lisbon market. And as of today, even if we have not started commercialization, we have fully let to a top luxury group, all the retail, the high street retail space.

Then we have Adequa. This is to show you that there's no only demand for pure prime CBD assets. Adequa is one of those examples where a tenant of ours that was willing to expand to grow in a campus, very, very close to Castellana has actually signed an agreement with us, a turnkey project. And so again, the yield on CapEx around this one is around 10%, 10.4%. And we will soon in '28 and '30, we will have these two buildings built up and completing what today is Campus Adequa.

And then finally, this is a jewel. This is a very small building, but a true jewel. and it's going to be even more valuable once Renazca project gets executed. As you know, it has been approved. And once it is executed, we know very well that a lot of tenants will be willing to pay very high rent for these unique assets, which for those who have visited Plaza Ruiz Picasso building is just next to it, you can actually monitor the works from that one.

Moving to logistics in Slide 15. GRI like-for-like has been positive despite the loss of a tenant in 48,000 square meter warehouse in [indiscernible] that had an impact of 3% in occupancy. The sound 5.8% Release Spread, together with an average CPI of around 2.5%, has helped to increase rents by 2.5 reaching EUR 86 million. Gross yield at 5.7%, slightly higher than the average yield of the portfolio 5.3%, and net initial yield at 5. The leasing activity has been strong with more than 440,000 square meters contracted compared to only 100,000 square meters in '24, while valuation uplift has been moderate being only 1.2% on a like-for-like basis.

This has been mainly driven by the increase in CapEx. Certainly more on future development, but a little bit as well on existing assets due to, for example, fire safety measures. In '25, we finished construction and delivered 21,000 square meters fully led to [indiscernible]. And we've also sold 73,000 square meters warehouse that was under refurbishment in Vitoria and have added a couple of projects to the committed pipeline, now amounting to 279,000 square meters.

Yield on CapEx for all these projects remain quite appealing at 13.2%. The noncommitted land bank has therefore reduced by 61,000 square meters outstanding at 183,000 square meters located mainly in Madrid and Barcelona.

If we move to shopping centers, well, this has been said already by Ismael. it's great performance in every KPI that you can look at, the GRI of EUR 133 million, it's an uplift of 4.7% like-for-like. It's a great combination of a very high Release Spread plus CPI. In terms of valuation, this EUR 2.1 billion portfolio has gone up by 2.9% with an implied gross yield of 6.4 and net initial yield of 5.7. And this portfolio, shopping center portfolio is shifting to adapt to market trends and customer needs, and we are seeing retailers demanding new formats, so fewer, but bigger and certainly better located. The synergies with logistics, they continue to be a reality, and this is value also for the largest storage spaces that they required and experience of our customers keep on being the main and main focus of everything that we do.

And in Slide 21, you have a few examples of new retailers leasing space in our assets, mainly focused on health and beauty and leisure/home entertainment.

And with no further delay, I pass the floor to Francisco who will explain where the future is coming from, the data centers.

Many thanks, Ines. Moving into the Data Center section, I would like to start by congratulating, Ismael did, our data center team and the vision for a fantastic 2025 year, which had a very strong workload and proved the excellent execution. Part of this effort, as you have seen, has been crystallized at the beginning of this year, 2026, with the signing of very significant contracts across our assets.

Turning now to the presentation on Page 24, we provide as always an overview of the two phases under operation and/or construction with updated figures. On the one hand, we present the results of Phase 1, which we will now refer as Ismael said, as assets in operation, where the 64 meg have been fully contracted. The originally 14.5% gross yield on cost shared with you 12 months ago has now increased to 15.8% with a stabilized GRI of EUR 97 million above the previous EUR 88 million reported 12 months ago.

Regarding Phase 2, which we will refer as work in progress WIP, we have been able to redensify the first two buildings in Lisbon moving from 36 meg to now 40 meg increasing the total size of Phase 2 from 246 meg to 254 meg as you have here in the presentation. And this has led as well to an update of both the total investment amount and expected stabilized GRI now at EUR 397 million, delivering a very attractive 14.4% gross yield on cost.

And in terms of commercialization, moving now to Page 25, we have successfully completed the letting of the three assets of this Phase I, following the signing of an 18-meg contract with a very well-known new cloud operating [indiscernible] and first time in our portfolio reaching the full occupancy of our assets in operation. And for those of you who are more curious about the technical aspects, 34 meg out of the 64 are air cooled while 30 meg are liquid cool. And by the type of specification we have it means that these 30 meg liquid cool are targeting above 70 KV per rack. On our experience right now, they are more in the 120 KV per rack, which shows that the type of technology they are using is the last of one of [ NVIDIA ].

On Page 26, we show how the rental income will ramp up on a yearly basis with EUR 31 million already received in terms of rents in 2025 and a forecast of EUR 66 million for 2026, resulting in a stabilized GRI as we mentioned before, of EUR 97 million in 2027. From a value creation perspective, Page 27 shows the breakdown of total costs incurred. The valuation already captured, although it's a little bit more limited in [indiscernible] in the signing of this new contract that the appraisal was not aware of and the expected additional value to be accrued if the value assumptions remain unchanged as we are disclosing in the footnote. So this EUR 291 million estimated value, we expect to be captured in the next valuations if those are retained.

Moving to Phase 2. On Page 28, we include a brief reminder of the commercialization status of our data center assets that we divided, as you know, in bookings, advanced negotiations and let or prelet. And with this in mind, in Page 29, we summarize the status of the different projects of Phase 2 with now a total capacity of 254 meg IT.

Going one by one, in Bilbao 2, what we call ARA II, the construction is progressing on schedule. After 14 months of execution, we have gained sufficient certainty to enter into prelet agreement as the ready-for-service dates that we show in the presentation, December 2026 are very, very certain. This is a highly complex deployment because we will coexist the deployment of the equipment that we have as landlords, but also the client equipment, which are largely based on a liquid cooling solution.

The kind is -- was already in our portfolio is very well, no new cloud operator focused on AI and the level of densities that the client is requesting allows us to know that they are using a state-of-the-art technology, as all of you know. The connection to the substation of this building 2 has been already completed with our first building, what we call ARA III and right now, we are just progressing with cabling of that -- of those that were created for our first asset there.

Regarding Bilbao ARA I, as we will show in the following slides, the construction has started at the end of last year, beginning with piling works, and we have maintained our estimated ready for service by the end of 2027.

Moving now to the center part of the page, in Lisbon Compos. At the end of 2025, we started the construction of the first two buildings following, believe it or not, 1.5 years of piling works. And please consider the Lisbon region is both flood-prone, as unfortunately, we have experienced some few weeks ago, but also is located in a seismic zone and which has required a significant soil preparation, reason why of this 1.5 years of previous works. And as an example, the piling works have reached approximately 35 meters in depth, just to avoid situations as recommended.

And thanks to this preparation, none of the works were affected by the heavy rains experienced in the region earlier this month. From a construction point of view, we have once again redensified the buildings, increasing capacity to 40 mg per building IP, benefiting from the insights gained from client discussions that we have held over the last months. In parallel, substation works have also started with a ready for service in all these first two buildings by December 2027.

In terms of leasing, we are in very good progress regarding the initiative that we will comment on the following slides, while keeping the buildings ready for the latest computing technologies in case the first option does not ultimately materialize.

Moving into the 2 Madrid projects. In [indiscernible] approval, what we call [Foreign Language] in Spain of the land, and we are in the final stage of securing the organization permits to begin on-site works, which will run simultaneously with the building construction. The ready-for-service is currently planned for the first half of 2029. Regarding [indiscernible] located, as you know, on the same street as [indiscernible] we obtained environmental assessment approval at the end of last year and right after demolition works are started and are going and the construction permit has been already requested just to make sure that when we finalize the demolition works, we can immediately start.

Given the previous timing experiences, we are still maintaining ready- for-service in the second half of 2029 although knowing that we have already power on site what in our naming we call power ready supplied, we have already entered in negotiations with several clients interested in this site precisely for the reason that power is already there.

Regarding CapEx commitment planning for Phase II and now I'm moving into Page 30. 2025 has been a record year for the company in terms of CapEx commitments. And this is significant because you need to know that a significant portion of this CapEx relates to equipment, which typically has shorter execution timelines once we commission it on site.

Commitments have reached EUR 987 million versus the previously reported EUR 836 million, but also the next two years looks very strong in terms of CapEx commitments. So in the absence of any capital event, the company expects to tap the debt market, as Ismael was mentioning before, again, mainly during the second half of the year, once the equity that we raised in 2024 is fully deployed and at work.

The target stabilized GRI is planned for 2030 as mentioned in the last quarter presentation, at EUR 387 million, delivering a 14.4% stabilized gross yield on cost. All these figures are reflected in Page 31, 32 and 33, which includes images showing construction progress in both Bilbao, Arasur and Lisbon campuses. And for those attending to our Capital Markets Day in the 9th and 10th of March, you will have the opportunity to see these projects at a human scale, which I think I can tell you that is pretty impressive.

Finally, on Page 34, we would like to share the status of our EU Gigafactory initiative. As previously mentioned in the last year call, timelines of this initiative have experienced significant delays and based upon our latest information, the work resolution is now expected before year-end 2026. As we have stated several times, our Phase 2 projects were not conditional upon obtaining the EU Gigafactory award. In fact, this initiative was not even under consideration when we launched Phase 2 and we have always maintained discussions with traditional clients, both hyperscalers and new class operators in line with our original business plan. Nevertheless, as we always say, we've tried to be constructive shareholders -- stakeholders and good citizens, and we remain prepared for initiatives that could benefit the regions where we operate, particularly the Iberian Peninsula and we strong believe we continue believing that bringing the EU Gigafactory status to our region will create a lot of value, whether we are -- whether or not we are directly involved.

As you may recall, we have set most of our capacity in Arasur, Capacity 1, and the full capacity of [indiscernible] for this initiative in Spain and the first two buildings for our Lisbon campuses of the Portuguese initiative. And we were always betting an Iberian consortium, so both Spain and Portugal, something that looks like were well received because most of the countries are doing exactly the same in other parts of Europe and offering several locations per country to allow synchronized computing and across the campuses.

Situation as of today is that the Spanish government has shown a preference for another Spanish project. And thereby, they have released the capacity that we have reserved for that initiative in ARA II and [indiscernible] I, which, as you have seen, are both now fully let as following the -- what we have always commented to have one option and the other.

With regards to ARA I, we are in advance negotiation with a particular client, and those negotiations, of course, will be more intensified and documented once the ready-for-service dates are becoming more and more and more closer. Regarding our Lisbon Campos, we remain committed to this EU initiative, which is now why we are moving forward with the first two buildings in connection with the Portuguese proposal. And once again, as we approach ready-for-service dates, the number of clients inquiring about availability continues to grow. For this reason, we will welcome clarity from the EU in terms of the timing because as soon as we are approaching and approaching delivery times, normally more clients are interested and we would want to have to take a decision there.

And now Ismael will close this presentation with the closing remarks and outlook before we enter into Q&A.

Okay. Francisco, thank you. Well, on Page 36, closing remarks and outlook. Everything which is written here is pretty evident. So I'm not going to torture you with any more bulls***. The only thing that I will say is that the idea is to move in terms of lets and pre-lets from the current 112 to as close as possible to 100 megawatts in data centers. And this could be achieved through one of several combinations of facts.

I mean, more normally, it will be through the documentation of the Lisbon lease which could come in the form of formalization of the EU Gigafactory program or otherwise, through an alternative route. I mean we have been lately adapting our -- the design of our campus there to the specific requirements of a certain client. You must have noticed that the total capacity has increased by 8 megawatts.

Well, this came at the cost of 12 additional million in construction cost that I believe makes sense. And now the white rooms conform to the specifications of concrete SOQ of a concrete client. But more importantly, are perfectly flexible to adapt to the requirements of either other neo hyperscalers or neo cloud clients. So with that, I believe the 2026 should be the year of Lisbon. We will work -- we will endeavor to achieve that target.

And that's it, dividend and FFO, we have already commented on it. And I believe the best thing we can do is move into Q&A so that you can make your questions in the line. And we will do our best to be able to reply to your questions.

[Operator Instructions] The first question comes from the line of Marios from Bernstein.

I've got a couple of questions from my side. So firstly, on the lease-up and the pre-letting of your data center pipeline. I think you mentioned that Bilbao building 2 was pre-let to existing neo cloud tenant and that Madrid say, was to a new neo cloud operator. So can you comment on the occupier type you're having discussions with across Phase 2 and whether we should anticipate a diversification of your tenant base across that phase?

Okay. Look, Marios, basically the leasing of Bilbao 02 has been closed with an existing client of ours. The one in Madrid, however, was a different one. At present, the diversification of our tenant roster is perfectly distributable. You can imagine with only 112 megawatts let, that I will beg you all to wait till we are 1 gigawatt in operation in order to calculate the real diversification of our portfolio, because have you calculated our diversification in logistics in 2014, you will have come to the -- this main conclusion that it was 72% DHL. But now no client -- individual client represents more than 10% of our rent.

So we need to continue building if we want to continue leasing. What I can tell you, talking about Phase 2 and preliminary conversations for Phase 3 is that we are talking to every kind of clients you can imagine. You love hyperscalers. We are talking to all the hyperscalers except one, which is a self-builder. But the other three, we are talking to them. And we are talking to no less than 5 Tier 1 neo clouds alike. So sooner or later, we will end up closing an agreement with a big hyperscalers and you all will breathe with tranquility. But I need to remind you that closing deals with hyperscalers is not an easy thing. It comes at a cost, because they are the fastest cowboy in town. And as such, they have a big pistol. And you have to be very, very careful because that pistol can kill you.

So it's big organizations, complicated organizations, you can engage in very fruitful and healthy conversations with the infrastructure guys, with the cable guys, with the first-line guys, but when you move into middle office and back office, it can be complicated. And at times, it is as frustrating as reaching contractual status and then stopping conversations because the conditions can turn abusive very quickly. So we will end up closing deals or reaching agreements with hyperscalers, but probably already in Phase 2 and more surely in Phase 3, but you need to bear with us for a second because we also need to defend our financials, which are your financials.

So let's not be childish on this, and let's not -- let's be careful about what we wish for because closing an agreement with one of these is very easy. However, the fact that this agreement is good is a very different thing, okay? So we have to continue working in that respect. What I can tell you is that we are now technically qualified with 3 out of the 4 hyperscalers, so at least we know that our facilities conform to their technical specifications. And sooner or later, we will end up closing.

The next question comes from the line of [ Veronique from Kampen ].

Maybe first on just the other business lines. I was hoping could you give some additional color on what you expect in terms of occupancy rate, any big departure planned in '26, especially for offices and logistics? So your view towards '26 for those business lines?

Okay. Well, in offices, the idea is to remain relatively flat. So we have finished this year at 94.2%. The idea is to finish this year between 93% and 94%, which is already a significant effort because you have to take into account that in April, we are losing 11,000 square meters from Meta in Barcelona in the middle of '22 at.

Yes, in a building, which is a winner, clearly winner in the market, but replacing 11,000 square meters in today's market in Barcelona is not an easy task. So we have to be prudent, taking into account the situation of the market there. In logistics, our idea is to improve a little bit the occupancy or compared to the 96.4% we have. It's quite binary because it depends a lot on whether we are able to lease one big shed in the Henares corridor or not. If we lease it up, then it's going to be very close to 100% again.

But let's not plan for that, at least for the moment, we will inform in due time. And then in shopping centers, we are going to remain relatively flat, because it's almost impossible to go higher. I mean, yes, I mean, you can go 20 basis points higher or that it is complicated to go significantly higher. In shopping centers, in fact, what we are trying to do now is to yield manage a little bit our portfolio, because we are the cheapest shopping center owner in Iberia in terms of OCR. And that is always a very interesting position to start from, and we will yield manage a little bit our shopping centers, although the behavior is impeccable for the moment.

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

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

Okay. And regarding the growth yield on cost, it is simply a reflection of the fact that the market is helping us. I mean, yes, of course, I mean, there are -- the teams are doing a fantastic job, but we are operating in a market which is quite favorable at present. So this is why we are improving -- if you look at our forecast in data centers, both in terms of cost per megawatt and delivery times, we have been absolutely bang on compared to the numbers we gave you.

So our construction cost has been exactly the one we forecasted. Even though you might notice that in Phase 2 is higher than in Phase 1, the only reason is that in Phase 2, we had to buy 2 of the 6 plots of our data centers. And also Phase 2 is fully liquid, while in Phase 1, we had some air, okay? So that is the reason why we have a higher cost.

Also Lisbon, as commented by Frank, is a slightly more costly construction to make because of the strict seismic regulations similar to Japan or California. We expect -- I mean, the -- we have already raised by 20 basis points the expected yield on cost on Phase 2. let's see how the leases come up. We might be able to bid it or not. I mean, that we better say than sorry. I mean we prefer to underestimate a little bit rather than being absolutely bullish, particularly when there is so much to be done before inaugurating those assets. I mean the RFSs other than Bilbao, Arasur 2 are expected for the end of '27. And between now and the end of '27, there is a lot to see. So let's continue -- let's remain prudent.

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

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

So the next question comes from the line of Florent Laroche from ODDO.

So actually, I would have just one question on data centers. So we can see that -- so you have made a lot of progress on Phase II. So congratulations, but we can see that you have also a lot of work to do before completing Phase II. Why is it today the right timing to present us the Phase III in 2 or 3 weeks? And why it is the right timing maybe to start to launch this Phase III in terms of risk?

Well, the reason is twofold. On one side, we have a number of internal definitions, and we report as we reach the milestones of those specific definitions. But in my mind, I see Phase 2 significantly derisked. Let's leave it that way. Second, power land is a scarce asset in Europe. I mean everyone is dying to get powered land. We are lucky enough to have a lot of power land in our ownership, because we started asking for power in 2021 and '22 when nobody else was asking for that.

So I think it is in the best interest of all of our shareholders that we make full use of that powered land. And then the future only God knows, but at least make use of everything we currently have because we continue enjoying very interesting yields on cost. And what is more important, we continue commercializing in clear market. At the beginning, when we explained this new venture of data centers to all of you, our prediction is that we will commercialize maybe Phase 1 in clear market, there will be no competition.

But certainly, we were expecting competition for Phase 2. The truth is that the market is full of noise, full of bull****, but in reality, very few people are really building or building to the exact specifications of AI, and therefore, very few can really meet the requirements of AI clients. And to our surprise, we are commercializing Phase 2 almost on a clear market basis. The next reasoning is that if we go fast with Phase 3, we could achieve a very similar result. So basically, I believe it will be extremely unfair to our shareholders not to move. We know it's a lot of complication. We know it's a lot of construction yards. We have recently incorporated one executive just for the control of our works.

But I think the best thing we can do if we want to be responsible managers is to move on and continue developing capacity because we are in a situation in the market which is as favorable as you can probably think.

The next question comes from the line of Celine from Barclays.

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

Okay. Well, starting by the easiest, which is the FFO gross to net. Well, as commented by Ines, we have basically improved compared to our projections, because we had a better margin. And talking about margin, the margin we expected for this year, that was not the stabilized margin, okay? It was not 70%. It was well below 70%. That was the margin we expected for this year that we have beaten that margin a little bit because we have been able to operate more efficiently our data centers. And then we have, as commented before, we have also benefited from a number of little tweaks and things that we have been doing on behalf of our clients.

Many of our clients do not have a super big established presence in Europe. And as such, they rely on our own engineers in order to install equipment or make offices fit-outs, do improvements to their equipment once installed. I mean we are helping them to do that, and they are paying us for that service. And as a consequence, we have improved a little bit the gross to net margin in our data centers, but not to a point in which we are in a position to reforecast the 70% stabilized, which we are -- we will very soon reach. But we cannot reforecast that because, first, 70% is already a very good gross to net margin, particularly compared to what our peers in the U.S. are getting. And second, because we still do not have all the information in order to be able to reforecast that. And then retail...

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

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

Well, basically, we are very happy with the performance of our retail. We have in a number of occasions commented with you that being a listed company, sometimes you cannot be too contrarian to the market because if we had, we would have loved to bid for 1 or 2 assets in the past 3, 4 years, but we have been being -- we would have been slaughtered in a public place, I mean had we done it.

So now there is a retail portfolio available in the market that we have analyzed in depth in a number of occasions already. It was very difficult to reach an agreement with the sellers because it was a relatively convoluted situation. But now it's out there. What I can tell you is that the assets are high quality. They will make a perfect fit with ours. But I can also tell you that this will be a capital recycling exercise. So if you are afraid about us using one penny out of our data center spending capacity, this is not the case.

I mean if we are to bid for this portfolio, which we will only do if we can achieve a positive capital recycling figure, I mean if the capital recycling disappears, we will not bid. And we are not going to participate in an investment banking auction. So we will do our best. We have a number of pros and cons. Our main con is that, of course, we don't control the French connection. Our main pro is that the Spanish staff, we know them very well. They are colleagues in the market and they will be probably very happy to join the family.

So we will see what comes out of that process. But if one day, we end up bidding for that and we are successful, what I can assure you is that we will rotate internal capital, try to sharpen the pencil a little bit in terms of ROA, I mean, try to obtain a positive print, positive arbitrage in ROA and make sure that the data center effort is not even disturbed by this acquisition.

Remember, there is a big hype in the market about resi transformation, et cetera. We have a number of levers that we could action in order to make sure that we can rotate capital in an efficient way, okay?

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

Yes. That is...

Okay, that is a big amount.

Yes.

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

I have 3, please. First on the recent [indiscernible] rent. So it was clearly above your expectations. I think correct me if I'm wrong, but it was around EUR 140,000 more or less per megawatt month. So I know it is Madrid, but how should we interpret your embedded 130 assumption for the entire Phase 2 because it seems a bit prudent probably to me. Also on the contract terms of the Bilbao 2 and Hefata, I don't know if there were any material changes to duration or escalator structures compared to previous agreements. And then last, you know that the Spanish grid operator, and also several Spanish utilities have recently announced increased CapEx plans for the power network. So I would like to know your view on this and whether you believe or not that these investment plans will meaningfully alleviate grid congestion and improve the power availability in Spain or not?

Thank you, Fernando. Well, first, on the price of Hefata 2, we are not going to be very specific because it's our client, and of course, the terms of engagement of our contracts have to remain secret. But it is true that in the global underwriting of Phase 2, we were relatively conservative at 118.5% on average, and we are beating those figures.

But it's always good to remain prudent because there could be deviations in course. There could be many things, equipment that could vary. So we have to be -- we have to remain prudent, but it's true that in that particular contract, it's been better than expected.

And then in terms of contract, basically the same that we have been doing up to now in the region of 10 years and with fixed escalators, which are now slightly higher because the 10-year inflation swap is also higher. So we are happy with the contract to all terms. Remember that one of the reasons among many that why we moved into data centers is because they were able to improve our WAULT once we sold the 3 portfolio. That, of course, was a secret weapon. I mean it was clearly improving our average WAULT across the portfolio.

One of the reasons why we moved into data centers was because the WAULT were pretty attractive. They remain so. And in fact, not only that remain, so the clients are now wanting longer terms if they can, in exchange for rent because they are trying to lock up IT capacity in a market which is starved of IT capacity.

There is very few, very few places where you can land 20, 30 megawatts of AI capable equipment. It's -- there are not so many places in the world. Colocation is a different thing. But AI is very special, and there are not so many places in the world where you can do it. And one thing also that the clients like a lot and why they are ready to compromise for longer terms is expansion capacity. I think it was a good vision in our side to bet from the very beginning on super large plots with a lot of energy in which we could grow with the client doing one building, another building, a third building and a fourth building.

That has been probably a very good decision and clients like it because once they send their experts, their engineers to a certain location, they achieve significant synergies if they can operate a more significant capacity than simply just one data center and move to another place within the country. So this is the situation.

And regarding [indiscernible] and the increased CapEx, it's a much welcome piece of news. Of course, our stance with the regulator has always been that they need to improve the grid. The Spanish grid is, believe it or not, because all of you are affected by the 28th of April blackout last year, but that was a different thing and happened for different reasons.

That the Spanish grid is super high quality. It is very well designed, very well duplicated and wet and is very robust. Of course, it will need investment in order to adapt to the new demand because at present, we are coming from a world in which the consumption was going down year after year because many households were incorporating self-generation. And as such, the consumption was going down and down and down.

But we are in front of an era in which consumption contrary to some of the official estimates that were made a long time ago and probably wrong with the new circumstances, consumption will go up and will go up very significantly, if only because of the effect of the data center industry. As a consequence, the country has to make an effort in terms of bringing together generation and consumption.

So that means investing in distribution and transport. And any news in that respect are very much welcome. The alternative is to allow and probably could be a very interesting complement, the alternative will be to allow private grids. But that is always complicated in Europe. As you know, it's the world -- the word private is not very much allowed in Europe. And private grids are only a reality for very small distances. I mean when you are bringing a certain generation mainly from renewable sources into a certain point that bigger grids are not that common in Europe.

So very happy to see that they are starting to move. The only problem is the speed of movement, which, as you know, is a problem always with the public sector. For the moment, the only entry door we have found to the grid is through agreements with renewable producers. And this is what we are doing. I mean we are engaged in a number of negotiations with a number of renewable generators and you will be keeping abreast of our evolution over the coming months/years because it is the only practical way to access the grid as of today.

I mean one day, there will be a bigger grid and electricity eventually will be widely available. But if you want to continue honoring your demand request from your clients, the only way is through agreements with renewable generators.

The next question comes from the line of Stephanie Dossmann from Jefferies.

I would have two questions. The first one regarding data centers and the appraisal values. I understand that appraisers recognize the value creation closer to the time of the lease signing. But could you say how much of Phase 2 is currently factored into the appraisal values?

So what the appraisers are doing is they're just incorporating into their valuation the assets that are under construction. So once we start construction, then those assets come into the perimeter. You have seen June 2025 that we have incorporated several assets, mainly ARA II and Lisbon 1 because they have already started construction. And then in December 2025, we have incorporated -- we started construction as disclosed before in ARA I and Lisbon 2, which means that the appraisal takes that into the appraisal.

The rest of the power land that we have is not being -- so it's hold at cost. And only when we start construction, then is when we -- when the appraisal enters into that valuation. From a valuation point of view, then you need to differentiate between the assets which are under operation and the assets that are considered as WIP. In the cases of assets in operation is exactly what like an office building or shopping center or logistics that we have.

So they do normally a DSF of 10 years. And that's the reason why they arrive at this value. And regarding WIP, as you may remember in logistics, appraisers tend to wait until the very last moment when the asset is completed and you have a tenant to reappraise the asset and then we're holding at cost the different development. But also, you need to be aware that those type of exercises normally were carried out over a period of between 9 months and 15 months only because the construction of logistics is much, much quicker. In the case of a data center, it's different. First one is, first, the land that you hold at cost already just because you are starting a construction there. It means that this power land all of a sudden becomes more -- becomes a reality first. And second, you are incurring a lot of cost and approaching pre-lets over the period of the 2 years that normally 2.5 years that takes us to build this type of assets. So I would say that the value is little by little absorbed until delivery times. Of course, the fact that we have pre-lets or not pre-lets of course, give more certainty to the projects, but this is how they are normally approaching it.

Stephanie, just to add to what Francisco commented, it is very important for you to know that the 4 land plots that are -- that have been included in the scope of work for the appraisers, they were on land that belong to us. So just by putting the market value, which is powered land and not raw land, they were sitting in our balance sheet at almost nothing, just by consider them as powered land that it's a significant uplift on a relative basis, of course, right? So Phase 2, as Frank said, the first thing to know is or the first thing to bear in mind is how that land -- the market value of that land stands.

In our case for what we had before, is certainly an uplift, not -- it is not the same for the land that we buy, of course, because that's the market value. And then as the different milestones of CapEx keep on going and as you approach the cash flow, you will get more value crystallized. But for this 4 particular projects, there's obviously been an uplift because they're sitting in our balance sheet for long at almost 0.

All right. And my second question relates to more traditional business. The office market in Barcelona. You said it is softer, of course. I was wondering what you expect on the midterm. I mean I understand you expect no oversupply shortly, but will the demand be strong enough to see higher Release Spread going forward? And what's your view generally speaking on the Barcelona office market?

Okay. Look, the Barcelona office market is in a digestion crisis. 320,000 square meters without client joined the market at the end of '24 and that hit is still being felt across the market. So this is taking a hit on the tension, the demand tension in the 22 ARA, more noticeable in occupancy than for the movement in rents but clearly noticeable.

Our expectation in a normal world is that we had positive Release Spread overall in Barcelona this year, not brilliant, 1.7%, but still positive. So rents are holding for the moment. The market has corrected itself, as you can expect. So no new construction starts have happened since 2024. And in normal circumstances, unless the Afghanistan, Pakistan war expands to Iran, Israel and U.S., Russia, normally, within 18 to 24 months, Barcelona should be able to absorb the excess offer and come back to a certain normality.

That would be what we would normally expect. Could be a little bit more, could be a little bit less, but Barcelona remains a strong small city, I mean, very specialized in certain submarkets within offices. A little bit of pharma, a little bit of gaming and tech. And as a consequence, we expect the city to continue performing robustly once they have been able to absorb this little blip caused by a situation of oversupply and touristification of the office development.

And the final question comes from the line of [indiscernible].

I have a couple of questions, if I may. One is in relation to your guidance for 2026. I'm trying to understand what assumptions are going in there in terms of additional debt funding. I think you said that in the second half, you're going to raise some more debt. In terms of share count, if you assume any change in that? And also in terms of the logistics, whether you assume that, that big asset that has been vacated by the client is going to be lifted up at any point during the year. So that's my first question.

Okay, Daniela. Look, regarding the guidance, the guidance stems out of our modeling of the year. We believe that the top line, the income could go up by around EUR 40 million easily, but it's going to be eaten by bigger financial expenses mainly. Why is that? Because there will be two events during the year. Money is fungible, so EUR 800 million will disappear when we have to repay our bond.

And second, the speed at which we are spending or investing money in CapEx because of our Phase 2 deployment is significant. Already in 2025, we exceeded our original budget. I say ever, I believe the original budget was like EUR 830 million and we ended up spending like EUR 980 million. So we have spent more money in CapEx commitments, okay, in the year than -- commitment, meaning when we commission a certain equipment, we pay between 20% and 40% upfront, and then we pay the rest upon the reception of the equipment.

However, that money for us becomes untouchable because we need to phase that payment if and when the equipment is received. So in our models, this is what we are seeing. Whether that could be achieved, I mean if we are quick in leasing up some logistic gaps, we should be able to improve it. They wouldn't move that much the needle because if you take into account that logistics account for around EUR 84 million of our rents and the rents expected for this year are going to be in the region of EUR 600 million, it's not going to move the needle that much.

What share count considered for the guidance, same share count. And that is, of course, a very tricky question, I know, because you are already assuming that there is going to be capital issuance at some point. But this is -- I mean, we are talking apples-to-apples. The 58 is with the same share count we have at present.

Second question, if I may. And that's on Phase 3. I wonder whether there's been any investment, even minimal infrastructure preparation in Lisbon. If I'm correct, Lisbon is Part 1 of your Phase 3. And given what you mentioned about the earthquake risk and all that kind of stuff. I wonder whether there's already been a little bit of investment in infrastructure into that and related to also Phase 3, what would be the earliest date that you would like to start ordering equipment or start properly deploying into Phase 3?

Okay. Regarding the commissioning of equipment for Phase 3, et cetera, we will inform in detail about Phase 3 on the Capital Markets Day. But you will see what is basically the cash flow schedule in -- for Phase 3, and you will see it significantly overlaps with Phase 2.

Regarding whether we have already advanced infra investments for Phase 3, yes. I mean, in Lisbon, we have been preparing the ground for plots 3, 4, 5, and we might start precharging land for plots 6 and 7. But we are talking about relatively humble investments. I mean we are not talking about significant things. Likewise, we have spent money in the licensing of a number of projects, including, for example, the one in [indiscernible] where we are already requested construction license, and we have already applied for specific planning status by the autonomous region.

We are building up electric capacity in anticipation of Phase 3. For example, the whole purpose of the Solaria agreement in November was that, was to illuminate plots 5 -- 4 and 5 of Arasur and some of the other agreements that we might be reaching in or have reached in as we speak, are also related one way or another to Phase 3 or pipeline. But we will inform about all that in the Capital Markets Day.

The only thing that is important for you to keep in mind is that Phase 3 will be defined with everything that is being licensed and has power. So it will not include any pie in the sky or talking about things in which we could get the electricity, et cetera. We will be very specific about that on the Capital Markets Day.

Thank you very much. There are no further questions. Just a quick reminder, many of you already know, but we'll be hosting our Capital Markets Day in Bilbao the following 9th and 10th of March. It won't be broadcasted. It will be recorded and then uploaded into our website. But all of our material will be published on our website that morning, the 10th of March. So hopefully, all of you can make it so you get to enjoy a nice wine. And you know where we are in case you have any other questions and have an excellent weekend.

Good evening, everyone. Thank you for joining MERLIN's 9M25 trading update. As we always do on quarterly results, our CEO, Ismael Clemente, will briefly walk you through the main highlights of the period, and we will then open the line for Q&A.

[Operator Instructions] With no further delay, I pass the floor to Ismael. Thank you.

Thank you, Ines. Welcome to the 9 months 2025 results presentation by MERLIN Properties. The quarter from 30th of June to 30th of September has been pretty productive for the company. Company has performed like a Swiss clock, particularly in the traditional asset classes.

The evolution of gross rents like-for-like has been plus 3.4% with relatively neutral variation in occupancy. In fact, we have lost approximately 10 basis points. 6.4% FFO per share year-on-year as a result of a better contribution to the margins of the data center division and a 5.7% increase in the NTA per share year-on-year, which together with the dividend takes the theoretical TSR to plus 8.4% in the period.

The activity in Offices, Logistics and Shopping Centers has been strong, as commented, with more than 700,000 square meters transactions during the first 9 months of the year. The FFO increased 6.4%. This is despite higher financial expenses. Please take into account that the bond issuance in our budget was forecast for the end of October, and we ended up doing it in the last week of August. That means an excess of cash, not so well remunerated in cash at banks, but slightly higher financial costs, which, of course, erode part of our margins.

The occupancy remains very, very high, 95.5%, and what is important, remarkably stable. I mean there are ups and downs, of course. Now Logistics is going a little bit down, but Shopping Centers are going a little bit up. But the end result is that the overall occupancy of the company is very, very stable.

In terms of Data Centers, the Mega Plan continue deploying very successfully. The European Union is playing its usual role. So the firm-up submission that was originally earmarked for the end of October has been postponed to December. And the decision-making, which initially was end of December, is now going to be end of April.

So the European Union is approximately 4 months delayed for now. And that has wiped out part of the competitive advantage of participating in the EU Gigafactory program that was basically to bring forward approximately 1 year the execution of Phase 3.

I mean we have wasted a little bit of time. I mean we have netted off 4 months out of the 12 that we had in mind that would eventually benefit the company in terms of bringing forward Phase 3.

The good thing, I mean, the positive of the Gigafactory program is that, if selected, 180 megawatts of Phase 2 will be let at once. That is, of course, super important for the company because it will significantly derisk Phase 2. Out of 246, 180 will be gone in 1 second. However, with the delays, we have decided to start sounding the market for firm-ups.

I mean we don't want to depend on the EU Gigafactory program because it's a little bit too complicated. It's not probably our ecosystem. I mean we are a private company, and it's complicated to swim in that ocean full of sharks.

And so we are targeting only 48 megawatts by end of April pre-commercialized for Phase 2, which is more than we anticipated. 20 of those are now already in an advanced phase of documentation.

And the other 28 for the moment is on ROFO that we will try to document between now and April that will correspond to the full capacity of the Bilbao-Arasur building #2. And then we will move into Bilbao-Arasur building #1. And we have just started also due diligencing the lease loan facilities for just another client.

The pros and cons of the European Union program is that, as a clear con, we have restricted commercialization to only European names. So the final, let's say, client of computing has to be European. And as you can imagine, this is narrowing a little bit the scope of our commercialization efforts.

So the good thing is that if everything goes well, part of the offtake will be done by the European Union. However, we are starting to feel that if we simply lift the restriction, we will be able to commercialize without the help of the European Union. It's probably too complicated for us.

The very important because I know some of you believe that the CapEx plan for this year was stringent. The CapEx commitments for 2025 are not only well on track, will probably be exceeded.

I mean, depending on just one thing that we need to do during the month of December, we believe we will exceed the CapEx commitments that were scheduled for 2025. So the deployment of the Phase 2 of Data Centers is well on track. We haven't valued the assets in the period. So the NTA per share is virtually the same we used to have with the generation of cash in the period.

And in terms of business performance, Offices have achieved a like-for-like year-on-year of 3.8%, which is very, very interesting. The release spread cosmetically looks like 0.2% owing to the Tecnicas Reunidas deal we did at the beginning of the year. But in the absence of that deal, it is 5.0%.

So the thesis that we have commented with all of you in some occasions about the acceleration of rents in Madrid as a consequence of the restructuring of stock owing to the resi reconversion, let's say, wave, it's clearly proving to be right. In logistics, the like-for-like is only 1.7%, but you might notice that the release spread is 5.7%.

So the only reason why the like-for-like is lower is because we have lost 200 bps of occupancy. But if and when we start recovering occupancy, the like-for-like will start recovering because the prospective increase of rents, which is evidenced on the release spread is -- continues to be very, very sound.

And Shopping Centers, it's been a surprising quarter with a very interesting evolution of sales and footfall figures. The like-for-like is 3.5%, but the lease spread is 4.2%, which is remarkable, given also that we have recently increased a little bit the stock as a consequence of the inauguration of the extension of Marineda in La Coruna.

So overall occupancy is 95.5%, slightly worse than 30th of June, but better than the same period last year. And basically, the performance in all asset classes is immaculate. I mean the company is really, really doing a very good job in all the asset classes.

And without further extension of the explanation, I will open the floor for Q&A because I'm sure given what has happened today in the market, you will have lots of questions regarding many aspects of the life of the company, including very probably Data Centers, which, by the way, is one of the things in which the company is not having any problems.

But okay, let's open the floor for Q&A and happy to take your questions. And Ines and Fran will be today a little bit more active than in other calls because I am not physically with them in the Madrid office. I am at my hometown, at my little village, but we -- I have had a personal circumstance, sad one, that keeps me here. So I am attending the call on a remote basis.

So eventually, Ines and Fran will take today a little bit more protagonism on the answer to your questions, but I will be here, and you can also address questions, particularly to me if you so wish.

Thank you very much, Ismael. So we have the first question coming from the line of Callum Marley from Kolytics.

I've got a few. Just to begin with, can you clarify that the comments you made now on Phase 3 being delayed for 4 months and stating that it's time wasted, what's the strategy here going forward? Are you going to try and pre-lease those 180 megawatts of the 426 in the upsizing pipeline? Just to get better clarity there.

Okay. Look, the waste of time is a little bit that we have devoted too much time to the European Union Gigafactory program. We are now still trying to build consensus around the creation of a single Iberian consortium, which basically will be the result of us plus another private consortium in Spain plus the public consortium of Spain plus the public consortium of Portugal.

So we are trying to put together four consortiums in one. And this is proving to be extremely stressful, very complicated, strong interest, lots of politics, and we are not very good at that. So we are a little bit losing our patience, because at the end, if we lift the restriction on European Union commercialization, eventually, we can achieve the same result with much less stress.

So this is simply what I meant when I said wasting our time, no more than that. Because if you look at the CapEx execution, we are not delayed. We are well on track.

The only other delay that we are commenting in this call today is the prospective delay we are fearing in two of the Madrid projects, Tres Cantos and Getafe, as a consequence of the fact that we have been requested a double environmental assessment in Getafe, one for demolition, one for construction, however stupid it looks. And in Tres Cantos, one for urbanization works, one for construction.

So that duplicity of environmental assessments creates a time lag that results in a time delay in the execution of the project, which is between 6 months and 1 year. And that means it moves the tail end of the cash flows of Phase 2, 1 year further, from 2029 to 2030 to attain 100% of the cash flow of Phase 2.

However, you might notice that we have been doing some preparation works for Phase 3. We will proceed to a definition of the scope of Phase 3 that will be communicated to market in the February conference call pertaining to full year 2025 results, okay?

And in that definition of Phase 3, you will see that some of the most immediate projects of Phase 3 will eventually overlap with the tail end of Phase 2. So paradoxically enough, some of the early projects of Phase 3 will start kicking in terms of cash flow before we finish with the last tail end of projects of Phase 2.

It's part of life. I mean we are developing and developing is always complex, particularly in Western European societies, which are full of administrative rules and bulls***. So it's complicated. You have to understand that it is complicated sometimes to deal with the public administration, okay? So this is what I meant, okay?

That's clear. Can I just confirm if there's any more environmental reviews for the other data centers under construction in Phase 2? Or is it just those two Madrid sites?

In Phase 2, we are clear on all environmental studies, including the latest one we have received is Arasur building #1. So we are clear in Portugal in full. We are clear in the Basque Country for Arasur 2 and Arasur 1, which is the next two buildings we are doing.

So it's only in Getafe and Tres Cantos where we are clear in the first environmental assessment, but we need to do a second because it's like that in the legislation. It's however stupid it might look to you because you are a private person and you try to do things in life with common sense that however stupid it might look, it is how it is. So we need to abide by the rules and do everything by the book, okay? So that is for Phase 2.

And what we are doing regarding, let's say, the nonmoney-related activities of Phase 3, what we are trying to do now is advancing some of the red tape -- administrative red tape of Phase 3, things which do not require cash flow or do not require a lot of cash flow. We are already advancing that trying to anticipate the possibility of further delays when we start executing Phase 3. So it's part of life, okay?

That's clear. Two more questions. One on the Gigafactory and one big picture. On the initiative, there doesn't seem to be anything concrete from the EU about how the public partnerships might work.

Just hypothetically, could you clarify if you were to be successful on your submission, how the partnership might work? So let's say, the partnership covers the 180 megawatts that you submit. And if we assume that costs, I don't know, EUR 1.8 billion to build, how much would the EU contribute to this?

Very good question. Look, the modality that we have chosen in the EU submission, I mean, after talking to the EU, there are two ways of obtaining the help of the European Union. One is via CapEx and the other is via offtaking, and we have chosen via offtaking. That means that 35% of the offtaking is guaranteed by the European Union in JV with the local government.

So what this means basically is that out of the 180, okay, 60 megawatts will be offtaken by the European Union and the local government, be it Spain, be it Portugal, depending on which data center we are talking about. And the rest, it is our responsibility to commercialize with final clients, for which we have already lined up two GPU operators together with their corresponding end clients, which in all cases are European.

So if the EU Gigafactory program goes forward or if we are selected, the 180 megawatts are commercialized, 60 as a consequence of the intervention of the EU, the other 120 as a consequence of our own bilateral agreements with our own clients, okay?

The only nuance is that this is subject to being selected. What we are trying to do now is obtaining the same back-to-back agreements with the same clients irrespective of EU, okay? And in that regard, we expect to have 48 megawatts at least committed for April. So out of the 120 that we are doing on our side, a little less than 50% of that.

And we will continue working. Remember, we are in the initial phases of construction. So our perspective of having pre-lets at this moment in construction was zero, okay?

So we are trying to celebrate, to enter into pre-lets to cover that capacity irrespective of the outcome of the EU Gigafactory program because it might well be that the EU Gigafactory program is delayed again to the summer or to end of the year or it might also happen that the EU Gigafactory program ends up modified.

For example, moving 1 year further the termination of the facilities, which is at present our main competitive advantage. It is very clear that we are not the poster child of any member state, but our competitive advantage is that we do have the IT capacity, which no one else has at present.

So if the contest rules are modified by European Union, we might all of a sudden lose that competitive advantage because if instead of deciding that the gigafactories have to be ready by '27, '28, they decide that they can be ready by '29, '30, eventually, many other people will be able to, let's say, comply with that prerequisite.

And as a consequence, we will lose our main competitive advantage because clearly, our competitive advantage is not lobby capacity, is not, let's say, soft influence capacity in -- with political powers.

That's clear. And just one more big picture and to get your thoughts. In the U.S., we see Sam Altman and his big tech peers investing trillions of dollars into data centers and AI on the basis that maybe in 10 years' time, there's a significantly more demand for compute than there is today.

Just be interesting to hear what your thoughts are on this strategy, whether European countries should be potentially following suit at a faster rate than what we are or whether you think that there's potentially an excess supply risk there later on down the road?

Well, the U.S. and Europe are completely different realities. Despite all the noise, in Spain at present, as we speak, there are 70, 12 and 48 megawatts being built at present to which we will add 60 of Arasur #1. So less than 200 at present and less than 250 in 1 year time. This is what is being built in Spain, which is virtually nothing.

However, the U.S. wave is already reaching Europe in the sense that we are seeing a lot of interest from a lot of very significant accounts to commit into very large projects. Hence why we are trying to secure power for all the remainder of Arasur, okay?

Remember in Arasur, we have one building, #3, which is already operating; building #2, which is built that we are starting equipment and will be ready for service at the end of '26; and building #1, which we should start building at the end of this year, should be ready by end of '27. But we have land reserved for another 3 buildings, building 4, 5 and 6.

And we are now fighting to get the electrification for those three plots so that we can take the total capacity of the Arasur campus to something between 300 and 350 megawatts. This is what we want to achieve. And why we want that kind of scale because scale matters. We are seeing that some of the clients really want big scale. They want to have what they call power visibility.

So we need to be able to give them power visibility because Spain and Portugal, for argument's sake, is one of the few corners in Europe where you can do that. I mean, in many other countries in Europe, you have either generation problems in many, distribution problems in some, or generation and distribution in many others.

In Spain, we have a distribution problem because nobody has put one penny on the distribution network for many years, on the grid. But we have no problem of generation. We have a clear excess generation as compared to consumption. And as a consequence, in theory, there are pockets of electricity, of power that you can find still if you are local and you can dig deep into the current grid organization.

There are places where you can find abundant electricity. So this is what we are trying to do at present. Likewise, in Portugal, where we have received 250 megawatts from both EDP and the National Grid Authority, REN. And those 250 megawatts correspond to 180 megawatts of IT power, which is building #1 and 2, which are the ones we are already building.

And this is the reason we have -- why we have started preparing the ground for building 3, 4 and 5. because, first, we cannot do it later because we cannot do micro-piloting when two data centers are already working on the site because we will create vibrations that will not be good for the machinery of those two data centers.

As a consequence, we have started preparing the compaction and the micro-piloting of that land in order to be able to host the three next phases of that campus, which are already electrified.

But on top of that, we have also started moving with the Portuguese authorities, which are smarter, and they are offering you electricity rather than denying electricity to you. And we are -- we have started moving to obtain electricity for buildings 6 and 7, okay, for which we will have the next year to -- in order to try to close some sort of agreement with that.

And then regarding our star project, which is Navalmoral de la Mata, in that one, of course, having 1 gigawatt today in Europe is a luxury. So we have now very, very strong interest that we are trying to document in the corresponding HOTs.

And if we can get the electricity from the Spanish authorities, the electricity is there, we know, that if we can get the electricity from the Spanish authorities with a very high degree of probability, that is a project that will be born already, let's say, committed, booked or pre-let eventually as you, like all investors, probably wish, okay?

So this is what we are doing in terms of preparation of Phase 3. But as aforesaid, we will -- I mean, it's been a very fast movement in the last months. We are a little bit digesting our own success. Sometimes we feel like sitting a little bit, taking a rest and enjoying. But of course, this is not a real possibility.

And between now and February, we will prepare a definition of what we consider Phase 3, including a funding plan, okay, which in this occasion might entail particular agreements in some mammoth projects with external partners in order to develop because otherwise, they are a little bit too big for the size of our company at present.

Okay. Thank you, Callum. So the next question comes from the line of Thomas Rothaeusler from Deutsche Bank.

Yes, also I have a question on Data Centers. I mean you say your competitive advantage is that you have ready-to-use product while there is hardly any competitive product available in the market currently. By when do you expect this situation to change? So by when do you expect more product from competitors? So it sounds like well beyond 2028. And how could that impact your Phase 3?

Very good question, Thomas. I mean, I believe not earlier than 2030 because at present, there is a lot of noise, but very few people really putting a shovel in the ground. You only have a construction yard in Alcala with ACS. There is some construction in the site of Iron Mountain in San Fernando de Henares.

And then it's us in Barcelona, at the end, in Cerdanyola del Valles, they haven't put a shovel in the ground and Goodman has not put a shovel in the ground in Parc Logistic de La Zona Franca. So in reality, this is what we have -- I mean Aragon, despite all the noise, nothing which basically is 0.0 new construction at present. okay?

Although we believe that the QTS project, for example, is for real, and it will be done that probably ready for service 2030 with luck. So as commented in some occasions, we have commercialized Phase 1 on a clear market basis. Phase 2, we were pointing or thinking that we will also be in clear market basis. It's probably now confirmed we are going to be in clear market.

And it looks like the vast majority of Phase 3 will also be commercialized on a clear market basis because the first ready for services of Phase 3 could start not later than 2028 and will expand to 2030, '31 maybe for stabilization in '33 -- end of '32. So this is what we are expecting for Phase 3. And as a consequence, the market will not be very, very active.

And this is Spain. But also, if you look at the rest of the European panorama, leaving aside what is built as a consequence of the EU Gigafactory program, very little activity is observable in the rest of the core European markets. I mean it's very hard to get power in Europe these days, and there is not a lot of activity.

And contrary to the stance of the U.S. government, except for the Nordics, which have abundant generation capacity at very small grids, very, very small grids, the most significant competitors for the future, I believe, are going to be the U.K. and France because their governments are smarter.

And they will -- they are already moving into extra nuclear generation capacity, and they are already entering into grid reinforcement regulations. They are now trying to reinforce and make better their existing grids. So I believe long term, they are going to be competitors, but it will take many years because Europe is very complicated from a red tape standpoint.

We have shot our foot in terms of environmental regulations. Many of our regulations have probably been designed in China. And we have -- as a consequence, we have curtailed completely our economic activity. And as a consequence, it takes many, many years to do or to convert in real a project which entails some sort of construction or, let's say, CapEx activity. So this is the competitive panorama we see for the coming years.

Thank you, Thomas. So the next question comes from the line of Florent Laroche-Joubert from ODDO.

I would have a first question. So you seem that you have taken into account significantly the program from European Union in your plans. I would like to understand so why European Union should select an operator, a player operating in Spain and Portugal. So why do you think that you can be selected with a high probability?

Yes. Thank you for the question. What we are hearing first is that the number of people presenting options to the European Union has been massive, about 75 options possible over the European countries. So what they are appreciating is that if there are certain regions that they can offer a combined projects, of course, there need to be some linked to the two options.

In our case, not only from a connectivity point of view, not only from a client perspective point of view, not only about -- from an ownership of infrastructure point of view, but also on the energy side, as you know, basically both Spain and Portugal, they have a unique grid system, although, of course, managed by different entities, but it's the same structure.

All of that is basically helping us to propose a combined option with more capacity, with more size, with more companies that could use our facilities, and this is something that European Commission appreciates and sees a positive advantage as compared to isolated request or isolated offers from other countries.

This trend that we presented at the very beginning is being followed. So we are not the only ones that are putting together different consortiums, different countries to get a more powerful offer.

And as you know, the objective for European Union with this project is to incentivize that there is capacity available out there and also with this offtaking, offer companies, not big large model companies and software companies that normally take that space anyway, but also all the institutions, governments and finally European entities and in the U.S. that can work with capacity within the European region.

So that's basically what we see. As Ismael was commenting before, and commission has been very clear about that, there is two ingredients to be considered from the assignments.

One is from a technical point of view. So in a way, like 50% of the decision is based on technical reasons, technical reasons meaning, as Ismael explained before, ready for service dates, capacity from a technical point of view, how efficient you are, renewable sources from the power, et cetera.

And the other 50%, let's call it, is not right percent, but you understand what I mean is from a political decision, which means that what they also try to do is to incentivize penetration of this AI, not only in the region, but also in certain areas within the European Union. So this is, as Ismael was pointing out before, out of our control.

So we know that we -- our grade from a technical point of view is pretty high, if not the best, mainly because not only all the assets are new, but also because our ready for service is '26, '27, which is pretty immediate, and this basically are our advantage.

So far -- if, of course, the project is being delayed or the rules are changed, of course, then we are losing a bit of grip there. But right now, from a technical point of view, we can say we are top in the list.

But then this is a political decision, not only from the local government, but also from the commission to decide whether they want to implement this type of services and offering in which regions they want to help there.

And that is basically what explains why from a technical point of view, we are pretty confident we can get it, but there are elements which are out of our control and it's complex how we can influence on them.

Okay. And maybe a second question. So we understand that you work a lot on this program for the European Union. So do you consider it as a central scenario? And do you work also maybe on an alternative scenario where you're not selected at the end?

Yes, Florent, this is clearly something that we planned from the very beginning. Probably it's not even the plan B, it's the plan A. So this is why now we are concentrating in obtaining firm-ups from the clients irrespective of the European Union because European Union is like a Monte Carlo option, is binary, is 0, 1, and there are elements beyond our control.

I mean, we are a relatively young company. We are a very operational, very active company. We are not the typical public contractor. So we have zero experience in dealing with public authorities. Lobbying them, influencing them is not our cup of tea.

So technically speaking, we were ranked the first out of the five options that existed in Spain. But that is only part of the equation, as Fran was commenting. So from the very beginning, we prepared for a life without European Union because it is beyond our control. And eventually, imagine they say, well, it's no longer December. It's going to be now -- the firm-up submission is going to be May.

And then final decision moved from April to December next year. So by the time the whole thing unfolds, we might be completely commercialized on Phase 2. So if that is the case, why continue spending or wasting more time with the European Union if we can do our things on a completely autonomous basis.

The next question comes from the line of Celine from Barclays.

I just have one question on the EU project. So we've heard you mentioning how frustrating the whole process is, which I can understand. So what is the cutoff date for you to move on from the project and the consortium? Are you willing to wait until end of April?

It is a very good question, Celine. And to be absolutely frank, we haven't yet made an internal decision. Probably we are going to wait till April. But if in April, we see that the submission is delayed to December or if we see that there is even more administrative red tape or more lobbying capacity or more bulls*** that we cannot control, eventually, we will pull out. But Fran may have different thoughts on that.

Yes. It's -- I mean, for us as well, it's a little bit commitment to the country in the sense that we believe that in addition to the fact that we could have some offtaking from that project, yes, we are pushing this because we believe that this decision, if it comes to vis-a-vis the construction will create -- will basically push ecosystem from an NII perspective. And we believe this is good.

As Ismael said, any delay that we are suffering is in a way reducing the value of that option because if we are fully commercialized, if we don't need money for the CapEx, if we are -- if there is any help that could, let's say, accelerate our implementation because we are -- we'll be done. In that case, of course, it's losing how attractive the program is.

And by the way, the Europe Union has already achieved the objectives without even putting a dollar on us, which is good. But also it's interesting for us to continue trying to bring that ecosystem into Spain and Portugal. And that's the reason why we will continue pushing.

As said, there are other decisions that are not on our control and if it is decided that the offer is not selected and they decide another country or another alternative, then we have done from a Spanish/Portuguese point of view, wherever we can, what was in our hand, trying to bring that capacity and that help and ecosystem into our region.

I have a second question on Phase 3. So you're going to talk about it more in February, but are you going to mention how you are planning to finance it as well?

Yes. This is objective #1 for February. We will present the definition, the scope of Phase 3 together with the funding plan because the Phase 3 might be significant in terms of size.

And particularly, it might signal the start of one of our really, really big projects, which is Navalmoral de la Mata. And that project alone eventually warrants a separate analysis on how are we going to fund that because it's a very, very big project.

And eventually, we will need to check how we can do that, whether we continue simply running through the mother company from MERLIN or eventually for this particular case, we take a partner, which brings some other value eventually in the form of offtaking and/or financial capacity, which helps us in reaching an end in that very, very important project for the company. So you will have all the details in February.

Okay. So there are no more questions. We thank you all for being with us during this 9-month '25 trading update call. And as always, we remain at your disposal for any questions that may arise. Have a nice weekend. Thank you very much for being here. Bye-bye.