MERLIN Properties Annual Report 2021

88 | Annual Report | 2021 Accounting EBITDA The accounting EBITDA is calculated as the net operating income before net revaluations, amortizations, provisions, interest and taxes. The accounting EBITDA is a performance metric widely used by investors to value companies, as well as the rating agencies and creditors to evaluate the level of indebtedness The reconciliation with IFRS metrics appears in the table hereafter EBITDA The EBITDA is calculated as the Accounting EBITDA deducting the “non-overheads” costs and the LTIP Provision The EBITDA is a very useful metric as it excludes the impact of atypical costs incurred in the period. The atypical costs or “non-overheads” costs are the ones related to the acquisition and disposal of assets and indemnities among others (as described in the IPO prospectus) The reconciliation with IFRS metrics appears in the table hereafter Accounting FFO and FFO Accounting FFO or Accounting Funds From Operations is calculated as EBITDA less debt interest expenses and recurring taxes (excluding taxes from disposals or other extraordinary events) FFO is calculated deducting the non-overheads costs of the company from the Accounting FFO It is a relevant performance and liquidity metric recognized on a global basis in the real estate sector MERLIN Properties, as a member of EPRA (European Public Real Estate Association), follows EPRA’s best practices reporting standards which enables the investor to better compare certain performance metrics that are specific to the real estate sector. This metrics are released on a semi-annual basis and detailed in the management report. EPRA costs It is calculated as total operating costs of the company divided by the gross rents net of incentives This performance metric shows the operating efficiency on a recurring basis The reconciliation with the Financial Statements appears in the Appendix of this report EPRA Earnings Earnings from core operational activities as per EPRA’s recommendations The reconciliation with the Financial Statements appears in the Appendix of this report EPRA NRV, EPRA NTA and EPRA NDV EPRA Net Reinstatement Value: Assumes that entities never sell assets and aims to represent the value required to rebuild the entity EPRA Net Tangible Assets: Assumes that entities buy and sell assets, thereby crystallizing certain levels of unavoidable deferred tax EPRA Net Disposal Value: Represents the shareholders’ value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax EPRA Yields Net Initial Yield: Annualized rental income based on the passing rents at the balance sheet date, less non recoverable property operating expenses, divided by the market value of the property (GAV) increased with acquisition costs EPRA “Topped-up” NIY: Adjustment to the EPRA Net Initial Yield in respect of the expiration of rent free periods (or other unexpired lease incentives such as discounted rent periods and step rents) These are two relevant performance metrics widely used to compare the return of the real estate assets in the portfolio, based on the prevailing lease contracts at a given date regardless of the financial structure of the company as per EPRA’s recommendations The calculation is provided in the Appendix of this report Given the nature of the metric, it is not possible to reconcile it with the Group financial statements EPRA Vacancy Rate Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio Given the nature of the metric, it is not possible to reconcile it with the Group financial statements Loan-to-value ratio (LTV) The loan-to-value ratio is calculated as the net debt divided by the fair value of the assets of the company (GAV + transaction costs) The LTV is a performance metric widely used by investors to assess the level of risk, as well as the rating agencies and creditors to evaluate the level of indebtedness The reconciliation with IFRS metrics appears in the table hereafter Leverage ratio The leverage ratio is calculated as the net debt divided by the net debt plus the equity The leverage ratio is a performance metric widely used by investors to assess the level of risk, as well as the rating agencies and creditors to evaluate the level of indebtedness