Colonial SFL, Socimi S. A. (COL) Earnings Call Transcript & Summary

Thank you. Good afternoon. This is Pedro Vinolas speaking live from Paris. I'm happy to introduce today also here in Paris, too, Carmina Ganyet, Chief Corporate Officer; Juanma Ortega, Chief Operating Officer; joining us from Madrid, Carlos Krohmer, Chief Corporate Development Officer; and the rest of the team joining us from Barcelona. We are very happy today to share with you a new investment opportunity that we have done. It's about Colonial entering into the science and innovation arena with a lot of promising details. But before going into these details, let -- small video, very short, that will introduce better what we will be talking about in a few minutes. [Presentation]

Okay. So -- as an introduction what this investment is about, let me now be a little bit more specific about what we are presenting here today. We are presenting a specific investment, but is -- as important as this investment is the context and the future beyond this specific investment. The investment is about Colonial buying an existing portfolio, which is today the leader in the life science and innovation sector in Spain for a total amount of around EUR 200 million. This is what the deal is about. But I think that more important than the investment on this existing portfolio is to understand the context of what is beyond this initial investment. Colonial is investing in this existing portfolio because of the quality and returns of this portfolio, as we will see later, but also because this is a first stage of a strategy that has to go very well above this initial milestone. What Colonial is doing is investing, first of all, into a buildup strategy based on the global megatrends, accelerating the need for science and innovation space. It's about demographics, it's about technology, it's about geopolitics. These are megatrends that are supporting this accelerating need for science and innovation space. So we are investing in an existing portfolio, but we are here also to invest in a megatrend in a buildup strategy. It's not only about investing in this asset class. It is also about how are we investing in this asset class. We are doing this through a unique partnership between Colonial and Stoneshield. Stoneshield is a very well-recognized leading asset manager with a fantastic track record in the science and innovation field, and we believe that together, we can create a success history. And therefore, this alliance is also a fundamental part of our investment. And we are also structuring this new strategy, not only based on this alliance between Colonial and Stoneshield, not only with this investment being done by Colonial, but opening this opportunity to third-party money that is with a new business model to be developed that will allow us to fulfill our goal, which is the Pan-European ambition of creating the leader in the science and innovation segment, an ambition that today, it's about the existing portfolio that we are investing in. But it is also, as I said, about growth and is about short-term growth and is about long-term growth. Short-term growth, it's about EUR 700 million of identified pipeline in the short term that we can achieve. And it's about long term in a scenario where we can target in excess of EUR 2 billion of investments across Europe. As you will see, it's about asset classes, new asset classes in the science and innovation field. It is also about Europe. It's about where Europe is today and the opportunities that it offers. And of course, it's about returns. As we will see later on in the presentation today, it's investing into a vertical that allows for stabilized yields on cost within the range of 7% or 8%, and it's about long-term IRRs of double digits in the field of 15%. These are the main characteristics of this investment, which, as I said, is about seizing the European real estate opportunity behind the strategic growth. Maybe an additional comment that I would like to make, and I'm on Slide 7 of the presentation, is that this investment is fully consistent with our strategy in Colonial. As you know, Colonial has, for many years, focused -- been focused on a strategy where, on the one hand, Colonial had good recognition for -- or replicable portfolio of trophy assets in the office arena oriented to long-term capital preservation and growth, but it was also about putting up the work, the capabilities of Colonial in human transformation, in creating new top product, in expanding into [ high-growth ] industries with increasing demand. We already gave some examples of this last year with the Alpha X initiative. This investment opportunity that we are presenting today is about expanding into this philosophy, is about expanding this capability into a new segment of thriving ecosystems. Therefore, as I said, it's not about reshaping Colonial's strategy. It's about being consistent with this long-term strategy. Alpha X was a number of -- were a number of projects that we presented last year. These science and innovation SOCIMI are the projects that we are launching this year as part of this alliance with Stoneshield. This falls within our long-term strategy of matching together the core pricing power of a long-term exposure to a prime office product with value-add human transformation opportunities are the one that we are presenting today. In the next section of this presentation, we'll be presenting a little bit the rationale of this investment as a sector; later on, the specificity of the European leader where we're investing right now; and finally, the growth profile and returns that this investment opportunity is offering. So please Carmina, step in on section #2.

Thank you, Pere. In this section, as Pere mentioned, we are going to analyze the main driving forces that underpins the proposal we present today and why we especially think that now is the key moment. I am in Page 10. As you know, the science and innovation sector is an ecosystem of interconnected industry involving diverse knowledge-intensive corporates highly specialized. The global market is expected to be more than $6.3 trillion with significant expected for future growth on the back of megatrends. And this means -- this growth means increasing demand for science and innovation real estate specialized space. So the growth estimate is at 14%, backed by multiple underlying industry across pharma, [ health tech and research ], technology, energy, defense and security and research and development. So size and growth reinforce the momentum. And this is -- momentum is not just now. I'm on Page 11. We strong believe that the market of reference of the science and innovation, backed by a clear megatrend, as you have seen, is not [indiscernible]. It could be here. It can be here, will be here for a while. And why we believe this is an important avenue for the coming years? Different factors play into our favor: demographic factor, aging population, expectancy of life as a key driver, especially in Europe, where the population over 65 years old will increase 43% versus 2019; as well as technology. Artificial intelligence is accelerating scientific discoveries. And especially in U.S., the size of semiconductor market is expected in 2030 increasing 4x as well quantum computing 14% in a yearly basis. And finally, geopolitics, the important bet by Europe through an ambition plan to fund value-added industry and defense and security, accelerating the strategy autonomy for Europe. In Page 12, this ambition is being strongly pushed by recent announcement in Europe with an unprecedented plan of expenditure and investment across the key science and innovation industry, allocating a government budget for R&D, research and development, expecting to double in 2030 and with annual expenditure increasing by 3x. So that means the opportunity we present today is the right moment and in the right place. The big bet for Europe is an important tailwind accelerator and is sizing the Europe real estate behind the strategic autonomy of Europe. And this sector is more location-specific. In Page 13, we show you this -- who drives the locations where the ecosystem can -- will build through a quadruple helix model: government, civil society, universities and business. This location concentrates skills and talent pool of people, capital, meaning high-quality tenants and specialized knowledge industry. Consequently, on Page 14, based on the science and innovation, real estate remains the key emerging sector in Europe with an alternative real estate by forms in clusters. Europe becomes a growth destination for this industry supported by a significant strategic commitment to Europe, as we have highlighted in the previous pages, and by organic megatrends, as we have been sharing. So capital inflows in 2023 in Europe for this sector has been $45 billion, increasing 18% since 2020. So this environment creates a unique opportunity attracting global demand in Europe. We strong believe that the good momentum -- the good momentum for this industry. I am in Page 15. Europe is a less mature market in comparison to other international markets with strong growth, projections, especially in Europe, and with very few consolidating locations with a specialized infrastructure. So we see critical undersupply of strategic innovation infrastructure across Europe. And this is why we believe -- we strong believe that it's a good opportunity for now, this investment we present today. This mean momentum also for Barcelona and Madrid and Paris as an international science and innovation destination, where strategic infrastructure for European sovereignty in this field is located as well and especially where Colonial has a strong presence and Deeplabs has been started this activity in Madrid and Barcelona. Let me start some comments about Barcelona. I am in Page 16. So Barcelona is a favorite city for research and development investments. Let me give you some indicators. In the appendix, by the way, you have more detailed KPIs on different cities. But in the case of Barcelona, more than 50,000 students across 12 specialized science and innovation universities; 12,000 research, being #3 in Europe; approximately represent this sector 8% of the GDP, 7% of the employment; the second jobs creation in Europe; and the third largest economic sector. This is the reason, by the way, why AstraZeneca decided to allocate the new hub of more than 1,000 employees in Barcelona and with an additional expansion plans as well in the city. And a very important driver, you can see here some examples of the strategic infrastructure, but one of the important driver in life science is the clinical development. Barcelona, I don't know if you are familiar with, but it's very well positioned, meaning that in clinical trial in advanced therapies, it's #4 in Europe and #8 worldwide. Highlighting some of the infrastructures, you can see here some examples in this page. The supercomputing center, for example, is one of the most important in Europe, critical for life science, climate change and development and artificial intelligence, quantum computing and the chip industry. And this is the reason that recently, Innofab, a very strategic European project, has been decided Barcelona or has been selected Barcelona to allocate the [ last-generation ] microchips factory for the semiconductor industry. This is very key for the Europe strategy, as you know very well. Another key infrastructure of Europe for its strategic innovation plan is the Synchrotron Park, it's #7, the accelerator of electrons, which are very few in Europe, by the way, and it's used by a lot of researchers and innovation industry. So these are some examples for Barcelona. And let me jump in Madrid in Page 17. Madrid is another existing key location of Deeplabs today, and it's another important hub of international biomedical and innovation centers. Takeda, GlaxoSmithKline are some of the examples. In the same line, a lot of well-known international research institute, you can see here some examples, but some biologic center, biotechnology and genomic center are some of the strong ecosystem that attracts new innovation hubs and international talent. In the defense and security field, Indra is a prominent, as you know, Spanish defense and tech company. And in Tres Cantos, where Deeplabs have an important presence, there is a space hub focused on satellite communications technology. So civil space command, the National Institute of Aerospace are located in this area where -- and collectively contribute to Madrid's role as a center node in defense and security innovation landscape. And finally, you know that we have also our presence in Paris. We have a lot of capacities as well in this last science and innovation destination, which is Paris. This is as well an important network of world-class research institutes, such as Institut Pasteur, Université Paris-Saclay, the [Foreign Language], you have here some examples. And this is the major players of medical and digital health as well, has a very strong presence in this city, such Sanofi, Ipsen, Pfizer, among others. Recently, France has been also launched a new updated innovation plan for 2030, has been updated at a higher scale, EUR 7.5 billion, reinforce the destination of Paris as an important hub for this industry. So as a conclusion, not only the megatrends are an important lever for the growth in demand and specialized demand for adequate infrastructure for this industry, but also the strong commitment and ambitions for Europe in innovation, technology, defense and security reinforce the momentum. Our presence in the market, Colonial's presence in Madrid, Barcelona and Paris as -- all of them a clear destination due to the strength of the ecosystem and strategic infrastructure, reinforce especially the alliance we present today with Stoneshield as a unique opportunity to invest today in the science and innovation real estate. So this partnership with Colonial and Stoneshield becomes an early mover aligned with our long-term strategy.

Thank you. We will now enter the new section, Juanma, when you wish.

Thanks. Now in this section, I will describe how we are going to capture the beauty and the value of the megatrends explained by Carmina by offering the right product to the clients in the science and innovation arena. For that, let me walk you through what we have acquired with Deeplabs and how this platform sets the stage for our ambition to become a leading Pan-European science and innovation player. So let me move to Slide 20. What are we buying and what are the strengths of this platform? We've acquired a powerful innovation platform, 22 assets across 2 hubs, MaSID and BaSID, located in the cities of Madrid and Barcelona. That is 5 properties in Barcelona accounting for 60,000 square meters and 17 properties in Madrid accounting for 87,000 square meters. It's not just about real estate. It's also about the team behind it, a solid group of both real estate and science professionals who created from the scratch and operates the platform. So what makes Deeplabs stand out? First, its scale because it's already a leader in Spain with a strong market share of 33%, and secondly, ecosystems it has built. It is about dynamic environments that mix workspaces, wet and dry labs, research and development areas, amenities and much more. And this been possible, thanks to this talented team. The team knows how to transform outdated assets into high-demand, customized innovation spaces. And the team has strong sourcing skills. They are great at spotting opportunities where it's turning existing space into lab or acquiring assets with triple net leases where the team offers different options to tenants to make the most of the opportunity of its critical infrastructure. I'm now on Slide 21. And this is about the ecosystem in action. As I mentioned, the mix of experienced people and strategic hubs has created a real ecosystem. Looking at the map on the right-hand side, you'll see the hubs in Madrid and Barcelona. These clusters have been created by Deeplabs through many different acquisitions. The tenant mix includes major pharma companies, biotech firms, manufacturing, research institutions, among others. Good idea of it, just have a look to the corporate logos in this presentation. Sector-wise, the portfolio touches many key areas. 30% of the clients comes from the pharma, biotech, medtech industries; 20% are space, defense and mobility; and circa 11% automotive and telecom. How is the value growth captured? It is through an integrated platform with strong operational expertise and tailored approach. Deeplabs and Colonial share 2 core strategies. The first one is the Alpha strategy that Pere was mentioning before, and this is about creating tailored work environment that meet client needs. And the second one, also mentioned in this presentation, is about the urban transformation strategy, creating spaces and neighborhoods. Together, both strategies, plus the operational muscle of Deeplabs' team and consulting support from BioInnova, we are bringing real value into this transaction. It's not just about the space. As I said, it's about how it's managed and used. So I'm now in Slide 22. And let me introduce what's the value proposition of the deal. In terms of product design, we are talking about specialized spaces, wet labs for microbiology, biochemistry, cryotanks, et cetera; dry labs like data visualization rooms, computation centers; research and development workspaces tailored to technical needs. That is in terms of product design. In terms of clients, I think it's important to highlight why do science and innovation tenants stay longer. And this is because their spaces require heavy investment, equipment certifications, critical infrastructure. And what they do cannot be done remotely. That creates strong tenant stickiness. So finally, in terms of results, having into consideration the product design and the clients, we achieved rental premium, longer contract durations, and from a value perspective, a resilient portfolio with greater liquidity and yield compression. In the end, 40% to 50% increase in workspace rental values plus 3x the rent in the space devoted to labs and technical facilities. Here, you can see on the right-hand side a real example in one of the properties in Madrid, which is Encuartes 19. And finally, let's move to Slide 23. And after describing what we are acquiring, let me go to what are we building from here? So looking ahead, we see a clear path for growth, not just in Spain but across other European clusters, as it was introduced by Pere at the beginning of this presentation. We are targeting markets with supply constraints with strong innovation fundamentals. We have a pipeline of EUR 2 billion, and 40% of it is already identified, that was referred as the short-term pipeline, including EUR 200 million in advanced negotiations or under exclusivity in cities like Madrid, Barcelona and beyond. So we want to capitalize on a first-mover advantage. And together with the joint capabilities of Colonial and Stoneshield, we're confident we can accelerate that growth, bringing in third-party capital to scale up quickly and efficiently. So to sum up, we're not just buying a portfolio. We're something that successfully works. We are investing in a platform with proven execution, strong fundamentals and with the opportunity to replicate the model across different European destinations. Thanks all for your attention. And let me now hand it back over to Pere Vinolas.

Thank you, Juanma. Let's now talk about returns and growth profile. As Juanma was saying, this is about 3 things: first of all, it's about investing in the existing portfolio; second, it's about a buildup strategy; and third, it's about putting at stake the asset management capabilities that Colonial has. So it's about these 3 components that we are talking about returns. I'm now on Page 26. Let's talk first about the existing portfolio, which is roughly speaking, EUR 400 million. Here, we are talking about 130,000 square meters, the leading portfolio in Spain, an existing reality already, a proven concept. And here, we are talking about a combination of yielding assets, some pre-leased assets and some additional projects. Here, we expect a stabilized yield on cost between 6% and 7%. And this is the base case of the returns of this portfolio. Then it comes the second part, which is the short-term pipeline. Maybe the most important idea about this short-term pipeline is the visibility. We already have very high visibility on the investment opportunities that our platform can acquire. And therefore, we can do some assessments on the returns based on solid fundamentals. And in this respect, we expect a second layer of yields in this range, between 7% and 8% of stabilized yield on cost. And finally, there is this growth ambition, the acceleration of this business model and the idea of doing this through asset management on third-party capital. If we put these 3 things together, I'm on the next slide, we are talking about an estimate geared IRR of 15%, and we are talking about a stabilized yield on investment which is above 10%. It's double digit. So certainly, it's an opportunity with very high returns in return of the hard job that we expect to do here. Implications of this for shareholder value. First, we believe that regarding NTA, this will be slightly accretive in the short term but definitely accretive in the long term, as anyone could imagine with this kind of returns, and certainly will mean an important growth of the assets under management of the company. Concerning the EPRA EPS, we believe that the combination of existing yield income-producing assets and new projects will mean that in the short term, the EPS will be very slightly accretive. In other words, we do not change the guidance that we've provided to the market for 2025. On the other hand, we believe that this portfolio can be very accretive in the midterm. Some back-of-the-envelope numbers, also our more precise modeling, what its telling us is that this can add approximately EUR 0.03 to our EPS in the midterm. I'm talking about 2027, 2028. Last but not least, all of this is designed to be done within a framework of a stable EPRA LTV. That means without any harm or without any downside on the solvency of our capital structure. Therefore, very good prospects in terms of returns. Let me now go through some final conclusions. First of all, as I said, this is an initiative that is rooted in the long-term strategy of Colonial. You know that we see ourselves not only as a holding company of replicable assets. We see ourselves as a unique platform that, as I several times mentioned, most of these unique assets that we own is because at some point, we manage them as we transform them. So it's a company that has solid grounds in a trajectory of urban transformation. And in this respect, we have long term had a strategy of putting together a portfolio of stable yield income-producing assets with very good growth profile, our unique portfolio of trophy assets, but also this hand in hand with our capacity of putting urban transformation capabilities at stake and devoting some of our portfolio, around 10% of our portfolio, in value-added initiatives, is in this context that we see this investment in science and innovation in the alliance with Stoneshield. So it's -- first of all, the first message is about consistency in the strategy of Colonial. The second, of course, is a message of confidence in the strong growth that the science and innovation space will have in Europe and is already having. It's a number of things that are happening at the same time. It's about demographics, an aging population that is having an impact in the growth of science. It's about technology and all of the impact that have in innovation. And it's also about geopolitics. I think that Europe is changing. Europe is changing in the direction of more growth, more spending, more innovation. It's crystal clear that the deglobalization is reshaping the European landscape. And is it on the back of all of these megatrends that we see this opportunity as an important one. Not forgetting that, as Juanma explained, this is not about global megatrends only. It's about micro returns obtained through real estate management based on our capabilities. And as I said, this investment opportunity, it's about a combination of things. What we are presenting today is the investment on a portfolio, EUR 200 million being invested on very solid grounds, but it's also about investing in a buildup strategy. It's about investing in a new business model. It's about investing in a new environment of growth. And all of this is based on this alliance with Stoneshield, but it's also based on the existence already of a prime leader, of Deeplabs, which is the main operator in science and innovation in Spain, will be the basis for this growth strategy. Well, this is the presentation we wanted to share today. Thank you for your attention. And now as usual, we will be open to any questions you may have. Thank you.

[Operator Instructions] And the first question comes from Mr. Adam Shapton from Green Street.

I hope you can hear me okay. I mean I have a lot of questions, but I'll stick to 2. First is what do you envisage being Colonial's share of the JV in the long term? Obviously, you made the initial investment, but as you invite third-party capital and work towards the target AUM of about EUR 2.5 billion, what do you expect your share to be? And maybe why not just -- why would you not have ambitions to fund the whole thing yourself with an operating partner? And then maybe more of a real estate question. What -- just wondering what the mix of lab space and conventional office spaces that you'd envisaged for the portfolio? I mean science and innovation can be quite a broad term, including all the types of lab space you mentioned, but it could equally be conventional office for sort of science and innovation companies. So wondering what the mix of lab and other would be in the sort of EUR 2 billion of AUM.

Thank you, Adam. Very good questions, both of them. I think that regarding our long-term share, first of all, of course, we always have in mind our capital structure and its strength. And we are a company with a reputation as holding solid fundamentals. So basically, that's one of the constraints in order to have this long-term view. But I would say that here, there will be 3 phases. The Phase #1 is that Colonial is, of course, holding the major share of this existing investment because we are the founding investor at this stage in this portfolio together with Stoneshield. Then second phase, I think that is key to leverage on the appetite that third-party money -- investors will have. And this is not only about money, it's also about strategy and it's also about returns. So we will be diluting our share in this platform. We understand that we should go below 50%. Let's say that a 40% number in the midterm would be reasonable. And then as you suggest, well, maybe depending on the trends and returns and the performance, different things may happen. We may increase again or down. That will depend on the long term. We don't have a rigid view on this. But I think that the initial phase is for us to give a little bit of room to third-party investors and to dilute ourselves below 50%. Your second question is about the mix of labs versus office. Before going into this specific question, let's also say that we will pay a lot of attention about the right combination between actual cash flow versus great ideas. So you know what I mean. When you are in this kind of sectors with growth, you have to be wise and prudent in putting together existing streams of cash flows with solid growth, together with great capacity that some new ventures may offer, and that's another combination that we will have very present in our thoughts. But answering your question, we believe that wet and dry labs will have a share of 25% of the total assets under management, always bearing in mind that all of this exposure would be to this science and innovation sector. Therefore, even if it's offices, will be very unique kind of clusters that will have a specific focus to this vertical. But I also wanted to emphasize, as I said before, it's not about a narrow view of, let's say, health care, of life science. It's about this, it's about energy sector, it's about technology, it's about defense, it's about a number of sectors. But that was the answer to your question. Thank you, Adam.

Great. Sorry, can I just have one supplemental just on the JV? Do you expect to earn fees? Do you expect to earn fees in the long term as you bring in third-party capital? Will there be fees going to Colonial?

Yes, yes, the business model is based on this assumption. And in fact, we are partnering with one of the leaders in this with a very successful, proven track record in doing this for a number of years with several billion under management. So yes, this is a part of our business model in this space. And I think that is also wise, if you allow me the expression, in the current environment that we have. I think that when you have a platform like Colonial, it is wiser to expose them to, let's say, capital markets as we know them, in direct capital markets, but also leverage on your capabilities to also put your value at stake with the access to private capital or third-party money, which is a way to leverage the returns that, in the end, we are offering to our shareholders.

We have another question from Veronique Meertens from Kempen.

Also a few questions from my side. Maybe to start, just so I understand correctly, what's now exactly Stoneshield's share in the JV now in Deeplabs? Because you're acquiring for EUR 200 million for EUR 400 million of assets.

Look, there are 2 different levels. Here, we are talking first about an asset management company where Stoneshield and Colonial will be partners or are already partners at a 50% basis, both in equal terms. That would be the management company of the portfolio. Then at the portfolio level, at the beginning, at this moment, Colonial, because of this investment, will be holding 90% of the property of the existing assets.

Okay. Okay. That's very clear. And then maybe you mentioned the short term and EUR 700 million of assets identified. What is short term? Is that 1 to 2 years? Or what should I think about?

Yes, we wonder about this, too. No, look, I think we are talking about 1 year because there's a lot of work that has been done on the next layer of pipeline, and the appetite of the investors is there. So that's why we are very precise in identifying this, let's say, short-term pipeline because we would like to execute this part in a period that would be more close to 1 year than 2 years.

And Veronique, sorry, there is a pipeline that are in the same areas that today, Deeplabs is being developed. So there are some tenants that they are willing to expand and to strength the campus. So we have been identified additional, I would say, assets in the same areas that we are now -- Deeplabs is very active.

Okay. Very clear. And then maybe on valuation of these assets, what kind of yields in the end do you think you can get on these assets? As in what kind of development gains do you expect on these development or redevelopment?

Well, the strategy is sort of a triple net lease. So we -- they have the capacity, this platform as well we, as Colonial, very close to our tenants to do some kind of transactions of -- in the line of sale and leasebacks, so this triple net lease strategies. And as we said, they are yielding assets and repricing and re-rating, and the refurbishment or reconversion into potentially some part of wet labs or dry labs provide these additional yields. So this is why the expected yields, even being a yielding asset, is stabilized in 7%, 8%.

[indiscernible] kind of gains do you expect to make on this or nothing significant?

Can you repeat, Veronique? The line was cut for a second. Can you repeat?

What kind of development gains, for instance, for that EUR 700 million pipeline that you have? What do you have in mind there?

Yes, in this [indiscernible] as we highlight, 7%, 8% yield.

Okay. And maybe one last follow-up. The EUR 700 million, that's already for third capital, just to be sure?

Yes.

The second phase?

Yes.

We have another question from Pierre-Emmanuel Clouard from Jefferies.

Actually, a couple of questions on my side. Can you give us the average age of the portfolio, of the existing portfolio, excluding the pipeline?

Maybe Juanma, you can deal with this one?

Yes. Most of the portfolio has been recently renovated since 2021. So I'll say that from renovation, 4 years old. And the assets requiring transformation are currently underway. So it's an updated real estate portfolio.

And can you give us an idea on when those buildings have been built?

These buildings were built -- the platforms -- you mean acquired?

No, built, built.

Built.

Built, these buildings were built. The buildings in the northern region of Madrid were built between 1990 to 2010. So it's a diversified range of building age because this is not that they came and they acquired 1 portfolio of assets. They were acquiring many different assets to conform the existing ecosystems.

Okay. And in terms of CapEx plan in 2025, 2026, can you give us a broad breakdown how the EUR 700 million that you want to spend?

From the existing portfolio, there is still EUR 21 million secluded in the price to be deployed as CapEx. And for the EUR 700 million, most of the already pipeline identified is not requiring a lot of CapEx. It would require light CapEx and retransformation.

Okay. And maybe a final one. What is the average price per square meter of the existing portfolio? And if you can give us more color, is there a big discrepancy between Madrid and Barcelona?

Yes. The euro per square meter is quite appalling because it's below replacement cost, standing at EUR 12,700 per square meter. And the distribution, it's -- in Barcelona and Madrid, it's more or less equal. So it's not a big difference. It's not a big difference in rents either. So the blended average, it's EUR 2,700, including the CapEx to be deployed, as I mentioned before, the EUR 21 million.

There is another question from Ana Escalante from Morgan Stanley.

I have a question about like the long-term weight of this opportunity because if I understand correctly, the total pipeline of EUR 2 billion, that's the gross assets, right, we're talking about? Or that's Colonial expected investment? Because even if it was all from Colonial, that will represent, what, maximum 10% of your portfolio, assuming you keep the 50%, I guess, stake, maybe 40%, even less. So I don't know. Why do you think this is going to turn the story? Or another way to ask the question, if you think that this is the most interesting story at the moment, why doing only EUR 200 million at the moment and aiming for 10% of the portfolio? Why not doing more? Is it because of balance sheet constraint because this is more kind of like experimental, and therefore, conviction will come with time? Or why not doing more?

Yes. Thanks, Ana. We don't exclude doing more. So we want to do this in different stages. As I said, first of all, we are taking almost everything that is available today, like 90%. Second, we believe that it's strategic and even better for the history to allow for third-party money to step in. And then third, but this, let's say, becomes more uncertain, in the midterm, we may consider doing more or doing a lot more. That will depend on the prospects. What is true following your statements is that at this moment, yes, you are right. This is not changing the history of Colonial. This is part of our value-added portfolio. This is part of the 10% of the assets under management that we invest more in urban transformation. With these kind of levels, you are not going to change the balance sheet of Colonial. But yes, what you are going to do is to enhance your returns in a significant way, even only with this in the midterm. As I said before, our expectations in terms of EPS, this may add like EUR 0.03 in just 2 or 3 years. So it's about, let's say, return enhancement or EPS enhancement. It's not about revisiting our history. You're right in this. And it's true that this is an initial investment, and we remain open to take advantage of this if the opportunity arises. But we believe that in the short term, it's strategic to open this to third-party capital.

Okay. And then in terms of the scale-up, is the initial target to keep that split in terms of opco, propco, under which Colonial will own most of the assets, particularly thinking on different geographies, what you are versus the ones you are currently present at the moment? Or will that come mainly from the asset management capabilities, but not necessarily from an asset ownership point of view?

Yes. Well, first of all, at the asset management level, this is a long-term alliance between Colonial and Stoneshield. And we are investing here together with the belief that this is a fantastic history for the long term. And in that sense, we have a share, a joint venture, 50-50, that is here to remain, clearly speaking. At a different level, about exposure of Colonial at the asset level, yes, at the beginning, our exposure is 90% because of this strategy of growth on one side; and second, giving access to private capital. Our central scenario is that our presence should be diluted, even below 50%. That would be our midterm projection central scenario. After that, as I said, our strategy will be revisited, but that will be our initial base case.

It seems that there are no further questions. I'll give back the floor to Mr. Pere Vinolas to close the session.

Well, it has been a pleasure to share with you this new initiative. It's a very interesting one. It's a new one. So it's not business as usual. That particularly means that we are, as always, but even more in this circumstance, fully available to additional questions, inquiries or anything that you would like to share with our teams. We'll be very happy because this has been a hard work that has been done in order to be today in this situation. Behind what we have been presenting today is a very well grounded analysis of individual properties, and it's a very well grounded business plan supporting this. So -- but this needs, of course, being familiar with this. So we are very much open and available to have additional contact with you. Having said that, thank you very much for sharing this with us today. And I hope to be with you talking about new returns on this soon. Thank you, and have a very good day.