Earnings call transcript: Merlin Properties Q3 2025 sees stock soar despite revenue miss

Merlin Properties (MRL) reported its third-quarter 2025 earnings, meeting EPS expectations but falling short on revenue forecasts. The company posted an EPS of $0.14, aligning with analyst predictions, while revenue stood at $133.5 million, missing the forecast of $136.41 million by 2.13%. Despite the revenue shortfall, Merlin's stock surged 7.09% to $13.30, reflecting investor confidence in the company's strategic initiatives and financial health.

Key Takeaways

• Merlin met EPS expectations but missed revenue forecasts by 2.13%.
• Stock price surged by 7.09% post-earnings.
• Strong financial performance with FFO growth of 6.4% year-on-year.
• High occupancy rate maintained at 95.5%.
• Strategic focus on expanding data center capacity.

Company Performance

Merlin Properties demonstrated robust financial health in Q3 2025, with a notable 6.4% increase in funds from operations (FFO) year-on-year. The net asset value (NAV) per share also rose by 5.7%, underscoring the company's strong asset management and operational efficiency. Despite a slight reduction in occupancy, Merlin maintained a high rate of 95.5%, reflecting resilient demand across its property portfolio.

Financial Highlights

• Revenue: $133.5 million (missed forecast by 2.13%)
• Earnings per share: $0.14 (met forecast)
• FFO growth: +6.4% year-on-year
• NAV per share: +5.7%
• Occupancy rate: 95.5%

Earnings vs. Forecast

Merlin Properties met its EPS forecast of $0.14, but its revenue of $133.5 million fell short of the $136.41 million forecast, resulting in a 2.13% revenue surprise. This revenue miss contrasts with the company's historical trend of meeting or exceeding revenue expectations, highlighting a potential area for strategic focus.

Market Reaction

Despite the revenue miss, Merlin's stock price increased by 7.09%, closing at $13.30. This price movement positions the stock near its 52-week high of $14.1, indicating strong investor confidence. The positive market reaction suggests that investors are optimistic about the company's strategic initiatives and long-term growth prospects.

Outlook & Guidance

Looking forward, Merlin is targeting a total data center capacity of 300-350 megawatts at its Arasur campus, with plans for comprehensive phase three definition in February 2025. The company is also exploring external partnerships and potential funding strategies for major projects, such as Navalmoral.

Executive Commentary

CEO Ismael Clemente highlighted, "We are a little bit digesting our own success," emphasizing the company's strategic growth and market positioning. He also noted, "Scale matters. We are seeing that some of the clients really want big scale," underscoring the importance of capacity expansion in meeting client demands.

Risks and Challenges

• Revenue growth challenges: The revenue miss indicates potential hurdles in achieving growth targets.
• Market constraints: The European data center market's limited new construction and power distribution challenges could impact expansion plans.
• Regulatory complexities: European red tape may pose obstacles to project timelines and execution.

Q&A

During the earnings call, analysts inquired about Merlin's participation in the EU Gigafactory program and the dynamics of the data center market. The company provided insights into project timelines and strategies for commercializing data center capacity, addressing concerns related to environmental assessments and client demand.

Full transcript - Merlin Properties SA (MRL) Q3 2025:

Inés, Unspecified, Merlin Properties: Good evening, everyone. Thank you for joining Merlin's 9M25 trading update. As we always do on quality results, our CEO is Ismael Clemente. We will briefly walk you through the main highlights of the period, and we will then open the line for Q&A. For those of you who want to raise questions, please press star, followed by number five. With no further delay, I pass the floor to Ismael. Thank you.

Ismael Clemente, CEO, Merlin Properties: Thank you, Inés. Welcome to the 9M25 results presentation by Merlin Properties. The quarter from 30 June to 30 September has been pretty productive for the company. The 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 NAV 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 sq m transactioned during the first nine months of the year. The FFO increased 6.4% 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 cost, which, of course, eroded 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. The end result is that the overall occupancy of the company is very, very stable. In terms of data centers, the mega plan continues deploying very successfully. The European Union is playing its usual role. The firm submission that was originally earmarked for the end of October has been postponed to December.

The decision-making, which initially was end of December, is now going to be end of April. The European Union is approximately four months delayed for now. That has wiped out part of the competitive advantage of participating in the EU Gigafactory program that was basically to bring forward approximately one year the execution of phase three. I mean, we have wasted a little bit of time. I mean, we have netted off four months out of the 12 that we had in mind that would eventually benefit the company in terms of bringing forward phase three. The good thing, I mean, the positive of the Gigafactory program is that if selected, 180 megawatts of phase two will be let at once. That is, of course, super important for the company because it will significantly reduce risk.

Phase two out of 246, 180 will be gone in one second. However, with the delays, we have decided to start sounding the market for firm apps. I mean, we do not want to depend on the EU Gigafactory program because it is a little bit too complicated. It is not probably our ecosystem. I mean, we are a private company, and it is complicated to swim in that ocean full of sharks. We are targeting only 48 megawatts by the end of April, pre-commercialized for phase two, which is more than we anticipated. Plenty of those are now already in an advanced phase of documentation. The other 28, for the moment, is a ROFO that we will try to document between now and April that will correspond to the full capacity of the Bilbao Arasur building number two. We will move into Bilbao Arasur building number one.

We have just started also due diligencing the Lisbon 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. The final, let's say, client of computing has to be European. As you can imagine, this is narrowing a little bit the scope of our commercialization efforts. 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 believed 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. The deployment of the phase two of data centers is well on track. We have not valued the assets in the period. The NAV per share is virtually the same we used to have with the generation of cash in the period. In terms of business performance, offices have achieved a like-for-like year-on-year of 3.8%, which is very, very interesting. The risk spread cosmetically looks like 0.2% owing to the technical remedial deal we did at the beginning of the year.

In the absence of that deal, it is 5.0%. The thesis that we have commented with all of you on some occasions about the acceleration of rents in Madrid as a consequence of the destruction of stock owing to the residue conversion, let's say, wave, is clearly proving to be right. In logistics, the like-for-like is only 1.7%, but you might notice that the risk spread is 5.7%. The only reason why the like-for-like is lower is because we have lost 200 basis points of occupancy. 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 risk spread, continues to be very, very, very sound. In shopping centers, it has been a surprising quarter with a very interesting evolution of sales and footfall figures.

The like-for-like is 3.5%, but the risk 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 Coruña. Overall occupancy is 95.5%, slightly worse than 30 June, but better than the same period last year. 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. 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.

Okay, let's open the floor for Q&A, and happy to take your questions. Inés 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, where I have had a personal circumstance, a sad one that keeps me here. I am attending the call on a remote basis. Eventually, Inés 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.

Inés, Unspecified, Merlin Properties: Thank you very much, Ismael. We have a first question coming from the line of Callum Morley from Politics. Callum, the floor is yours.

Hello, thank you for taking my questions. I've got a few. Just to begin with, can you clarify the comments you made, Ismael, on phase three being delayed for four 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 or the 426 in the upsizing pipeline? Just to get a bit of clarity there.

Ismael Clemente, CEO, Merlin Properties: 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. 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. 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. 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. In Tres Cantos, one for urbanization works, one for construction. That duplicity of environmental assessments creates a time lag that results in a time delay in the execution of the project, which is between six months and one year. That means it moves the tail end of the cash flows of phase two one year further, from 2029 to 2030, to attain 100% of the cash flow of phase two.

However, you might notice that we have been doing some preparation works for phase three. We will proceed to a definition of the scope of phase three that will be communicated to market in the February conference call pertaining to full year 2025 results. Okay? In that definition of phase three, you will see that some of the most immediate projects of phase three will eventually overlap with the tail end of phase two. Paradoxically enough, some of the early projects of phase three will start kicking in terms of cash flow before we finish with the last tail end of projects of phase two. 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 bullshit. 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 two, or is it just those two Madrid sites?

In phase two, we are clear on all environmental studies, including the latest one we have received is Arasur building number one. We are clear in Portugal in full. We are clear in the Basque Country for Arasur two and Arasur one, which is the next two buildings we are doing. It is only in Getafe and Tres Cantos where we are clear in the first environmental assessment, but we need to do a second because it is like that in the legislation. However stupid it might look to you because you are a private person and you try to do things in life with common sense. However stupid it might look, it is how it is. We need to abide by the rules and do everything by the book. Okay? That is for phase two.

What we are doing regarding, let's say, the non-money-related activities of phase three, what we are trying to do now is advancing some of the red tape, administrative red tape of phase three, 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 three. It is part of life. Okay?

That's clear. Two more questions. One on the Gigafactory and one big picture. On the initiative, there does not 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? Let's say the partnership covers the 180 megawatts that you submit. If we assume that costs, I do not 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 off-taking. We have chosen via off-taking. That means that 35% of the off-taking is guaranteed by the European Union in JV with the local government. What this means basically is that out of the 180, okay, 60 megawatts will be off-taken by the European Union and the local government, be it Spain, be it Portugal, depending on which data center we are talking about. 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.

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 obtain the same back-to-back agreements with the same clients, irrespective of EU. Okay? In that regard, we expect to have 48 megawatts at least committed for April. Out of the 120 that we are doing on our side, a little less than 50% of that. We will continue working. Remember, we are in the initial phases of construction. Our perspective of having pre-let at this moment in construction was zero. Okay?

We are trying to celebrate, to enter into pre-let to cover that capacity, irrespective of the outcome of the EU Gigafactory program. 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 one 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.

If the contest rules are modified by the 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 2027, 2028, they decide that they can be ready by 2029, 2030, eventually many other people will be able to, let's say, comply with that prerequisite. 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 with political powers.

That's clear. Just one more big picture 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 significantly more demand for compute than there is today. Just 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.

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 number one. So less than 200 at present and less than 250 in one year's 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 reminder of Arasur. Okay?

Remember, in Arasur, we have one building, number three, which is already operating, building number two, which is built that we are starting equipment and will be ready for service at the end of 2026, and building number one, which we should start building at the end of this year, should be ready by end of 2027. We have land reserved for another three buildings, building four, five, and six. 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 300-350 megawatts. This is what we want to achieve. Why do 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.

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. 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. 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. Those 250 megawatts correspond to 180 megawatts of IT power, which is building number one and two, which are the ones we are already building. This is the reason why we have started preparing the ground for building three, four, and five. First, we cannot do it later because we cannot do micropiloting 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 micropiloting of that land in order to be able to host the three net spaces of that campus, which are already electrified.

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. We have started moving to obtain electricity for buildings six and seven, for which we will have the next year in order to try to close some sort of agreement with that. Regarding our star project, which is Navalmoral de la Mata, in that one, of course, having 1 gigawatt today in Europe is a luxury. We have now very, very strong interest that we are trying to document in the corresponding HOTs. If we can get the electricity from the Spanish authorities, the electricity is there.

We know that if we can get that 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-led eventually, as you all investors probably wish. Okay? This is what we are doing in terms of preparation of phase three. As a foresight, 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. Of course, this is not a real possibility. Between now and February, we will prepare a definition of what we consider phase three, including a funding plan, okay, which in this occasion might entail particular agreements in some Mahmood 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.

Thanks.

Fran, Unspecified, Merlin Properties: Okay. Thank you, Callum. The next question comes from the line of Tomas Rojaso from Deutsche Bank. Tomas, the line is yours.

Hi, good evening. Yes, also on the 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? By when do you expect more product from competitors? It sounds like well beyond 2028. How could that impact your phase three?

Ismael Clemente, CEO, Merlin Properties: Very good question, Tomas. 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 Alcalá with ACS. There is a stunning construction in the site of Iron Mountain in San Fernando de Henares. It is us in Barcelona. At the end, in Cerdanyola del Vallès, they have not put a shovel in the ground. Goodman has not put a shovel in the ground in Parlogistics Zona Franca. In reality, this is what we have. In Aragón, 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, but probably ready for service 2030 with luck.

As commented in some occasions, we have commercialized phase one on a clear market basis. Phase two, we were pointing or thinking that we would also be in clear market basis. It is probably now confirmed. We are going to be in clear market. It looks like the vast majority of phase three will also be commercialized on a clear market basis. The first ready-for-services of phase three could start not later than 2028 and will span to 2030, 2031 maybe for stabilization in 2033, end of 2032. This is what we are expecting for phase three. As a consequence, the market will not be very, very active. This is Spain.

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. There is not a lot of activity. Contrary to the stance of the U.S. government, except for the Nordics, which have abundant generation capacity, 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 are already moving into extra nuclear generation capacity. They are already entering into grid reinforcement regulations. They are now trying to reinforce and make better their existing grids.

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 feet in terms of environmental regulations. Many of our regulations have probably been designed in China. As a consequence, we have curtailed completely our economic activity. As a consequence, it takes many, many years to convert in real a project which entails some sort of construction or, let's say, CapEx activity. This is the competitive panorama we see for the coming years.

Okay. Thank you, Ismael. And my sincere condolences.

Thanks a lot, Tomas. Much appreciated. Thanks for that. Thanks.

Fran, Unspecified, Merlin Properties: Thank you, Tomas. The next question comes from the line of Florin Larroy from Other. Florin, the line is yours.

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

Ismael Clemente, CEO, Merlin Properties: Yeah, 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. What they are appreciating is that if there are certain regions that they can offer a combined project, of course, they need to be some linked to the two options. In our case, not only from the connectivity point of view, not only from a client perspective point of view, not only 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. This is something that the European Commission appreciates and sees as a positive advantage as compared to isolated requests or isolated offers from other countries. This trend that we presented at the very beginning is being followed. We are not the only ones that are putting together different consortiums, different countries to get a more powerful offer. As you know, the objective for the European Union with this project is to incentivize that there is capacity available out there. Also with this off-taking offer, companies, not big, large, model companies and software companies that normally they take that space anyway, but also all the institutions, governments, and final European entities and individuals that can work with capacity within the European region.

That's basically what we see. As Ismael was commenting before, the commission has been very clear about that. There are two ingredients to be considered from the assignments. One is from a technical point of view. In a way, like 50% of the decision is based on technical reasons. Technical reasons meaning, as Ismael explained before, ready-for-service dates and capacity from a technical point of view, how efficient you are, renewable sources from the power, etc. The other 50%, let's call it, it's not the right percentage, 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. This is, as Ismael was pointing out before, out of our control.

We know that 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 2026-2027, which is pretty immediate. This is basically 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 grid there. Right now, from a technical point of view, we can say we are top in the list. Then it is a political decision, not only from the local governments, 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.

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 we can influence on them.

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

Yes. Yes, Florin, this is clearly something that we planned from the very beginning. Probably it's not even the plan B, it's the plan A. This is why now we are concentrating in obtaining firm maps from the clients irrespective of the European Union. The European Union is like a Monte Carlo option. It's binary. It's zero, one. 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. We have zero experience in dealing with public authorities, lobbying them, influencing them. It's not our cup of tea. Technically speaking, we were ranked the first out of the five options that existed in Spain. That is only part of the equation, as Fran was commenting.

From the very beginning, we prepared for a life without the European Union because it is beyond our control. Eventually, imagine they say, "Well, it's no longer December. It's going to be now the firm map submission is going to be May." Then final decision moves from April to December next year. By the time the whole thing unfolds, we might be completely commercialized on phase two. 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?

Okay. Thank you very much. We think a lot very much on you, Ismael. Thank you very much.

Thank you. Thanks a lot.

Fran, Unspecified, Merlin Properties: The next question comes from the line of Celine from Barclays. Celine, the line is yours.

Hi everyone. First of all, we are very sorry for your loss. I hope you're okay. I just have one question on the EU project. We've heard you mentioning how frustrating the whole process is, which I can understand. What is the cutoff date for you to move on from the project and the consortium? Are you willing to wait until the end of April? Thank you.

Ismael Clemente, CEO, Merlin Properties: It is a very good question, Celine. To be absolutely frank, we haven't yet made an internal decision. Probably we are going to wait till April. 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 bullshit that we cannot control, eventually we will pull out. Fran may have different thoughts on that. Yeah, 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 off-taking from that project, yeah, we are pushing this because we believe that this decision, if it comes to the EU CIBIR consortium, will create or will basically push an ecosystem from an AI perspective. 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 do not need money for the CapEx, if there is any help that could, let's say, accelerate our implementation because we will be done. In that case, of course, it is losing how attractive the program is. By the way, the European Union has already achieved the objectives without even putting a dollar on us, which is good. It is also interesting for us to continue trying to bring that ecosystem into Spain and Portugal. That is the reason why we will continue pushing. I said there are other decisions that are not in our control.

If it is decided that the offer is not selected and they decide another country or another alternative, we have, 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.

Fran, Unspecified, Merlin Properties: Thank you. I have a second question on phase three. You are going to talk about it more in February, but are you going to mention how you are planning to finance it as well?

Ismael Clemente, CEO, Merlin Properties: Yes. Yes, this is objective number one for February. We will present the definition, the scope of phase three together with the funding plan. The phase three might be significant in terms of size. Particularly, it might signal the start of one of our really, really big projects, which is Navalmoral de la Mata. That project alone eventually warrants a separate analysis on how are we going to fund that. It is a very, very big project. Eventually, we will need to check how we can do that, whether we continue simply running through the mother companies from Merlin, or eventually for this particular case, we take a partner which brings some added value eventually in the form of off-taking and/or financial capacity, which helps us in reaching an end in that very, very important project for the company.

You will have all the details in February.

Fran, Unspecified, Merlin Properties: Thank you, Ismael. Take care.

Ismael Clemente, CEO, Merlin Properties: It's a pleasure.

Fran, Unspecified, Merlin Properties: Okay. There are no more questions. We thank you all for being with us during this nine-month 2025 training update call. 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.

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