Merlin properties bets big on ai data centers, secures €700m

In a whirlwind two-week sprint, Spanish property giant Merlin Properties has shifted gears from outlining its “Mega to Giga” plan for next-generation AI data centers to rapidly securing €700 million in capital—a move executed amidst the escalating tensions in Iran. The swift injection of funds, backed by key shareholders, marks the first installment of a planned €15 billion investment by 2031, to be financed through both equity and debt offerings.

A strategic shift: from office space to ai infrastructure

Merlin, led by Ismael Clemente, is undergoing a dramatic transformation, evolving from a traditional real estate investment trust (REIT) focused on offices, retail spaces, and logistics facilities into a pivotal player in the burgeoning AI infrastructure landscape. The company’s ambitions extend beyond mere data centers; they encompass the substantial energy requirements needed to power them, positioning Merlin as a comprehensive solutions provider.

The initial commitment involves approximately €8 billion across three phases, but the company’s ultimate vision centers on a “megacampus” in Navalmoral de la Mata, Extremadura, a project slated to require €1.9 billion. Regulatory approvals and access to the electrical grid could elevate the total investment to a staggering €15 billion.

This isn’t a recent, reactive pivot to AI. Nearly five years ago, Merlin forged an alliance with Edge, an Endeavour-backed Technology specialist. Together, they’re pursuing the development of the “Diagonal Digital Ibérica,” a strategic initiative designed to leverage the Iberian Peninsula’s position as a key connectivity hub between Europe, the Americas, and Africa, utilizing subsea cables connecting the US with France and Morocco. The project aims to create a digital infrastructure map centered around Merlin’s data centers.

Key to the rapid funding was the unwavering support of major investors. Nortia, the holding company of gaming magnate Manuel Lao, and Santander both provided irrevocable subscription commitments, guaranteeing a significant portion of the capital raise. Santander’s involvement is particularly noteworthy, acting as an investor, underwriter, and insurer for the offering, effectively de-risking the placement and ensuring its success.

The timing of this capital injection is particularly astute, despite the current volatility in energy markets stemming from the closure of the Ormuz Strait. Interest rates are surging, and financing costs are rising, but Merlin has successfully navigated these headwinds. The company’s track record with its 50/50 joint venture with Edge, which handles Technology and operational management while Merlin owns the properties and manages lease income, has instilled confidence in investors.

The combined Merlin-Edge team now comprises over 300 professionals, and the company has already secured qualification from three of the four Tier-1 hyperscalers (Amazon, Meta, Google, and Microsoft). Furthermore, it boasts partnerships with Nvidia and serves as an infrastructure provider for CoreWeave, Lambda, Crusoe, and Nebius. All equipment is sourced from the EU and OECD countries.

Internal projections estimate that Merlin’s data center capacity will surge from 314 MW in 2025 to 2,166 MW by 2030—a testament to the company’s aggressive expansion strategy. McKinsey estimates a global investment of €7 trillion in digital infrastructure driven by the AI race, further underscoring the potential of Merlin's venture.

While Merlin faces competition from established players like Iron Mountain, ACS, Iberdrola/Echelon, QTS/Blackstone, AWS, and Microsoft, the company asserts it holds a significant advantage, claiming “up to 20 months” lead time in bringing data centers online. From 44 MW of operational capacity in 2025, Merlin projects reaching 730 MW installed by 2031. The first three phases of the plan require an investment of nearly €7.84 billion and are expected to generate annual gross rents of €1.15 billion, fundamentally reshaping Merlin's revenue streams – with data centers accounting for 65% of the business in less than five years.

Looking beyond the initial phases, Merlin's pipeline includes an additional 5.1 GW of capacity, including the ambitious Navalmoral de la Mata megacampus, strategically located near energy hubs dominated by Iberdrola, Eiffage, and Naturgy, alongside a nuclear power plant. Here, Merlin envisions 1.4 GW of technological capacity with a potential investment of €15 billion.

A new era for iberian data infrastructure

The speed and scale of Merlin's transformation signal a new era for data infrastructure in the Iberian Peninsula, one where a traditional REIT is rapidly becoming a dominant force in the AI-powered future.