MERLIN Properties Annual Report 2017 / English

ı 48 ı Notes to the consolidated income statement Gross rents (€ 469,405 thousand) less portfolio operating expenses not rechargeable to tenants (€ 35,564 thousand) equals to net rents before incentives and collection loss of € 433,841 thousand. After deducting incentives and collection loss (€ 18,605 thousand) the resulting amount is € 415,236 thousand of net rents. Other operating income includes mainly asset management services performed for third parties for € 8,196 thousand (Testa Residencial and Aedas Homes) and Tree inflation derivative (€ 2,049 thousand). The total amount of operating expenses of the Company in the period is € 86,337 thousand, with the following breakdown: i. € 27,780 thousand correspond to personnel expenses. ii. € 9,767 of recurring general expenses. iii. € 43,839 thousand corresponding to the long-term incentive plan (LTIP) accrued: (i) 25% of the 2016 incentive awarded in 2016 (€15,739 thousand), and (ii) a total provision of € 28,100 thousand for the 2017- 2019 incentive plan. This amount as per the Spanish GAAP is booked under personnel expenses too. iv. € 4,951 thousand of non-recurring operating expenses. Non-recurring expenses correspond mainly to expenses for the bond issuance executed in May and October. The sum of the personnel expenses (excluding the amount accrued for the LTIP) and the recurring operating expenses of the Company are within the threshold of overheads of the Company, prevailing this period the 0.6% of the EPRA NAV of the Company. The reconciliation between gross rents of the period and FFO is as follows: Gross rents Propex non rechargeable Net rents before incentives and collection loss Incentives and collection loss Net rents after incentives and collection loss Other operating income Personnel expenses Opex recurring Net financial results & recurring taxes Recurring FFO Recurring EBITDA 469.4 433.8 415.2 289.2 392.6 (35.6) (18.6) 14.9 (27.8) (9.8) (103.5)