MERLIN Properties Annual Report 2021

MERLIN Properties | 7 III plans continue progressing after having delivered 214,077 square meters in the period and another 104,155 square meters in Zal Port. Shopping centers have started to recover. After the successful implementation of the commercial policy in 2020 to help our tenants pull through the pandemic, incentives have decreased to € 24.9 million, mainly concentrated in the first semester when most shopping centers still suffered restrictions in terms of openings and capacity. In operating terms, occupancy has increased in 2021 and stands at 94.2%. Footfall and tenant sales continue recovering, increasing 24.9% and 26.9% respectively, although we have not yet reached pre-pandemic levels. Gross rental income in 2021 amounts to € 114.9 million. Rents in net leases, our triple net lease portfolio which includes the bank branches leased to BBVA, have amounted to € 85.6 million and 100% occupied. As of the publication of this Annual Report, MERLIN has announced the disposal to BBVA of 662 bank branches leased to BBVA for an amount of €1,987 million euros, which represents a premium over last appraisal of 17.1%. Proceeds from the disposal will be used to reduce debt and to distribute an extraordinary dividend, compulsory by the SOCIMI regime, of approximately € 315 million. Following this important transaction, MERLIN significantly reduces its loan- to-value to 31.2% and obtains resources for the Company’s growth plan, focused on logistics; to consolidate even more its leadership position in this asset category with excellent fundamentals, and to develop the data center plan launched in 2021. MERLIN, with the sale of the bank branches, ultimately creates value for shareholders and prepares itself for the transition from rents associated with analogical businesses (bank branches) to rents associated with digital businesses (3PL logistics and data centers). The Company has made significant improvements in terms of sustainability in 2021, after the creation of the Sustainability, Ethics, and Innovation Commission. From the hand of this delegated commission of the Board of Directors, the Company has dynamically worked in elaborating an active plan for decarbonization, culminating with the launch of the pathway to net zero as of the publication of the Report. MERLIN commits to reduce its footprint by 85% from baseline 2018 until 2028. The pathway to net zero also includes MERLIN’s commitments with the embodied footprint reduction in the construction and development of assets and launches an innovative initiative to attract its tenants to MERLIN’s decarbonization pathway: reduction in the tenant’s lease if they duly certified they are net zero in their operations. Finally, the Company in 2021 has improved in all the sustainability ratings in which it is present, highlighting the inclusion in the Dow Jones Sustainability Index for Europe. In terms of certifications, the Company counts with 91% of its portfolio certified by LEED and/or BREEAM. This year, the Nomination and Compensation Commission has worked in the elaboration of a new remuneration policy, which is now up for approval by MERLIN’s shareholders in the Annual General Meeting. This new policy, although it is a continuation of the existing policy approved by the 17th of June 2020 General Meeting, introduces some modifications to adapt it to the new developments introduced in the Ley de Sociedades de Capital and to align it with the stakeholders, in particular with its shareholders. In the compensation decision, this policy takes into account the principle of proportionality, the financial situation of