Merlin properties bets big on ai, secures €700m funding
In a swift maneuver that has surprised even seasoned observers, Spanish socimi Merlin Properties has moved with remarkable speed to capitalize on the burgeoning artificial intelligence boom. Just two weeks after unveiling its ambitious 'Mega to Giga' plan for next-generation data centers, the company has already secured a €700 million capital injection in a lightning-fast market placement, navigating turbulent waters amidst the Iran-Israel conflict with surprising ease.
A strategic shift: from office spaces to ai infrastructure
This initial tranche represents the first installment of a staggering €15 billion investment plan slated for completion by 2031, a strategy primarily fueled by equity and bond sales. For years, Merlin has been known as a leader in office spaces, retail outlets, and logistics warehouses – a decidedly “traditional” real estate player. Now, the company is aggressively repositioning itself as a key infrastructure provider for the AI revolution, encompassing not only cutting-edge data centers but also the substantial energy resources required to power them.
The commitment extends beyond initial phases, with nearly €8 billion earmarked for Phases I, II, and III. But the true prize lies in Phase IV: a sprawling 'megacampus' slated for Navalmoral de la Mata in Extremadura. This ambitious project, carrying a preliminary investment of €1.9 billion, could balloon to €15 billion with the necessary regulatory approvals and access to the electrical grid – a significant hurdle that Merlin is actively pursuing.
The Diagonal Digital Ibérica - a concept Merlin has been developing since nearly five years ago in partnership with Technology specialist Edge (a subsidiary of Endeavour) - is central to this vision. The plan aims to establish a strategic hub connecting Europe, the Americas, and Africa by leveraging subsea cable connections between the US, France, and Morocco. This positioning promises to be a critical advantage in the increasingly competitive data center landscape.
The backing for this ambitious plan is considerable. Nortia, the holding company of gaming magnate Manuel Lao, and Santander, Spain's largest bank, have both provided irrevocable subscription commitments, representing 8.5% and 24.5% of Merlin’s capital respectively. Santander is playing a triple role, acting as investor, placement agent, and underwriter, essentially guaranteeing the success of the placement. This allowed Merlin to quickly secure over €460 million, fueling the third phase of their transformation into Spain's leading data center company.
The timing couldn't be more challenging. The ongoing crisis in the Middle East is sending ripples through global financial markets, particularly the bond market – where Merlin also seeks funding. Rising interest rates are inevitably increasing borrowing costs, but Merlin’s success so far appears to be rooted in a compelling narrative and a proven track record. The joint venture with Edge, which provides the Technology and operational expertise, has already demonstrated significant success, with Merlin handling construction, ownership, and rental income.
Merlin’s ambition is clear: to surpass competitors like AWS (Amazon), Blackstone, and ACS (which leads in the US market with its Turner subsidiary). The company claims a significant lead, boasting “up to 20 months of advantage” in bringing data centers online – a crucial factor in a rapidly evolving market. Their internal projections forecast a dramatic shift in their revenue streams, with data centers accounting for 65% of their business within five years, compared to just 6% currently. By 2030, Merlin anticipates a staggering 2,166 MW of data center capacity, a dramatic increase from the 314 MW projected for 2025. The company cites a McKinsey estimate predicting a global investment of €7 trillion in digital infrastructure during this “AI race.”
While six other major players – Iron Mountain, ACS, Iberdrola/Echelon, QTS/Blackstone, AWS, and Microsoft – are vying for dominance in Spain and Portugal, Merlin’s speed and efficiency are proving to be key differentiators. With a pipeline of an additional 5.1 GW, and the potential for a 1.4 GW megacampus in Extremadura powered by a mix of solar (Iberdrola, Eiffage, Naturgy) and nuclear energy, Merlin is laying the groundwork for a future where data is king – and they intend to rule the kingdom.