MERLIN Properties Annual Report 2023

6 | Annual report | 2023 Javier García-Carranza Non-Executive Chairman Letter from the Chairman Dear Shareholders, I am pleased to present to you the 2023 MERLIN Properties (“MERLIN” or the “Company”) Annual Report. The Annual Report details the Annual Accounts and all relevant information relating to the financial year 2023 in a very detailed manner. The year 2023 has been characterised by the ECB's interest rate hikes, which since July 2022 have been followed by ten consecutive rate hikes to 4.5% in September 2023, a level not seen since 2001. This has been reflected in the containment of inflation, which has been kept at a year-on- year rate of 3%. Spain's GDP grew 2.5%, exceeding initial forecasts, with a solid employment rate and consumption levels quite positive. Shareholder value creation is a combination of operational excellence and anticipation of real estate cycles with asset rotation. Our sector is by definition a very capital-intensive sector and therefore very sensitive to interest rate levels. Although our rents are indexed annually to inflation, the value of the assets is fixed by the rate at which they are discounted. Consequently, we have faced a high level of interest rates in 2023 which has affected the value of our assets and our cost of financing in the long term. This decline in asset values has been partially mitigated by good operational management which brought the portfolio's occupancy rate to 96.2%. All in all, it was a negative year in terms of net asset value (NTA per share) despite the team's efforts to create value in operational management. This operational value creation is reflected in its key operating metrics and, more importantly, in all the asset categories in which it operates. This year we have seen how MERLIN achieved growth in rents and occupancy. At consolidated level, the Company achieved gross revenues of € 475.6 million and cash flow generation (“FFO”) of € 284.2 million or € 61 cents per share, a growth of 9.6% vs. 2022, after excluding the effect of the sale of 662 branches to BBVA, formalised in June 2022. By business segment, offices ended the year in line with forecasts. Occupancy stood at 92.5% and we had a significant increase in rents in comparable terms of 6.1%. Rents of € 254.8 million The highlight of the year was the successful launch of our first three Data Centers, a category of assets that represents the future of the company