Intemoney | Yesterday, Merlin Properties (Buy, PO £15) confirmed, in a CMD focused on data centres, its plans to carry out Phase III of this asset, consisting of the development of 412 MW of new capacity mainly in Lisbon, the Basque Country and Zaragoza.
Phases I and II, already under construction or in service, total around 320 MW, with an investment of €3.37 billion. Phase III will involve an additional investment of around €4.5 billion until 2031. According to Merlin, this amount will be raised through capital increases of around €2.2-2.3 billion, with the remaining €2.3 billion coming from debt issues, which could include convertible bonds. The capital increases are expected to begin this year, for around €700-800 million, and would be completed in 2027-28. The REIT described a future Phase IV, with a development of more than 2,000 MW, which would be centred mainly in Navalmoral de la Mata (Cáceres), for which Chairman Ismael Clemente expects an agreement with a partner.
Assessment: The truth is that these figures are not particularly surprising, as Merlin had already described Phase III as “upsizing”, for a total of 426 MW at the time. The investment volume implies an average of around €11 million per MW, which is quite typical, and the capital increases are not a surprise either, after the one carried out in July 2024, for just over €900 million, which was then used to finance Phase II. From what the chairman said yesterday, it could be inferred that Merlin would have carried out the first expansion immediately if it had not been for the conflict in Iran. Data centres generated €31 million in income for Merlin in 2025, or 6% of the consolidated total, and the REIT aims for this asset to generate 65% once Phase III comes into service. Our estimates currently only consider phases I and II, but even so, we forecast that data centres will account for 40% of income in 2031e, when Merlin could generate EBITDA of €841 million (€399 million in 25); debt would not exceed 40% of GAV in any financial year until then.
