MERLIN Properties: Data Center Commercialization Surges Past Guidance as Tenant Base Diversifies
H1 2026 results show 160 MW let, a new wave of Chinese and AI model tenants, and a shift toward convertible bond funding — all while traditional assets hold up.
MRL.MC · Earnings Call · 2026-07-28
The Data Center Engine
MERLIN Properties' H1 2026 results were dominated by its data center platform. The company has now commercialized 160 megawatts, up from 112 at the start of the year, and CEO Ismael Clemente said they are “in a position to far exceed” — Ismael Orrego, CEO · 2026-07-28 the 200 MW guidance for 2026, potentially reaching 340 MW. This acceleration is driven by the conversion of the Arasur 1 head of terms into a full lease, and the entire Phase 1 is now let. Phase 2 is heavily pre-let, with 70% of capacity under contract. pre let has become the company's top keyword, reflecting a fundamental shift from speculative development to a build-to-lease model. The company also pulled forward Phase 3 construction, advancing nearly EUR 150 million of future revenue by compressing the timeline for Lisbon buildings 3-5.
Tenant Diversification
The most striking new development is the evolution of the tenant base. While neoclouds and hyperscalers remain important, type of tenant is expanding. Clemente noted:
we are starting to see a third type of tenants, which is Chinese... And then fourth type of tenant, which is big model companies.
This includes Alibaba, TikTok, and Tencent Weibo on the Chinese side, and AI model companies in the middle of IPO processes seeking to secure capacity directly. The CFO, Francisco Rivas, added that while neoclouds still represent 45% of the current 340 MW pipeline, hyperscalers are growing to 5-10%, and "others" (including these new tenant types) make up the remainder. This diversification is crucial for reducing counterparty risk, as the market has been concerned about the credit quality of neoclouds.
Funding and Capital Structure
With CapEx commitments accelerating, funding is front and center. MERLIN raised EUR 768 million in a capital increase earlier this year, and LTV stands at a conservative 24.5%. But the next round of funding is likely to come via a convertible bond. Clemente stated: “Most likely, the second batch will come under the form of a convertible bond.” — Ismael Orrego, CEO · 2026-07-28 This is a shift from the plain vanilla capital increase, and it reflects management's confidence in the NAV trajectory. The company also clarified the promote structure, with EUR 101 million accrued to date on Phase 1, representing roughly 10-15% of total project profit. This transparency is intended to help investors model the value creation. convertible bond is now a key topic in investor discussions.
Traditional Assets Hold Up
Despite the data center focus, the traditional asset classes performed well. Shopping centers delivered 6.4% like-for-like growth, with occupancy costs at a very low 10.8%, indicating headroom for rent growth. Offices saw all-time high occupancy in Madrid, though Barcelona remains weak due to the Meta exit from Torre Glories. Torre Glories is a known overhang, but management remains confident in the asset's iconic status. Logistics continues to generate steady income, with 97.3% occupancy at Southport. The company raised its FFO guidance to EUR 340 million for the year, and NTA per share stands at EUR 15.99, implying a 4-5% NAV discount. The stock was down on the day for unclear reasons, but the fundamentals remain strong.
Why It Matters
MERLIN is undergoing a genuine transformation. The data center platform, which was initially seen as a side bet, is now the primary growth engine, with commercialization running far ahead of schedule. The emergence of new tenant types – Chinese cloud providers and AI model companies – suggests the capital-intensive buildout is finding diverse and deep demand. The shift to convertible bond funding signals confidence in the share price and NAV appreciation. For investors, the key is to understand the value being created through the promote and the pre-leasing, which is not fully reflected in FFO today but will materialize as cash flows stabilize.