MERLIN Properties Annual Report 2019 / English

| 7 Lastly, our portfolio of net leases provides us with highly stable cash flows, along with very high, very stable occupancy levels and exceptionally creditworthy tenants, which are important components in cash generation and balance sheet stability. We have a portfolio of 0.4 million sqm, valued at €1,873 million, 92% of which is let to tenants with an A- rating, and 100% occupancy. In an increasingly complex market environment, this portfolio guarantees the recurring cash flow necessary to meet our obligations. Finally, in 2019 we made a long-term strategic investment by purchasing a 14.46% stake in the Distrito Castellana Norte project, a transformative development for the city of Madrid (our main office market), where we think we can add tremendous value and where, in our opinion, it is important for a leading company like MERLIN Properties to participate. Given its lengthy development horizon, we have adopted the industry view of creating value with regard to this project. Thus, 2019 has been a year of better efficiency and returns, of improvements in the average quality of our assets through capex and divestments, and of consolidating our leadership in all sectors, while participating in key strategic projects like DCN. Financially, as I mentioned earlier, we have a strong balance sheet with an LTV ratio of 40.6%, down 7 bps from 2018, and an average maturity of 6.4 years, with 99.5% of our debt financed at a fixed rate. The average cost of financing is 2.09%. The company has an extensive franchise of fixed-income investors that provide good, recurring access to markets. Taken together, these factors allow us to propose a recurring per-share dividend of €0.35 at the Shareholders’ Meeting and face the environment with caution but confidence in the strength of our balance sheet and the quality of our assets and our management. As chairman of the Board of Directors and the head of corporate governance, we will continue to improve the latter, while providing our investors with maximum transparency. In this respect, in 2020 we will add profiles that enrich the composition of the Board. In FY 2019, we completed a three-year cycle of company growth and consolidation as the industry leader in Iberia. This growth cycle was accompanied by a comprehensive management incentive plan in line with the interests of shareholders whose objectives have been met. In the coming years, as the market grows more complex, we will increasingly focus on consolidating our current position and the new remuneration policy will be consistent with the new circumstances and market references. At MERLIN Properties, we take into account all of the company’s stakeholders: shareholders, investors, clients, suppliers, and employees. We are confident that our success is based on striking a balance between them and that our joint efforts result in profits for the company. As such, we are committed through hard work and dedication to ensuring it remains so in the future. Finally, although we face a difficult market environment, we will confront it with an innovative, fighting spirit, confident that the worst crisis is the one that results from a lack of strength and determination to face it. At MERLIN Properties, we have that strength and determination and we will face the future with prudence and optimism. Once again I want to thank the shareholders of MERLIN Properties for their confidence and support, without which none of this would be possible. Many thanks.