Merlin Properties

SOCIMI, S.A. and

Subsidiaries

Consolidated Financial Statements for

the year ended 31 December 2022

prepared in accordance with International

Financial Reporting Standards (IFRSs)

as adopted by the European Union and

Consolidated Directors' Report

MERLIN PROPERTIES SOCIMI, S.A.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS OF 31 DECEMBER 2022

(Thousand euros)

ASSETS	Notes	31/12/2022	31/12/2021	EQUITY AND LIABILITIES	Notes	31/12/2022	31/12/2021
NON-CURRENT ASSETS				EQUITY	Note 13
Other intangible assets		1,746	1,594	Share capital		469,771	469,771
Property, plant and equipment		6,323	9,160	Share premium		3,541,379	3,647,876
Investment property	Note 7	10,714,200	12,297,257	Reserves		3,023,630	2,566,276
Investments accounted for using the equity method	Note 9	500,300	482,784	Other shareholder contributions		540	540
Non-current financial assets	Note 10	211,048	359,791	Valuation adjustments		12,798	(67,420)
Derivatives		18,882	167,080	Tresury shares		(17,166)	(32,305)
Other financial assets		192,166	192,711	Interim dividend		(444,815)	(70,033)
Deferred tax assets	Note 17	78,646	83,808	Profit/(Loss) for the year attributable to the Parent		263,087	512,217
Total non-current assets		11,512,263	13,234,394	Equity attributable to the Parent		6,849,224	7,026,922
				Total equity		6,849,224	7,026,922
				NON-CURRENT LIABILITIES
				Debt instruments and other marketable securities	Note 14	3,279,334	4,017,570
				Long-term bank borrowings	Note 14	189,866	1,641,139
				Other financial liabilities	Note 15	156,398	158,353
				Deferred tax liabilities	Note 15 y 17	613,479	681,013
				Provisions	Note 15	12,670	11,210
				Total non-current liabilities		4,251,747	6,509,285
				CURRENT LIABILITIES
CURRENT ASSETS				Debt instruments and other marketable securities	Note 14	775,036	588,155
Inventories	Note 5.2	44,508	38,697	Bank borrowings	Note 14	2,806	14,853
Trade and other receivables	Notes 10 y 11	49,840	39,625	Other current financial liabilities	Note 15	9,020	7,864
Other current financial assets	Note 10	2,960	82,919	Trade and other payables	Note 16	146,850	114,155
Other current assets		12,463	10,481	Current income tax liabilities	Note 17	5,234	3,935
Cash and cash equivalents	Note 12	429,449	866,721	Other current liabilities	Note 15	11,566	7,668
Total current assets		539,220	1,038,443	Total current liabilities		950,512	736,630
TOTAL ASSETS		12,051,483	14,272,837	TOTAL EQUITY AND LIABILITIES		12,051,483	14,272,837

The accompanying explanatory Notes 1 to 24 and Appendix I are an integral part of the consolidated statement of financial position as at 31 December 2022.

1

MERLIN PROPERTIES SOCIMI, S.A.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE PERIOD ENDED IN 2022

(Thousand euros)

	Notes	Year 2022	Year 2021(*)
				CONTINUING OPERATIONS:
Revenue	Notes 6 y 18	439,038	382,830
Other operating income		2,650	4,277
Staff costs	Note 18.c	(39,673)	(40,779)
Other operating expenses	Note 18.b	(73,818)	(68,594)
Profit/(loss) on disposals of non-current assets	Note 7	11,561	(1,900)
Depreciation and amortisation charge		(1,885)	(1,858)
Excessive provisions		(160)	1,169
Change in fair value of investment properties	Note 7	(249,272)	195,497
PROFIT/(LOSS) FROM OPERATIONS		88,441	470,642
Changes in the fair value of financial instruments-	Note 10 y 14	41,226	10,352
Finance income	Note 18.d	3,942	5,421
Profit/(loss) on disposal of financial instruments		(283)	(1,347)
Finance expenses	Note 18.d	(109,203)	(116,458)
Share of results of companies accounted for using the equity	Note 9	24,033	34,560
PROFIT/(LOSS) BEFORE TAX		48,156	403,170
Income tax	Note 17	(6,800)	(7,810)
PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS		41,356	395,360
DISCONTINUED OPERATIONS
Profit/(loss) for the year from discontinued operations net of tax	Note 3	221,731	116,857
PROFIT/(LOSS) FOR THE YEAR		263,087	512,217
Attributable to shareholders of the Parent		263,087	512,217
EARNINGS PER SHARE FROM CONTINUING OPERATIONS (in euros):	Note 13.6
Basic		0.09	0.85
Diluted		0.09	0.85
EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS (in euros):	Note 13.6
Basic		0.47	0.25
Diluted		0.47	0.25

(*) Reexpresed Financial Statements

The accompanying explanatory Notes 1 to 24 and Appendix I are an integral part of the consolidated

statement of financial position as at 31 December 2022.

2

MERLIN PROPERTIES SOCIMI, S.A.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD OF 2022

(Thousand euros)

	Notes	Year 2022	Year 2021(*)
PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO CONTINUING OPERATIONS					41,356	395,360
PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO DISCONTINUING OPERATIONS		221,731	116,857
PROFIT/(LOSS) PER INCOME STATEMENT (I)		263,087	512,217
OTHER COMPREHENSIVE INCOME:
Income and expense recognised directly in equity-
Arising from cash flow hedges (*) from continuing operations	Note 13.7	12,781	—
Arising from cash flow hedges (*) from discontinuing operations	Note 3	90,577	23,202
OTHER COMPREHENSIVE INCOME RECOGNISED DIRECTLY IN EQUITY (II)		103,358	23,202
Transfers to the income statement from continuing operations	Note 13.7	17	—
Transfers to the income statement from discontinuing operations	Note 3	(23,157)	8,915
TOTAL TRANSFERS TO THE INCOME STATEMENT (III)		(23,140)	8,915
TOTAL COMPREHENSIVE INCOME (I+II+III)		343,305	544,334
Attributable to shareholders of the Parent from continuing operations		54,154	395,360
Attributable to shareholders of the Parent from discontinuing operations		289,151	148,974
Attributable to shareholders of the Parent		343,305	544,334

(*) Rexpresed Financial Statements

(**) Amounts to be transferred to the profit and loss account in subsequent years

The accompanying explanatory Notes 1 to 24 en the Consolidated Memory and Appendix I are an

integral part of the consolidated statement of financial for the period ending in 2022.

3

MERLIN PROPERTIES SOCIMI, S.A.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD

ENDED DECEMBER 31 2022

(Thousand euros)

	Share Capital	Share premium	Reserves	Shareholder Contribution	Profit/ (loss) for the year	Interim Dividend	Valuation adjustme nts	Translation differences	Treasury shares	Equity attributed to the Parent Company	Non- controlling interests	Total Equity
Balance as of 31 December 2020													469,771	3,813,409	2,509,875	540	56,358	—	(99,537)	—	(54,149)	6,696,267	—	6,696,267
Consolidated comprehensive income for 2021													—	—	—	—	512,217	—	32,117	—	—	544,334	—	544,334
Distribution of 2020 profit													—	(25,467)	81,825	—	(56,358)	—	—	—	—	—	—	—
Transactions with shareholders or owners
Distribution of dividends	—	(140,066)	—	—	—	(70,033)	—	—	—	(210,099)	—	(210,099)
Disposal of treasury shares	—	—	—	—	—	—	—	—	5	5	—	5
Recognition of share-based payments	—	—	8,758	—	—	—	—	—	—	8,758	—	8,758
Share-based payments	—	—	(33,813)	—	—	—	—	—	20,896	(12,917)	—	(12,917)
Delivery of share distribution scheme	—	—	(369)	—	—	—	—	—	943	574	—	574
Balance as of 31 December 2021	469,771	3,647,876	2,566,276	540	512,217	(70,033)	(67,420)	—	(32,305)	7,026,922	—	7,026,922
Consolidated comprehensive income for 2022	—	—	—	—	263,087	—	80,218	—	—	343,305	—	343,305
Distribution of 2021 profit	—	—	442,184	—	(512,217)	70,033	—	—	—	—	—	—
Transactions with shareholders or owners
Distribution of dividends	—	(106,497)	(10,614)	—	—	(444,815)	—	—	—	(561,926)	—	(561,926)
Changes in the scope of consolidation	—	—	51,217	—	—	—	—	—	—	51,217	—	51,217
Acquisition/(sale) of treasury shares	—	—	—	—	—	—	—	—	142	142	—	142
Recognition of share-based payments	—	—	4,014	—	—	—	—	—	—	4,014	—	4,014
Share-based payments	—	—	(23,864)	—	—	—	—	—	14,133	(9,731)	—	(9,731)
Delivery of share distribution scheme	—	—	(35)	—	—	—	—	—	864	829	—	829
Other changes	—	—	(5,548)	—	—	—	—	—	—	(5,548)	—	(5,548)
Balance as of 31 December 2022	469,771	3,541,379	3,023,630	540	263,087	(444,815)	12,798	—	(17,166)	6,849,224	—	6,849,224

The accompanying explanatory Notes 1 to 24 and Appendix I are an integral part of the consolidated statement of changes in equity for the period ended as of 31

December 2022.

4

MERLIN PROPERTIES SOCIMI, S.A.

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD

PERIOD ENDED DECEMBER 31 2022

(Thousand euros)

	Notes	Ejercicio 2022	Ejercicio 2021(*)
CONTINUED OPERATIONS
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES:		222,155	162,463
Profit for the year before tax		48,156	403,170
Adjustments for-		283,772	(114,602)
Depreciation and amortisation charge		1,885	1,858
Change in fair value of investment property	Note 7	249,272	(195,497)
Changes in operating provisions		4,174	11,079
Profit/(Loss) on derecognition and disposal of non-current assets	Note 7	(11,561)	1,867
Finance income		(3,942)	(5,421)
Finance expenses		109,203	116,426
Changes in fair value of financial instruments		(41,226)	(10,353)
Share of results of investments accounted for using the equity method	Note 9	(24,033)	(34,560)
Other adjustments to profit		—	(1)
Changes in working capital-		(9,637)	(21,600)
Inventories		(5,811)	(5,261)
Accounts receivable		(1,684)	(5,703)
Other current assets		(2,987)	7,019
Accounts payable		19,614	(30,545)
Other assets and liabilities		(18,769)	12,890
Other cash flows from operating activities-		(100,136)	(104,505)
Interest paid		(100,588)	(103,861)
Interest received		1,980	3,011
Income tax recovered (paid)		(1,528)	(3,655)
CASH FLOWS FROM/(USED IN) INVESTMENT ACTIVITIES:		1,184,254	(454)
Payments due to investments-		(997,196)	(177,359)
Net cash flow from business acquisitions	Note 3	—	(2)
Investment property	Note 7	(370,161)	(182,389)
Property, plant and equipment		(644)	(2,332)
Contributions for discontinued activities		(619,727)	—
Contributions to associates and other non-current investments		(5,593)	—
Intangible assets		(1,071)	(1,342)
Financial assets		—	8,706
Proceeds from disposals-		2,181,450	176,905
Financial assets of discontinued operations	Note 3	1,987,400	75,558
Investment property		109,402	101,347
Other disposals		84,648	—
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES:		(1,700,436)	335,392
Proceeds and payments relating to equity instruments-		(406,475)	(158,545)
Issue of equity instruments		—	—
Treasury share purchases	Note 13	(142)	(5)
Premium Refunds	Note 4	(106,497)	(140,066)
Dividends Paid	Note 4	(455,429)	(70,033)
Dividends Paid / Premium Refunds from subsidiaries		4,162	—
Dividends paid from discontinued operations		51,144	51,559
Charges for discontinued activities		100,287	—
Proceeds and payments relating to financial liabilities-		(1,293,961)	493,937
Debt issuance with credit institutions	Note 14	81,760	417
Cancellation of interest rate derivatives		24,329	—
Issuance of debentures and bonds		—	494,230
Repayment of bank borrowings	Note 14	(851,750)	(710)
Return of debentures and bonds	Note 14	(548,300)	—
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(294,027)	497,401
Cash and cash equivalents at beginning of period		723,476	226,075
Cash and cash equivalents at end of period		429,449	723,476

5

		Ejercicio	Ejercicio
DISCONTINUED OPERATIONS	Notas	2022	2021
CASH FLOWS FROM OPERATING ACTIVITIES	Note 3	36,596	68,001
CASH FLOWS FROM INVESTING ACTIVITIES	Note 3	—	110,685
CASH FLOWS FROM FINANCING ACTIVITIES	Note 3	(174,872)	(61,388)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(138,276)	117,298
Cash and cash equivalents at beginning of period		143,245	25,947
Cash and cash equivalents included for the transaction		4,969	—
Cash and cash equivalents at end of period		—	143,245

(*) Reexpresed Financial Statements

The accompanying explanatory Notes 1 to 24 and Appendix I are an integral part of the consolidated

statement of cash flows for the period ended as at 31 December 2022.

6

Merlin Properties SOCIMI, S.A. and Subsidiaries

Notes to the consolidated financial statements

for the year ended

31 December 2022

1.    Nature and activity of the Group

Merlin Properties SOCIMI, S.A. (the "Parent Company") was incorporated in Spain on 25 March 2014

under the Corporate Enterprises Act. On 22 May 2014, the Parent requested to be included in the tax

regime for listed companies investing in the property market (REITs), effective from 1 January 2014.

On 27 February 2017, the Parent changed its registered office from Paseo de la Castellana 42 to

Paseo de la Castellana 257, Madrid, Spain.

The Parent Company's corporate purpose, as in its bylaws, is as follows:

–The acquisition and development of urban real estate for subsequent leasing, including the

refurbishment of buildings as per the VAT Act;

–The holding of equity interests in other REITs or in other non-resident entities in Spain with the

same corporate purpose and which operate under a similar regime as that established for

REITs with respect to the mandatory profit distribution policy enforced by law or by the bylaws;

–The holding of equity interests in other resident or non-resident entities in Spain whose

corporate purpose is to acquire urban real estate for subsequent leasing, and which operate

under the same regime as that established for REITs with respect to the mandatory profit

distribution policy enforced by law or by the bylaws, and which meet the investment

requirements stipulated for these companies; and

–The holding of shares or equity interests in collective real estate investment undertakings

regulated by Law 35/2003, of 4 November, on collective investment undertakings, or any

statute that may replace this in the future.

In addition to the economic activity relating to the main corporate purpose, the Parent may also carry

on any other ancillary activities, i.e., those that generate income, which in total represents less than

20% of its income in each tax period, or those that may be considered ancillary activities by law at the

time.

The activities included in the Parent's corporate purpose may be indirectly performed, either wholly or

in part, through the ownership of shares or equity interests in companies with a similar or identical

corporate purpose.

The direct and, where applicable, indirect performance of any activities which are reserved under

special legislation are excluded. If the law prescribes the need for a professional qualification,

administrative authorisation, entry in a public register, or any other requirement for the purpose of

exercising any of the activities within the corporate purpose, no such activity can be exercised until all

the applicable professional or administrative requirements have been met.

Merlin Properties SOCIMI, S.A. and Subsidiaries ("the Group") engage mainly in the acquisition and

management (through leasing to third parties) of offices, industrial buildings, logistic centres, shops

and shopping centres, and they may also invest, to a lesser extent, in other assets for lease.

On 30 June 2014, the Parent was floated on the Spanish stock market through the issuance of EUR

125,000 thousand shares, with a share premium of EUR 1,125,000 thousand. Merlin Properties

7

SOCIMI, S.A.'s shares/securities have been listed on the electronic trading system of the Spanish

stock exchanges since 30 June 2014.

On 15 January 2020, the Parent's shares were listed on Euronext Lisbon under a dual listing.

The Parent Company and the majority of its subsidiaries are governed by Spanish Law 11/2009, of 26

October, as amended by Spanish REITs Act (Ley 16/2012, de 27 de diciembre, por la que se regulan

las Sociedades Anonimas Cotizadas de Inversion en el Mercado Inmobiliario). Article 3 of that Act sets

out the investment requirements for these types of companies, namely:

1. At least 80% of a REIT's assets must be invested in urban real estate for leasing purposes

and/or in land to be developed for leasing purposes provided that such development starts

within three years of acquisition, along with investments in the capital or equity of other

entities referred to in section 1, Article 2 of the Act.

The value of the assets will be determined according to the average of the individual balance

sheets for each quarter of the year, whereby the REIT may opt to calculate such value by

taking into account the market value of the assets included in such balance sheets instead of

their carrying amount, in which case that value would apply to all balance sheets for the year.

For these purposes, the money and credit rights arising from the disposal of these properties

or shareholdings, if applicable, during the same year or previous years will not be calculated,

provided that, in this latter case, the reinvestment period referred to in Article 6 of this Act has

not elapsed.

2.Similarly, at least 80% of the income for the tax period for each year, excluding that arising

from the disposal of shareholdings and properties used in fulfilment of its primary corporate

purpose, once the holding period referred to below has elapsed, should come from the lease

of properties and from dividends or shares in profit from these investments.

This percentage is calculated based on consolidated profit if the company is a Parent

Company of a group, as defined in Article 42 of the Spanish Commercial Code, irrespective of

the place of residence and the obligation to prepare consolidated financial statements. Said

group will exclusively comprise the REIT and all the other entities referred to in section 1,

Article 2 of that Act.

3.The REIT's real estate assets must be leased for at least three years. The time that the

properties have been offered for lease, up to a maximum of one year, will be included for the

purposes of this calculation.

This period will be calculated:

a)In the case of properties that are included in the REIT's assets before it avails itself of

the regime, from the date of commencement of the first tax period in which the special

tax regime set forth in this Act is applied, provided that the property is leased or

offered for lease at that date. Otherwise, the following paragraph must be apply.

b)In the case of properties developed or acquired subsequently by the REIT, from the

date on which they were leased or offered for lease for the first time.

c)Shares or equity investments in entities referred to in section 1, Article 2 of the Act

must be kept in the REIT's asset base for a period of at least three years after their

acquisition or, if applicable, from the beginning of the first tax period during which the

special tax regime in the Law applies.

As in transitional provision one of Law 11/2009, of 26 December, amended by Law 16/2012, of 27

December, governing listed companies investing in the property market, these companies may opt to

apply the special tax regime under Article 13 of this Act, even when the requirements stipulated therein

are not fulfilled, under the condition that such requirements are met within two years of the date

application of the REIT tax regime is sought.

8

REITs are taxed at a rate of 0% for corporate income tax. However, where dividends distributed to an

equity holder owning at least 5% of the REIT's share capital are exempt from taxation or taxed below

10%, such REIT will be subject to a special charge of 19% of the dividends distributed to said equity

holder, in respect of corporate income tax. If deemed applicable, this special charge must be be paid

by the REIT within two months after the dividend distribution date.

With effect for financial years beginning on or after 1 January 2021, Law 11/2021, of 9 July, on

measures to prevent and combat tax fraud amended Article 9 (4) of Spanish Law 11/2009, of 26

October, regulating REITs. Specifically, a special tax of 15% was introduced on the amount of profit

obtained in the year which is not distributed, in the portion that arises from: a) income that has not

been taxed at the general corporate income tax rate and, b) income that does not arise from the

transfer of eligible assets, once the three-year maintenance period has elapsed, which has been

included in the three-year reinvestment period in Article 6.1.b) of Law 16/2012, of 27 December. This

special tax will be considered corporate income tax and will accrue on the day of the agreement to

apply profit for the year by the general shareholders meeting or equivalent body. The self-assessment

and payment of the tax must be performed within two months of the accrual.

The transitional period in which the Company had to meet all requirements of this tax regime ended in

2017. Group management, based on the opinion of its tax advisers, assessed compliance with the

requirements of the regime, concluding that such requirements were met at 31 December 2022.

Consequently, the Group's consolidated financial statements and the individual financial statements of

the Parent for 2022, prepared by its Directors, which are awaiting approval by the General Meeting,

have been prepared under the REIT Regime. However, the directors of the Parent consider that the

above financial statements will be approved without any material changes.

On the other hand, the financial statements for 2022 for the companies that make up the Group are

pending preparation by their respective Directors and are expected to be approved by their respective

General Shareholders' or Partners' Meetings within the deadlines established by applicable law.

The separate and consolidated financial statements published by Merlin Properties, SOCIMI, S.A. for

2021 prepared by its directors were approved by the Directors at the Annual General Meeting on 4

May 2022.

The 2021 separate annual financial statements of the Group companies, which were prepared by their

respective directors, were approved at the respective General Meetings within the periods in

applicable tax legislation.

In view of the business activities currently performed by the Group, it does not have any environmental

liability, expenses, assets, provisions or contingencies that might be material with respect to its equity,

financial position or results. Therefore, no specific disclosures relating to environmental issues are

included in these notes to the consolidated financial statements.

The Company did not change its corporate or trading name in 2021 or 2022.

2.    Basis of presentation of the consolidated financial statements and consolidation principles

2.1 Regulatory framework

The regulatory financial reporting framework applicable to the Group consists of the following:

–The Spanish Commercial Code and all other Spanish commercial laws.

–International Financial Reporting Standards (IFRSs) as adopted by the European Union

pursuant to Regulation (EC) No 1606/2002 of the European Parliament and Law 62/2003, of

30 December, on tax, administrative and social security measures, and applicable rules and

circulars of the Spanish National Securities Market Commission (CNMV);

9

–Law 11/2009, of 26 October, amended by REITs Act and all other commercial law; and

–All other applicable Spanish accounting legislation.

2.2 Basis of presentation of the consolidated financial statements

The consolidated financial statements for 2022 were obtained from the accounting records and

financial statements of the Parent and consolidated companies, and have been prepared in

accordance with the regulatory financial reporting framework described in Note 2.1 and, accordingly,

they constitute a fair presentation of the Group's consolidated equity and financial position at 31

December 2022 and the consolidated results of its operations, the changes in consolidated equity and

the consolidated cash flows in the year then ended.

Given that the accounting policies and measurement bases applied in preparing the Group's

consolidated financial statements for 2022 may differ from those applied by some of the Group

companies, the necessary adjustments and reclassifications were made on consolidation to unify

these policies and bases and to make them compliant with IFRSs as adopted by the European Union

To present the various items composing the consolidated financial statements in a uniform manner, the

accounting, policies and measurement bases used by the Parent were applied to all the consolidated

companies.

2.2.1 Adoption of Financial Reporting Standards and Interpretations effective as from 1 January 2022

In 2022 the following standards, amendments and interpretations entered into force, which, where

applicable, were used by the Group in preparing these financial statements:

Standards, Amendments and Interpretations	Description	Mandatory application in the financial years beginning on or after:
Amendments to IFRS 3 Reference to the Conceptual Framework	IFRS 3 is updated to align the definitions of assets and liabilities in a business combination with those in the conceptual framework In addition, certain clarifications are introduced regarding the recognition of contingent liabilities and assets.	1 January 2022
Amendment to IAS 16 Income before projected use	The amendment prohibits a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Proceeds from selling such items, together with production costs, must be recognised in profit or loss.	1 January 2022
Amendment to IAS 37 Payable Contracts - Cost of performing a contract	The amendment specifies that the direct cost of fulfilling a contract includes both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling the contract.	1 January 2022
Improvements to IFRSs, 2018-2020 cycle	Minor amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41.	1 January 2022

These standards and amendments have not had a significant impact.

All accounting policies and measurement bases with a significant effect on the condensed

consolidated financial statements were applied.

10

2.2.2 Standards not yet in force in 2022

The following standards were not yet in force in 2022, either because their effective date is

subsequent to the date of the consolidated financial statements or because they had not yet been

adopted by the European Union.

Standards, Amendments and Interpretations	Description	Mandatory application in the financial years beginning on or after:
Amendments to IAS 1 Breakdown of accounting policies	Amendments that require companies to appropriately identify the material accounting policy information that should be disclosed in the financial statements.	1 January 2023 (1)
Amendment to IAS 8 - Definition of a business	Amendments and clarifications to help entities distinguish changes in accounting estimates.	1 January 2023 (1)
Amendment to IAS 12 Deferred tax related to assets and liabilities arising from a single transaction	Clarifications on how companies should account for deferred tax on transactions such as leases and decommissioning obligations.	1 January 2023 (1)
Amendment to IFRS 17 Insurance Agreements - Initial application of IFRS 17 and IFRS 9. Comparative information	Amendments to the transition requirements of IFRS 17 for insurers that simultaneously apply IFRS 17 and IFRS 9 for the first time.	1 January 2023 (1)
IFRS 17 Insurance contracts and its amendments	It replaces IFRS 4 and establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts to ensure that entities provide related and reliable information that gives a basis for users of the financial information to assess the effect that insurance contracts have on the financial statements	1 January 2023 (1)
Amendment to IAS 1 Classification of liabilities as current and non-current and classification of non-current liabilities with covenants	Clarifications regarding the presentation as current or non-current flows of liabilities, and in particular with maturity based on compliance with covenants.	1 January 2024
Amendment to IFRS 16 lease liability in a sale and leaseback	This change clarifies the subsequent accounting of lease liabilities arising in sales and subsequent leasebacks.	1 January 2024

(1) Approved for use in the European Union

At present, the Group is assessing the impacts that the future application of standards with a

mandatory application date from 1 January 2023 could have on the consolidated financial statements

once they come into force, although these impacts are not expected to be significant.

2.3Functional currency

These consolidated financial statements are presented in euros, since the euro is the functional

currency in the area in which the Group operates.

2.4 Comparative information

The information relating to 2021 contained in these notes to the consolidated financial statements is

presented solely for comparison purposes with similar information relating to the year ended 31

December 2022.

11

As detailed in Note 3, the consolidated income statement, consolidated statement of comprehensive

income and consolidated cash flow statement included for comparison purposes in these consolidated

financial statements corresponding to 31 December 2021 were reexpresed to be homogeneous and to

reflect the effect of the discontinuation of the Net Lease business segment in 2022.

2.5 Responsibility for the information and use of estimates

The information in these consolidated financial statements is the responsibility of the Parent's

directors.

In the Group's consolidated financial statements for 2022 estimates were occasionally made by the

senior executives of the Group and of the consolidated companies, later ratified by the directors, to

quantify certain of the assets, liabilities, income, expenses and obligations reported herein. These

estimates relate basically to the following:

–The market value of the Group's property assets (see Note 5.1). The Group obtained

valuations from independent experts at 31 December 2022.

–The fair value of certain financial instruments (see Notes 5.5 and 5.6).

–The assessment of provisions and contingencies (see Note 5.11)

–Management of financial risk and, in particular, of liquidity risk and climate change risk (see

Note 23).

–The recovery of deferred tax assets and the tax rate applicable to temporary differences (see

Note 5.13).

–Compliance with the requirements that govern listed real estate investment companies (see

Note 1).

Changes in estimates:

Although these estimates were made based on the best information available at 31 December 2022,

future events may require that these estimates be modified prospectively (upwards or downwards),

according to IAS 8. The effects of any change would be recognised in the corresponding consolidated

income statement.

2.6Basis of consolidation applied

All companies over which effective control is exercised by virtue of holding a majority of the voting

rights in their representation and decision-making bodies and the power to determine the company's

financial and operational policies were fully consolidated; and companies in which the Group owns

more than a 20% interest and exercises significant influence without holding a majority of the voting

rights were accounted for using the equity method (see Note 9). Likewise,a significant influence on the

investments held by the Group with a participation rate of less than 20% is considered to exist if it has

representation on the Board of these companies of the parties related to it.

A number of adjustments have been made to align the accounting principles and measurement bases

of Group companies with those of the Parent, including the application of International Financial

Reporting Standards measurement bases to all Group companies and associates.

It was not necessary to unify accounting periods since the balance sheet date of all the Group

companies and associates is 31 December of each year.

12

2.6.1 Subsidiaries

Subsidiaries are considered to be those companies over which the Parent directly or indirectly

exercises control through subsidiaries. The Parent Company has control over a subsidiary when it is

exposed or has rights to variable returns from its involvement with the subsidiary, and when it has the

ability to exercise its power to affect its returns. The Parent Company has power when the voting rights

are sufficient to give it the ability to direct the relevant activities of the subsidiary. The Parent Company

is exposed or has rights to variable returns from its involvement with the subsidiary when its returns

from its involvement have the potential to vary as a result of the subsidiary's performance.

The financial statements of the subsidiaries are fully consolidated with those of the Parent.

Accordingly, all material balances and effects of the transactions between consolidated companies are

eliminated on consolidation.

Any third-party interests in the Group's equity and profit or loss are recognised under "Non-controlling

interests" in the consolidated statement of financial position and "Result attributable to non-controlling

interests" in the consolidated income statement and consolidated comprehensive income statement.

The results of subsidiaries acquired or sold during the year are included in the consolidated income

statements from the effective date of acquisition or until the effective date of disposal, as appropriate.

Appendix I includes information on Group companies and associates.

2.6.2 Associates

The companies listed in Appendix I, over which Merlin Properties, SOCIMI, S.A. does not exercise

control but rather has a significant influence, are included under "Investments accounted for using the

equity method" in the accompanying consolidated statement of financial position and are measured

using the equity method, which consists of the value of the net assets and any goodwill of the

associate. The share of these companies' net profit or loss for the year is included under "Share of

results of associates accounted for using the equity method" in the accompanying consolidated

income statement.

2.6.3 Inter-group transactions

Gains or losses on transactions between consolidated companies are eliminated on consolidation and

deferred until they are realised with third parties outside the Group. The capitalised expenses of Group

work on non-current assets are recognised at production cost, and any intra-Group results are

eliminated. Receivables and payables between consolidated Group companies and any intra-Group

income and expenses were eliminated.

2.6.4 First-time consolidation differences

At the date of an acquisition, the assets and liabilities of a subsidiary are measured at their fair values

at that date. Any excess of the cost of acquisition over the fair values of the identifiable net assets

acquired is recognised as goodwill. When there is an negative difference between the acquisition cost

and the fair values of the identifiable net assets acquired (i.e. a discount on acquisition), the valuations

of the net assets are reviewed and, if applicable, said difference i is credited to profit or loss in the

period in which the acquisition is made.

2.6.5 Business combinations

The Group accounts for business combinations using the purchase method. The date of acquisition is

the date on which the Group takes control of the acquiree.

The consideration paid is calculated at the date of acquisition as the sum of the fair values of the

assets delivered, the liabilities incurred and assumed and the equity instruments issued by the Group

in exchange for control of the business acquired. Acquisition costs, such as professional fees, do not

13

form part of the cost of the business combination, but are taken directly to the consolidated income

statement.

Where applicable, the contingent consideration is recognised at the acquisition-date fair value.

Subsequent changes to the fair value of the contingent consideration are taken to the consolidated

income statement unless this change arises within the one-year period established as the provisional

accounting period, in which case the business combination will be modified.

Goodwill is calculated as the excess of the aggregate of the consideration transferred, any non-

controlling interests, and the fair value of any previously acquired interest less the net identifiable

assets acquired.

If the acquisition cost of the identifiable net assets is less than their fair value, the related difference is

recognised in the consolidated income statement for the year.

2.6.6 Scope of consolidation

The companies composing the Merlin Group at 31 December 2022, along with information relating to

the consolidation method, are listed in Appendix I of the consolidated financial statements.

2.7 Quantitative and qualitative information on the impacts arising from COVID-19 and the war

in Ukraine

The evolution in 2022 of the health crisis caused by COVID-19 allowed the Group to complete the

commercial measures it implemented in 2020 and 2021. In this regard, no specific trade measures

were performed in 2022 due to the impact of COVID-19 on lessees, although the Group closely

monitored the various risks that were highlighted by the health and economic crisis. In this regard, the

fair value methodology for investment property was performed normally, without any independent

appraisers including any uncertainty in the outcome of their assessment, the Group's liquidity risk is

not significant, nor is the credit risk of its customers.

On 24 February 2022, on the other hand, a war between Russia and Ukraine began with uncertain

geopolitical consequences at the global level both in the short, medium and long-term. Although the

Group does not have any activity in the countries where the war is concentrated, nor have its

operations been significantly impacted, the Group constantly monitors its performance and its effect on

the macroeconomic variables to which the sector in which the Group operates is usually sensitive.

Measurement of fair value of investment property

The Group adjusted the fair value of its real estate investments according to IAS 40. This fair value is

determined using the reference of the valuations made by independent third parties every six months

so that, at the close of each six-month period, the fair value reflects the market conditions of the

elements of the investment properties at that date.

At 31 December 2022, the valuations performed by CBRE Valuation Adviser, S.A., Jones Lang

LaSalle, S.A. and Savills Consultores Inmobiliarios, S.A. did not indicate any type of uncertainty

regarding the market value of the Group's investment property.

The measurement methodology described in Note 7 was not changed.

Meanwhile, the details of main assumptions used in the appraisals at December 2022 and December

2021 based on the nature of the assets and the sensitivities to increases and decreases of those

variables are included in Note 7.

14

Liquidity risk

In the opinion of the Parent's directors, the current economic situation of high inflation and interest rate

increases by the central banks may have a significant impact on the overall financial position of the

companies, which could be divided into the liquidity risk of the companies or groups and the liquidity

risk of customers (credit risk).

In this context, at 31 December 2022, the Group had a leverage ratio, understood as a debt to the fair

value of the assets (LTV) of 32.7% (this ratio is obtained from dividing the Company's net debt

between the fair value of the assets including transaction costs) and cash and cash equivalents

(including treasury shares) of EUR 446,615 thousand. The only significant debt maturities faced by the

Group over the next twelve months are in April 2023, due to the maturity of a bond amounting to EUR

743 million. However, the Group has a liquidity position, including the corporate credit line and

unarranged financing, amounting to EUR 1,839 million (see Note 14) which ensures liquidity needs to

cover the negative working capital presented by the Group at 31 December 2022 (411,292 thousands

of euros).

The Parent's Directors and Management Team are constantly monitoring the evolution of the current

situation and the effects it may have on the credit market, and they believe that the Group's situation at

31 December 2022 ensure that it will be solvent to fulfil the obligations on the balance sheet at 31

December 2022, and there is no material uncertainty about the continuity of the Group's operations.

Credit risk

The Directors continued to assess the credit risk of their tenants as a result of the COVID-19 crisis,

having discontinued in 2022 the rental subsidy policies implemented in 2020 and 2021 since no

relevant risk was identified in this regard. With respect to the application of the simplified approach of

impairment and credit risk, and also taking into consideration other differential factors of the Group's

portfolio of tenants and the characteristics of their leases, and the amounts collected thus far, the

Group has concluded that the increased credit risk of its customers has not been significantly affected,

this risk falling below 1% of turnover.

In relation to its other financial assets exposed to credit risk, which mainly correspond to loans to

associates and third parties, the Directors of the Parent have determined that there has not been a

significant increase in the risk, considering the measures agreed in some cases with tenants and the

long-term expectations based on the historical experience with those entities, which make it possible

to estimate that the credit risk will remain in line with the previous year.

War conflict in Ukraine

The war between Russia and Ukraine has caused, among many other aspects, significant fluctuations

in the cost of raw materials and energy, putting global economic growth in significant difficulties. The

evolution of the conflict is uncertain at present and given the complexity of the markets, as a result of

their globalisation, the Group's operations are exposed, albeit indirectly, to the evolution and extent of

the conflict in the coming months, and to the reaction and adaptation capacity of all impacted

economic agents. Although the Group's operations have not been directly affected by the development

of the conflict, nor by the international sanctions imposed, the indirect effects, such as price escalation,

the impact on construction and financing costs and the increase in energy cost, are currently affecting

all economic operators in the sector, and the directors are therefore closely monitoring the situation.

15

3.    Changes in the scope of consolidation

2022

The following changes in the scope of consolidation took place in 2022.

•Departure of Tree Inversiones Inmobiliarias Socimi, S.A. ("Tree") from the scope

(discontinuation of the Net Lease Segment)

On 1 February 2022, the Group sent BBVA a communication that included, among other aspects, a

proposed sale of 100% of the shares of Tree Inversiones Inmobiliarias Socimi, S.A. in accordance with

the right to vote held by BBVA, on 1 April 2022 the Group received a communication from BBVA on its

acceptance of the proposed sale of Tree sale, which was subject, inter alia, to the approval of the

Spanish National Market Commission and the Competition (CNMC). On 1 June 2022, the CNMC

authorised the transaction and the sale was finalised on 15 June 2022.

Based on the above, the sale price of Tree Inversiones Inmobiliarias Socimi, S.A. amounted to EUR

1,987,400 thousand, which after early settlement of the debt associated with Tree and the transaction

costs, generating a gain at a consolidated level of EUR 215,452 thousand. In addition, Tree

Inversiones Inmobiliarias Socimi, S.A. has contributed EUR 6,279 thousand to the results up to the

date of the sale, after considering the effects of the liquidation of derivative financial instruments that it

held, and those that it had due to the application of IFRS 9 in past refinancings in previous financial

years.

Prior to the sale, on 21 March 2022, Tree Inversiones Inmobiliarias Socimi, S.A. agreed to distribute a

dividend of EUR 53,908 thousand to Merlin Properties Socimi, S.A. charged to profit for 2021.

Based on the above, at 31 December 2022, said Net Lease line of activity is presented as

discontinued in these consolidated annual accounts, having reexpresed the comparative information of

the consolidated income statement and the consolidated statement of cash flows from the previous

period.

On 17 December 2021, the Group also sold 32 of its 33 premises in Catalonia, which, together with

the bank branches leased to BBVA, were part of the Net Lease segment.

The impact that the sale of Tree Inversiones Inmobiliarias Socimi, S.A. had on the consolidated

income statement at 31 December 2022 (in thousands of euros) is shown below:

Item	Net Lease
Profit/(Loss) after tax generated prior to disposal	6,279
Loss from disposal	215,452
Profit for the year from discontinued operations net of tax	221,731

16

The income, expenses and profit/(loss) before tax for the discontinued operations recognised in the

consolidated income statement are as follows (in thousands of euros):

Income statement	December 2022 (*)	December 2021
Net Income (Note 18.a)	38,104	85,373
Other operating expenses (Note 18.b)	(1,231)	12
Impairment and gains or losses on disposal of non-current assets	101	5,957
Changes in value of investment property (Note 7)	-	(18,489)
PROFIT/(LOSS) FROM OPERATIONS	36,974	72,853
Finance costs (Note 18.d)	(53,852)	(19,943)
Changes in fair value in financial instruments (Notes 13.7 and 14.3)	23,157	62,719
FINANCIAL PROFIT/(LOSS)	(30,695)	42,776
PROFIT BEFORE TAX ON DISCONTINUED OPERATIONS	6,279	115,629
Income tax (Note 17)	-	1,228
PROFIT/(LOSS) FOR THE PERIOD CORRESPONDING TO DISCONTINUED OPERATIONS	6,279	116,857

(*) 5-month and 14-day period

The net cash flows attributable to the operating, investment and financing activities of the discontinued

activities are as follows (in thousands of euros):

	December 2022 (*)	December 2021
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES:	36,596	68,001
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES:	-	110,685
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES:	(174,872)	(61,388)

(*) 5-month and 14-day period

•Entrants in the scope of consolidation

On 27 July 2022, Slack Tailwind Systems, S.L.U and Slow Rise Spain, S.L.U. entered into the scope of

consolidation. The Parent Company acquired 100% of the shares of both companies for EUR 3

thousand each. Subsequently, on 29 July and 15 September 2022, these companies have purchased,

respectively, part of the Serantes building in Madrid (see Note 7), this asset being their most relevant

contribution to the consolidated financial statements as of 31 December 2022.

On 3 August 2022, the Parent acquired 100% of the share capital of Generous Profile Unipessoal Lda.

for EUR 9 thousand. Subsequently, on 12 August 2022, Generous Profile Unipessoal Lda acquired the

Liberdade 195 building (see Note 7), and this asset was the most significant contribution to the

consolidated financial statements at 31 December 2022.

17

•Liquidation of PK Hoteles 22, S.L.

In 2022 the shareholders at the General Meeting of PK Hoteles 22, S.L. unanimously resolved to

liquidate the company, which is 32.50% owned by the Group. This transaction generated EUR 289

thousand in losses in the 2022 income statement.

2021

On 27 January 2021, Edged Spain, S.L.U. entered the scope of consolidation. The Parent Company

acquired 100% of the shares for EUR 3 thousand and subsequently sold 50% to Edged Global

Services Iberia, S.L.U. on 30 March 2021. Edged Spain, S.L.U. is a data processing centre services

company. The contribution to the consolidated financial statements at 31 December 2022 and 2021

was not significant.

4.    Distribution of the Parent's profit

The distribution of profit proposed by the Parent's directors for approval by its shareholders at the

Annual General Meeting is as follows:

	Thousands of
Profit/(Loss) for the year	910,716
Distribution:
To legal reserves	19,860
To offset interim dividend	444,815
Dividends	113,350
To voluntary reserves	332,691

Other dividends distributed

On 4 May 2022, the General Shareholders Meeting approved the distribution of a dividend charged to

"share premium" in the amount of EUR 106,497 thousand, and the distribution of an additional

dividend charged to 2021 profit for EUR 10,614 thousand.

On 28 July 2022, the Board approved the distribution of an interim dividend charged to earnings for

2022 in the amount of EUR 351,169 thousand.

On 10 November 2022, the Board approved the distribution of a dividend of EUR 93,646 thousand

charged to the profit for 2022.

In the last five years, the Company distributed the following dividends and Share Premium refunds:

	2022	2021	2020	2019	2018
Shareholder remuneration	561,926	210,099	68,518	232,347	215,364

..

5.    Accounting policies

The main accounting policies and measurement bases applied in preparing the Group's consolidated

financial statements, which comply with the IFRSs in force at that date, are as follows:

18

5.1 Investment property

Investment property comprises buildings under construction and development for use as investment

property held (by the owner or by the tenant as an asset under usage rights), which are partially or

fully held to generate revenue, profits or both, rather than for use in the production or supply of goods

or services, or for the Group's administrative purposes or sale in the ordinary course of business.

All assets and usage rights (through the corresponding administrative concession or area right granted

by a public body) classified as real estate investments are in operation with various tenants. These

properties are earmarked for leasing to third parties. The Parent Company's directors do not plan to

dispose of these assets in the coming 12 months and have therefore decided to recognise them as

investment property in the consolidated statement of financial position.

Investment property is carried at fair value at the reporting date and is not depreciated. Investment

property includes land, buildings, usage rights of concessionaire projects and other constructions held

to earn rentals or with the aim of achieving gains on the sale as a result of future increases in the

respective market prices.

Gains or losses arising from changes in the fair value of investment property are included in the

income statement for the year in which they arise.

While construction work is in progress, the costs of construction work and finance costs are

capitalised. The above assets are recognised at fair value when they become operational.

According to IAS 40, the Group periodically determines the fair value of its investment property so that

the fair value reflects the actual market conditions of the investment property items at that date. This

fair value is determined every six months based on the appraisals undertaken by independent experts.

The market value of the Group's investment property at 31 December 2022, calculated based on

appraisals performed by JLL and CBRE, independent appraisers not related to the Group, amounted

to EUR 10,558,975 thousand (see Note 7).

5.2 Inventories

Land held for sale or integration into property development is considered as inventories. The Group

considers that its inventories do not meet the requirements of IAS 40 for consideration as investment

property.

At 31 December 2022, certain land acquired in 2020 was recognised as inventories, which form part of

an increased development area and are considered to be inventories as they are intended for sale.

Pursuant to the future sale agreement reached with a third party, the land resulting in final residential

use will be transferred to said third party, once all the buildable areas corresponding to each of the

uses are finally assigned by the approved and registered Reparcelling Project. . In accordance with

the above, the intended use of the land will be its recovery through sale, and the Group's objective is

not to obtain rental income on the land. Therefore, they were recognised as inventories at the end of

2022.

In relation to them, the Group has agreements with third parties for the future sale of those intended

for residential use and for which it has received, as of 31 December 2022, advance payments

amounting to 17,031 thousand euros that are recorded in the heading "Other Current Financial

Liabilities" of the consolidated statement of financial position.

The Group values its inventories at acquisition cost (or at market value if the latter is lower), including

both the acquisition cost of the land and plots, the urban planning costs, the construction costs and the

personnel directly related to the real estate activity, and, where applicable, financial expenses to the

extent that those expenses correspond to the period of urban planning and construction, provided that

they are inventories that need a period of more than one year to be able to be sold. If the inventories

19

are registered at a cost price higher than their market value, the appropriate valuation adjustments are

made, recording the corresponding impairment.

5.3 Investments accounted for using the equity method

At 31 December 2022, this heading in the consolidated statement of financial position included the

amount corresponding to the percentage of shareholders' equity of the investee relating to the Parent

and accounted for using the equity method once aligned to the accounting criteria applied by the

Group. In addition, and after accounting for these investments using the equity method, the Group

decides whether or not an additional impairment loss needs to be recognised as regards the Group's

net investment in the associate.

5.4 Leases

At the beginning of a contract, the Group assesses whether the contract is or contains a lease. A

contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a

period of time in exchange for consideration.

The group reassesses whether a contract is, or contains, a lease only if the terms of the contract

change.

5.4.1 Tenant

For a contract containing a lease component and one or more additional leases or non-leases, the

Group will distribute the consideration of the contract to each component of the lease based on the

relative price regardless of the lease component and the aggregate price independent of the

components that are non-lease components.

The relative price, independent of the lease and non-lease components, will be determined based on

the price that the landlord, or a similar supplier, would charge an entity separately for that component

or for a similar component. If there is no readily available separate observable price, the Group will

estimate the separate price, maximising the use of observable information.

The Group chose not to apply the recognition and measurement requirements indicated in IFRS 16 to

short-term leases in which the underlying asset is of low value, recognising the lease payments

associated with leases as a straight-line expense over the lease term.

Initial recognition

At the commencement date, a tenant recognises a right-of-use asset and a lease liability. At the

commencement date, a tenant will measure a right-of-use asset at cost. The cost of the right-of-use

asset includes:

a)the amount of the initial measurement of the lease liability measured at the

commencement date at the present value of the lease payments that were not paid at

that date. Lease payments will be discounted using the interest rate specified in the

lease, if that rate could be easily determined. If that rate cannot be easily determined,

the tenant will use the tenant's incremental loan rate.

b.lease payments paid before or from the commencement date, less leases received;

c.the initial direct costs incurred by the tenant; and

20

d.an estimate of the costs incurred by the tenant when dismantling and eliminating the

underlying asset, restoring the location where it is located or restoring the underlying

asset to the condition required by the terms of the lease, unless those costs are

incurred to produce inventories. The tenant could incur obligations as a result of these

costs either at the commencement date or as a result of using the underlying asset for

a specified period.

At the start date, the lease payments included in the measurement of the lease liability comprise the

following payments for the right to use the underlying asset during the lease term that are not paid at

the commencement date:

a.fixed payments, less any leases receivable;

b.variable lease payments, which depend on an index or rate, initially measured using

the index or rate at the commencement date;

c.amounts expected to be paid by the tenant as guarantees of residual value;

d.the exercise price of a call option if the tenant is reasonably confident of exercising

that option;

e.late lease payments if the lease term reflects that the tenant will exercise an option to

terminate the lease.

Subsequent measurement of the right-of-use asset

After the commencement date, the Group will measure its right-of-use assets using the cost model,

unless it applies the fair value model of IAS 40 'Investment properties' to its investment properties and

rights of use that meet the definition of investment property (see Note 5.1). If the right of use of the

assets relates to a class of property, plant and equipment to which the tenant applies the revaluation

model of IAS 16, the tenant may choose to use that revaluation model for all right-of-use assets of

assets related to that class of property, plant and equipment.

Subsequent measurement of lease liabilities

After the commencement date, the Group will measure a lease liability by:

a)increasing the carrying amount to reflect interest on the lease liability;

b.reducing the carrying amount to reflect the lease payments paid; and

c.re-measuring the carrying amount to reflect the new measurements or changes in the

lease and also to reflect the essentially fixed lease payments that have been revised.

5.4.2 Landlord

A landlord will classify each lease as an operating lease or a finance lease.

A lease will be classified as a finance lease when it substantially transfers all the risks and rewards

inherent to owning an underlying asset. A lease will be classified as an operating lease if it does not

substantially transfer all the risks and rewards inherent to owning an underlying asset.

Finance leases

At the commencement of the lease term, the Group recognises finance leases in the consolidated

statement of financial position at amounts equal to the fair value of the leased asset or, if lower, the

21

present value of the minimum lease payments. To calculate the present value of the lease payments

the interest rate in the finance lease is used.

The cost of assets acquired under finance leases is presented in the consolidated statement of

financial position based on the nature of the leased asset. These assets relate in full to investment

property and are measured in accordance with that in Note 5.1.

Operating leases

A landlord recognises lease payments from operating leases as income on a straight-line basis or on

another systematic basis. The landlord will apply another systematic basis if it is more representative

of the structure with which the profit from the use of the asset is reduced.

In relation to the rent subsidies that the Group granted to certain tenants during the COVID-19

pandemic, they did not entail any contractual changes and, therefore, the accounting treatment given

to the subsidies was to recognise lower income, and not accruing any impact on the balance sheet.

The Group will recognise the costs as expenses, including depreciation, incurred to obtain the lease

income. It will also add the initial direct costs incurred to obtain an operating lease to the carrying

amount of the underlying asset and recognise these costs as an expense over the lease term, on the

same basis as the lease income.

5.5 Financial instruments

Financial instruments are recognised when the Group becomes a party to the contractual provisions of

the instrument. From 1 January 2018, the Group classified its financial assets in accordance with IFRS

9 "Financial Instruments".

The classification of financial assets will depend both on how an entity manages its financial

instruments (its business model) and on the existence and characteristics of the contractual cash flows

of the financial assets. Based on the above, the asset is measured at amortised cost, at fair value

through changes in other comprehensive income or at fair value through changes in profit or loss for

the period, as follows:

–If the objective of the business model is to hold a financial asset to collect contractual cash

flows and, depending on the terms of the contract, cash flows that are solely payments of

principal and interest on that principal are received on specified dates, the financial asset is

measured at amortised cost.

–If the objective of the business model is both to collect contractual cash flows and sell financial

assets and, depending on the terms of the contract, cash flows that are solely payments of

principal and interest on that principal are received on specified dates, the financial asset is

measured at fair value through other comprehensive income (equity).

Outside these scenarios, the remaining assets will be measured at fair value through changes in

losses and gains. All equity instruments (e.g. shares) are, by default, measured in this category. This is

because their contractual flows do not meet the characteristic of being only payments of principal and

interest. Financial derivatives are also classified as financial assets at fair value through profit or loss

unless they are designated as hedging instruments.

For the purposes of measurement, financial assets should be classified into one of the following

categories, with the accounting policies of each category being as follows:

1.Financial assets at amortised cost: these assets are subsequently recognised at their initial

cost amortised in accordance with the effective interest method. This amortised cost will be

reduced by any impairment loss. They are recognised in the consolidated income statement

for the period when the financial asset is de-recognised or impaired, or due to exchange

22

differences. Interest calculated using the effective interest method is recognised in the income

statement under the heading 'Financial income'.

2.Financial assets at fair value with profit or loss: financial assets at fair value with profit or loss

are recognised initially and subsequently at fair value, excluding transaction costs, which are

charged to the income statement. Gains or losses from changes in fair value are presented in

the income statement under the heading 'Changes in the fair value of financial instruments' in

the period in which they originated. Any dividends and interest also leads to financial results.

3.Debt instruments at fair value with changes in total profit or loss: These instruments are

subsequently recognised at fair value, recognising changes in fair value in 'Other

comprehensive income'. Interest income, impairment losses and exchange differences are

recognised in the consolidated income statement. When sold or derecognised, the

accumulated fair value adjustments recognised in "Other comprehensive income" are included

in the income statement as 'other financial income/(expenses)'.

4.Equity instruments at fair value with changes in total profit or loss: They are subsequently

measured at fair value. Dividends are only recorded in profits and loss, unless the dividends

clearly represent a recovery in the cost of the investment. Other gains or losses are

recognised as 'Other comprehensive income' and are never reclassified as profit or loss.

5.Financial assets at cost: Financial assets that should be classified in the above category, but

their fair value cannot reliably be estimated.

Impairment of financial assets

The impairment model applies to financial assets measured at amortised cost that include the item

"Customers and other receivables".

The impairment model is based on a dual measurement approach, under which there will be an

impairment provision based on expected losses over the next 12 months or based on expected losses

over the entire life of the asset. The fact that determines the transition from the first approach to the

second is that there is a significant decline in creditworthiness.

The deterioration of the Group's receivables was not significant, taking into account that the risk of

default was less than 1% of turnover and that the Group has deposits from its tenants to secure its

loans.

Financial liabilities

The main financial liabilities held by the Group companies are held-to-maturity financial liabilities,

which are measured at amortised cost. The financial liabilities held by the Group companies are

classified as:

1.Bank loans and other loans: loans from banks and other lenders are recognised by the

proceeds received, net of transaction costs.

Borrowings are subsequently measured at amortised cost. Any difference between the proceeds

(net of transaction costs) and the redemption value is recognised in the income statement over the

term of the borrowings using the effective interest method.

Financial debt is eliminated from the consolidated statement of financial position when the

obligation specified in the agreement is paid, cancelled or expired. The difference between the

carrying amount of a financial liability that has been cancelled or transferred to another party and

the consideration paid, including any transferred assets other than the cash or liabilities assumed,

is recognised in profit or loss for the year as other financial income or expenses.

23

Exchanges of debt instruments between the Group and the counterparty or substantial changes in

the liabilities initially recognised are accounted for as a cancellation of the original liability and the

recognition of a new financial liability, provided that the instruments have substantially different

terms. The Group considers that the terms are substantially different if the discounted present

value of the cash flows under the new terms, including any fees paid net of any fees received and

discounted using the original effective interest rate, is at least ten per cent different from the

discounted present value of the remaining cash flows of the original financial liability.

If the exchange is recognised as a cancellation of the original financial liability, the costs or fees

are recognised in the consolidated income statement as part of the consolidated income

statement. Otherwise, the modified flows are discounted at the original effective interest rate,

recognising any difference with the prior carrying amount, in profit or loss. Likewise, the costs or

fees adjust the carrying amount of the financial liability and are amortised by the amortised cost

method for the remaining life of the modified liability.

The Group recognises the difference between the carrying amount of a financial liability or the part

of it cancelled or transferred to a third party and the consideration paid, including any assets

transferred other than the cash or liabilities assumed in profit or loss.

The Group will account for exchanges of debt instruments with a lender, provided that the

instruments have substantially different conditions, such as a cancellation of the original financial

liability and subsequent recognition of a new financial liability. Similarly, a substantial change in the

terms of an existing financial liability or a part of it will be recognised as a cancellation of the

original financial liability and a subsequent recognition of a new financial liability. The difference

between the carrying amount of the cancelled financial liability and the consideration paid, which

includes any transferred assets other than cash or any liabilities assumed, will be recognised in

profit or loss for the year.

If it is determined that the new terms or changes of a financial liability are not substantially different

from the existing ones and it is therefore determined that the change is not substantial, the existing

financial liability will not be derecognised. The Group will recalculate the gross carrying amount of

the financial liability and recognise a change gain or loss in profit/(loss). The gross carrying

amount of the financial liability will be recalculated as the present value of the renegotiated or

modified contractual cash flows discounted at the original effective interest rate of the financial

liability.

2.Trade and other payables: trade payables are initially recognised at fair value and are

subsequently measured at amortised cost using the effective interest method.

The Group derecognises financial liabilities when the obligations giving rise to them cease to exist.

5.6 Derivative financial instruments and hedge accounting

The Group uses derivative financial instruments to hedge the risks to which its future activities,

transactions and cash flows are exposed. These risks are mainly due to changes in interest rates.

Among the various transactions, the Group uses certain financial instruments as economic hedges.

Derivatives are initially recognised at fair value on the date on which the derivative contract is signed

and are subsequently measured at fair value at each reporting date. Subsequent changes in fair value

are recognised depending on whether the derivative has been designated as a hedging instrument

and, if so, on the nature of the item being hedged.

At the beginning of the hedging relationship, the Group documents the economic relationship between

the hedging instruments and the hedged items, including whether changes in the cash flows of the

hedging instruments are expected to offset changes in the cash flows of the hedged items. The Group

documents its risk management objective and strategy to undertake its hedge transactions.

24

The effective part of the changes in the fair value of the derivatives that are designated and classified

as cash flow hedges is recognised in the cash flow hedge reserve under equity. The loss or gain

relating to the ineffective part is immediately recognised in the consolidated income for the year under

'Changes in the fair value of financial instruments' in the consolidated income statement.

Gains or losses relating to the effective part of the change in the intrinsic value of the option

agreements are recognised in the cash flow reserve hedge under equity. Changes in the time value of

option agreements that relate to the hedged item ('aligned time value') are recognised under other

comprehensive income in the costs of the hedge reserve in equity.

When forward contracts are used to hedge expected transactions, the Group generally designates

only the change in the fair value of the forward contract related to the cash component as the hedging

instrument. Gains or losses related to the effective part of the change in the cash component of

forward contracts are recognised in the cash flow hedge reserve under equity. The change in the

forward element of the contract related to the hedged item is recognised in other comprehensive

income on the costs of the hedge reserve under equity. In some cases, the gains or losses

corresponding to the effective part of the change in fair value of the full term contract are recognised in

the cash flow hedge reserve under equity.

–Cash flow hedges: In hedges of this nature, the portion of the gain or loss on the hedging

instrument that has been determined to be an effective hedge is recognised temporarily in

equity and is recognised in the income statement in the same period during which the hedged

item affects profit or loss, unless the hedge relates to a forecast transaction that results in the

recognition of a non-financial asset or a non-financial liability, in which case the amounts

recognised in equity are included in the initial cost of the asset or liability when it is acquired or

assumed.

–Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated

or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gains or

losses on the hedging instrument recognised in equity are retained in equity until the forecast

transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative

gain or loss recognised in equity is transferred to net profit or loss for the year.

Derivatives embedded in other financial instruments or other host contracts are treated as separate

derivatives when their risks and characteristics are not closely related to those of the host contracts

and provided that the host contracts are not measured at fair value by recognising changes in fair

value in the consolidated statement of comprehensive income.

The fair value of the derivative financial instruments is calculated using the valuation techniques

described in Note 5.7 below.

5.7 Valuation techniques and applicable assumptions to measure fair value

The fair value of financial assets and liabilities is calculated as followed:

–The fair value of financial assets and liabilities with standard terms and that are traded on

active, liquid markets is calculated by reference to prices quoted in the market.

–The fair value of financial assets and liabilities (except derivative instruments) is calculated in

accordance with the generally accepted valuation models based on discounted cash flows

using the prices of observable market transactions and the contributor prices of similar

instruments.

–The fair value of interest rate swaps is calculated by discounting future settlements between

fixed and floating interest rates to their present value, in line with implicit market interest rates,

obtained from long-term interest rate swap curves. Implicit volatility is used to calculate the fair

values of caps and floors using option valuation models.

25

Likewise, in the valuation of derivative financial instruments, the risk inherent to the element or position

hedged must be effectively eliminated during the entire expected term of the hedge and there must be

adequate documentation evidencing the specific designation of the financial derivative to hedge

certain balances or transactions and how this effectiveness was intended to be achieved and

measured. Moreover, pursuant to IFRS 13 and due to the inherent risk, the credit risk of the parties to

the contract (both their own risk and that of the counterparty) must be included in the valuation of the

derivatives. The Group applied the discounted cash flow method, considering a discount rate affected

by the Merlin Group's own credit risk.

Valuation methodology for the embedded Tree derivative

Until the date of sale of TreeIn particular for the measurement of the implicit derivative of the income,

the Group based its estimate on the future total income arising from the agreement adjusted by the

counterparty's credit risk. The estimate of future rental income was based on the eurozone inflation

swaps (harmonised CPI in the euro area excluding tobacco) at the time of the analysis, and it

considered the credit risk of the corresponding counterparty. The measurement approach used was

based on the discounted cash flow model.

The following information was used in determining the value of the embedded income derivative (see

Note 10):

–Forward curve of the consumer price index of the Euro area without tobacco (HICP).

–Volatility of the HICP to calculate the value of the land (0%) included in leases.

–EUR discount factors for calculating the present value of future income (sum of the

components of future income and value of land).

–Credit risk charges (Credit Default Swap) for the calculation of the adjustment for the value of

the counterparty's credit risk (CVA).

HICP forward curve

For the construction of the curve, the 30-year zero coupon swap was used. From year to year, the

annual rates were integrated and interpolated, applying seasonality adjustments, to obtain the forward

rate curve.

HICP volatility

0% was taken as an initial premium for land. Subsequently, the volatility of each future settlement or

forward year by year (floorlet) was calculated. Once the volatilities and forward rates were available,

the amount of the land component was determined.

EUR discount factors

Since the market standard requires swap derivatives to be discounted at the Overnight indexed swap

rate, both Euribor and Eonia rates were included in the yield curve data. The yield curve data used for

the calculations were:

–Deposit fees: 1D, 2D, 3D

–Fixing of the Euribor: 1M, 3M and 6M

–Euribor Futures: between 6M and 2Y

–Euribor Swap Rates: from 2Y to 30Y

–EONIA swap base fees: up to 30Y

26

–Credit Default Swap (CDS) rates

–CDS market data were used and interpolated for the specific deadlines or periods of the rents.

We used the 'Current Exposure Method' to calculate the CVA.

After the sale of the Net Lease segment, the Group no longer had any additional income derivatives at

31 December 2022.

Financial instruments measured subsequent to initial recognition at fair value are grouped into levels 1

to 3 based on the degree to which the fair value is observable:

–Level 1: those measured using quoted prices (unadjusted) in active markets for identical

assets or liabilities.

–Level 2: those measured using inputs other than quoted prices included within Level 1 that are

observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from

prices).

–Level 3: those measured using valuation techniques, including inputs for the asset or liability

that are not based on observable market data (non-observable inputs).

The Group's financial assets and liabilities measured at fair value were as follows at 31 December

2022:

2022

	Thousands of euros
	Level 1	Level 2	Level 3	Total
Derivative financial instruments (Note 14.3)	-	(11)	(9,256)	(9,267)
Financial instruments - assets (Note 14.3)	-	18,882	-	18,882
	-	18,871	(9,256)	9,615

2021

	Thousands of euros
	Level 1	Level 2	Level 3	Total
Derivative financial instruments (Note 14.3)	-	(79,754)	(15,134)	(94,888)
Embedded derivatives (Note 10)	-	167,080	-	167,080
Financial assets at fair value through profit or loss (Note 10)	-	-	80,964	80,964
	-	87,326	65,830	153,156

In addition, Note 7 includes information regarding the determination of the fair value of investment

property.

5.8 Equity instruments

An equity instrument is a contract that evidences a residual interest in the assets of the Parent after

deducting all of its liabilities.

Capital instruments issued by the Parent are recognised in equity at the proceeds received, net of

issue costs.

27

The Parent Company's equity instruments acquired by the Group are recognised separately at cost

and deducted from equity in the consolidated statement of financial position, regardless of why they

were acquired. No gains or losses from transactions involving own equity instruments are recognised

in the consolidated income statement.

The subsequent amortisation of the equity instruments of the Parent gives rise to a capital reduction

for the nominal amount of said shares and the positive or negative difference between the acquisition

price and the nominal value of the shares is charged or credited to accounts of reserves.

The transaction costs related to own equity instruments are recognised as a decrease in equity, net of

any related tax effect.

5.9 Distributions to shareholders

Dividends are paid in cash and recognised as a reduction in equity when the pay-outs are approved by

shareholders at the Annual General Meeting.

The Parent Company is subject to the special regime for REITs. As in Article 6 of Law 11/2009, of 26

October 2009, amended by REITs Act 2012 opting to pay tax under the special tax regime are required

to distribute the profit generated during the year to shareholders as dividends. Once the corresponding

commercial obligations have been fulfilled, said distribution must be agreed within six months from

year end, and the dividends paid within 30 days from the date on which the pay-out is agreed.

Moreover, as specified in Law 11/2009, of 26 October 2009, amended by Law 16/2012, of 27

December, the Parent must distribute the following as dividends:

•100% of the profit from dividends or shares in profits distributed by the entities referred to in

section 1, Article 2 of Law 11/2009.

•At least 50% of the profits arising from the transfer of the properties, shares or ownership

interests referred to in section 1, Article 2 of Law 11/2009, subsequent to expiry of the time

limits referred to in section 2, Article 3 of Law 11/2009, which are used for pursuit of the

entities' principal corporate purpose. The remainder of these profits must be reinvested in

other property or investments used for the pursuit of said activity within three years after the

transfer date. Otherwise these profits should be distributed in full together with any profit

arising in the year in which the reinvestment period expires. If the items to be reinvested are

transferred prior to the end of the holding period, that profit must be distributed in full together

with, if applicable, the profit generated during the year in which the items were transferred.

The obligation to distribute profit does not apply to the portion of the profit attributable to prior

years in which the Company was not included under the special tax regime in this Act.

•At least 80% of the remaining profits obtained. When dividend distributions are charged to

reserves generated from profits in a year in which the special tax regime applied, the

distribution must necessarily be approved as set out above.

5.10 Cash and cash equivalents

The Group includes under this heading cash and short-term highly liquid investments maturing in less

than three months that are readily convertible to cash and which are subject to an insignificant risk of

changes in value. The interest income associated with these transactions is recognised as income

when accrued while unmatured interest is presented in the consolidated statement of financial position

as an addition to the balance of the above heading.

28

5.11 Provisions

When preparing the consolidated financial statements the Parent's directors made a distinction

between:

•Provisions: credit balances covering present obligations arising from past events with respect

to which it is probable that an outflow of resources embodying economic benefits that is

uncertain as to its amount and/or timing will be required to settle the obligations; and

•Contingent liabilities: possible obligations that arise from past events and whose existence will

be confirmed only by the occurrence or non-occurrence of one or more future events not

wholly within the Group's control.

The consolidated financial statements include all the provisions with respect to which it is likely that the

obligation will have to be settled. Contingent liabilities are not recognised in the consolidated financial

statements but rather are disclosed in the notes to the consolidated financial statements, unless the

possibility of an outflow in settlement is considered to be remote.

Provisions are measured at the present value of the best possible estimate of the amount required to

settle or transfer the obligation, taking into account the information available on the event and its

consequences. Where discounting is used, adjustments made to provisions are recognised as finance

cost on an accrual basis.

The compensation receivable from a third party on settlement of the obligation is recognised as an

asset, provided there is no doubt that the reimbursement will take place, unless there is a legal

relationship whereby a portion of the risk has been externalised, as a result of which the Group is not

liable, in which case, the compensation will be taken into account when estimating, if appropriate, the

amount of the related provision.

5.12 Revenue recognition

Revenue and expenses are recognised on an accrual basis, i.e. when the actual flow of the related

goods and services occurs, regardless of when the resulting monetary or financial flow arises. Rental

income is measured at the fair value of the consideration received, net of discounts and taxes.

Discounts (rent waivers and rebates) granted to lessees are recognised as a reduction in rental

income when it is probable that conditions precedent will be fulfilled requiring them to be granted.

Discounts are recognised by expensing the total rent waiver or rebate on a straight-line basis over the

term of the lease in force. If a lease is cancelled earlier than expected, any outstanding rent waiver or

rebate is recognised in the last period prior to the end of the agreement.

Leasing of investment property to third parties

The Group companies' principal activity comprises the acquisition and leasing of primarily Shopping

centres, logistics units and offices. The Group's ordinary income is generated from the leasing of this

investment property to third parties.

Ordinary income from the leasing of investment property is recognised taking into account the stage of

completion of the transaction at the reporting date, provided the result of the transaction can be

reliably estimated. Income from the Group's leases is recognised by Group companies on a monthly

basis pursuant to the conditions and amounts agreed with the lessees in the various agreements. This

income is only recognised when it can be measured reliably and it is probable that the economic

benefits from the lease will be received.

Where the outcome of services rendered cannot be measured reliably, revenue is recognised to the

extent that the expenses incurred are deemed recoverable.

29

Service charges re-billed to lessees are recognised net of other operating expenses.

5.13 Income tax

5.13.1 General regime

Tax expense (tax income) comprises current tax expense (current tax income) and deferred tax

expense (deferred tax income).

The current income tax expense is the amount payable by the Group as a result of income tax

settlements for a given year. Tax credits and other tax benefits, excluding tax withholdings and pre-

payments, and tax loss carryforwards from prior years effectively offset in the current year reduce the

current income tax expense.

The deferred tax expense or income relates to the recognition and derecognition of deferred tax

assets and liabilities. These include temporary differences measured at the amount expected to be

payable or recoverable on differences between the carrying amounts of assets and liabilities and their

tax bases, and tax loss and tax credit carryforwards. These amounts are measured at the tax rates

that are expected to apply in the period when the asset is realised or the liability is settled.

Deferred tax liabilities are recognised for all taxable temporary differences, unless the temporary

difference arises from the initial recognition of goodwill, goodwill for which amortisation is not

deductible for tax purposes or the initial recognition of other assets and liabilities in a transaction that

affects neither accounting profit (loss) nor taxable profit (tax loss).

Deferred tax assets are recognised for temporary differences to the extent that it is considered

probable that the consolidated companies will have sufficient taxable profits in the future against which

the deferred tax asset can be utilised, and the deferred tax assets do not arise from the initial

recognition of other assets and liabilities in a transaction that affects neither accounting profit (loss) nor

taxable profit (tax loss). The other deferred tax assets (tax loss, temporary differences and tax credit

carryforwards) are only recognised if it is considered probable that the consolidated companies will

have sufficient future taxable profits against which they can be utilised.

The deferred tax assets recognised are reassessed at the end of each reporting period and the

appropriate adjustments are made to the extent that there are doubts as to their future recoverability.

Also, unrecognised deferred tax assets are reassessed at the end of each reporting period and are

recognised to the extent that it has become probable that they will be recovered through future taxable

profits.

5.13.2 REIT regime

The REIT special tax regime, as amended by Law 16/2012 of 27 December, is based on a 0%

corporate income tax rate, provided certain requirements are met. Particularly noteworthy amongst

those conditions is that at least 80% of income must come from urban real estate used for leasing

purposes and acquired in full ownership or through holdings in Spanish or foreign companies,

regardless of whether or not they are listed on organised markets, that meet the same investment and

profit distribution requirements. Likewise, the main sources of income for these entities must come

from the real estate market, either through leasing the properties, their subsequent sale after a

minimum lease period, or the income generated from holdings in entities with similar characteristics.

Nevertheless, tax is accrued in proportion to dividend distributions. Dividends received by the

shareholders are exempt, unless the recipient is a legal person subject to corporate income tax or a

permanent establishment of a foreign entity, in which case a deduction in the tax liability is established,

so that these earnings are taxed at the shareholder's rate. However, the remaining earnings must be

not be taxed provided that they are not distributed to shareholders.

As in Transitional Provision Nine of Law 11/2009, of 26 October, amended by Law 16/2012, of 27

December, which regulate REITs, the entity will be subject to a special tax rate of 19% on the total

dividends or profit shares distributed to shareholders with a shareholding in the entity of 5% or more,

30

when these dividends are exempt or taxed at a rate below 10% in the shareholders. The Group has

therefore established the procedure guaranteeing confirmation by shareholders of their tax rate,

proceeding where applicable, to withhold 19% of the dividend distributed to shareholders that do not

meet the above tax requirements.     

With effect for financial years beginning on or after 1 January 2021, Law 11/2021, of 9 July, on

measures to prevent and combat tax fraud amended Article 9 (4) of Spanish Law 11/2009, of 26

October, regulating REITs. Specifically, a special tax of 15% was introduced on the amount of profit

obtained in the year which is not distributed, in the portion that arises from: a) income that has not

been taxed at the general corporate income tax rate and, b) income that does not arise from the

transfer of eligible assets, once the three-year maintenance period has elapsed, which has been

included in the three-year reinvestment period in Article 6.1.b) of Law 16/2012, of 27 December. This

special tax will be considered corporate income tax and will accrue on the day of the agreement to

apply profit for the year by the general shareholders meeting or equivalent body. The self-assessment

and payment of the tax must be performed within two months of the accrual.

5.14 Share-based payments

The Parent Company recognises, on the one hand, the goods and services received as an asset or as

an expense, depending on their nature, when they are received and, on the other, the related increase

in equity, if the transaction is equity-settled, or the related liability if the transaction is settled with an

amount based on the value of the equity instruments.

In the case of equity-settled transactions, both the services rendered and the increase in equity are

measured at the fair value of the equity instruments granted, by reference to the grant date. In the

case of cash-settled share-based payments, the goods and services received and the related liability

are recognised at the fair value of the latter, by reference to the date on which the requirements for

recognition are met.

2017-2019 Incentive Plan

Also, at the General Meeting held on 26 April 2017, the shareholders approved a remuneration plan

for the management team and other important members of the Group's workforce, the measurement

period of which is from 1 January 2017 to 31 December 2019 (the "2017-2019 Incentive Plan").

According to the plan, the members of the management team may be entitled to receive: (i) a certain

monetary amount in accordance with the increase of the share price and (ii) Parent Company shares,

if certain objectives are fulfilled, referenced against the EPRA NAV.

In this regard, in 2022 the Group recorded an expense in the amount of EUR 1,210 thousand

corresponding to the last tranche accrued by the 2017-2019 Incentive Plan, with a counterpart charge

to reserves ending the plan and its registration.

2022 – 2024 Incentive Plan

The General Shareholder Meeting held on 4 May 2022 approved a long-term incentive plan consisting

of the delivery of a maximum number of MERLIN Properties, SOCIMI, S.A. ordinary shares equal to

3,491,767 shares (representing 0.74% of the share capital), aimed at the members of the

management and management team of the MERLIN Group, including the executive directors of the

Parent (LTIP 2022-2024).

The LTIP will be implemented through a performance share single cycle plan with a target

measurement period of 3 years; beginning on 1 January 2022 and ending on 31 December 2024 and

will be payable through the delivery of shares of the Parent in 2025, once (i) compliance with the

specific targets established for 2022-2024 has been verified and (ii) the beneficiary has remained in

the MERLIN Group.

31

With respect to the targets or metrics to which the plan is linked (see Note 20), it includes market and

non-market conditions.

With respect to the market condition 'Total shareholder profitability,' the Group applied a valuation

methodology for the underlying assets on the date of delivery of the incentive associated with the

Monte Carlo simulation method. The Monte Carlo simulation is a statistical method applied to the

financial modelling on the probability of different results where a random or independent variable

comes into play. In this regard, the Monte Carlo simulation method applied by the Group was based on

a Brownian motion model, which makes it possible to simulate the possible paths that the underlying

asset can follow (price of Merlin's share and EPRA Nareit Development Europe index) from the

repetition of random samples to obtain different numerical results. For the development of the

simulation, the generation of the random variable was performed by applying a standard normal

distribution N (0.1). To this end, the average or expected value corresponding to the spot price of the

Merlin share was established at the date of communicating the incentive and a standard deviation to

describe the change as regards the average, based on the volatility of the share.

With respect to the non-market conditions of i) EPRA NTA, ii) Net carbon and environment emissions

and iii) the Environment and Company, the Group estimated its compliance with them at each

measurement date during the term of the plan with the best information available.

5.15 Employee obligations

Under current labour legislation, the Group companies are required to pay termination benefits to

employees terminated under certain conditions.

When a restructuring plan is approved by the directors, made public and communicated to employees,

the Group recognises the provisions required to meet any future payments resulting from their

application. These provisions are calculated in accordance with the best estimates available of the

foreseeable costs.

In this sense, at 31 December 2022, the Group does not have commitments for this item, and there is

no Downsizing Plan in force.

5.16 Current assets and liabilities

The Group classifies its assets and liabilities as current and non-current in the consolidated statement

of financial position. To this end, current assets and current liabilities are those that meet the following

criteria:

•Assets are classified as current when they are expected to be realised, or are intended for

sale or consumption, during the course of the Group's normal operating cycle, when they are

held primarily for the purpose of being traded, when they are expected to be realised within

twelve months after the reporting date, or when they constitute cash or a cash equivalent,

unless they are restricted from being exchanged or used to settle a liability for at least twelve

months after the reporting date.

•Liabilities are classified as current when they are expected to be settled during the course of

the Group's normal operating cycle, when they are held primarily for the purpose of being

traded, when they are expected to be settled within twelve months after the reporting date, or

when the Group does not have an unconditional right to defer repayment of the liability for at

least twelve months after the reporting date.

•Derivative financial instruments not held for trading are classified as current or non-current

according to the period of maturity or periodic settlement.

32

5.17 Segment information

The Group groups its segments based on the nature of the assets in the various areas in which it

implements its strategy. In this sense, each operating segment is a component of the Group that

performs business activities from which it can earn revenue and incur expenses. The operating results

of each segment are regularly reviewed by the Group's management to decide on the resources to be

allocated to each segment, assess its performance and for which differentiated financial information is

available.

5.18 Earnings per share

Basic earnings per share are calculated by dividing net profit or loss attributable to the Parent

shareholders by the weighted average number of ordinary shares outstanding during the year,

excluding the average number of shares of the Parent held by the Group companies.

For the calculation of the diluted profit per share, the Group calculates the amounts of the diluted

earnings per share for the profit for the year attributable to the shareholders of the Parent and, where

applicable, the profit for the year of the ongoing activities attributable to those holders of equity

instruments.

To calculate the diluted earnings per share, the Group takes the profit or loss for the year attributable

to the holders of ordinary equity instruments and the weighted average number of shares in circulation

for all the dilutive effects inherent to the potential ordinary shares.

5.19 Environment

The Group performs activities whose primary purpose is to prevent, mitigate or repair environmental

damage caused by its operations, see climate change management policies in Note 23.

Expenses incurred in connection with these environmental activities are recognised as other operating

expenses in the year in which they are incurred. However, because of their nature, the Group's

business activities do not have a significant environmental impact.

5.20 Consolidated statements of cash flows

The following terms are used in the consolidated statements of cash flows (prepared using the indirect

method) with the meanings specified:

1.Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly

liquid investments that are subject to an insignificant risk of changes in value.

2.Operating activities: the principal revenue-producing activities of the entities composing the

consolidated Group and other activities that are not investing or financing activities.

3.Investing activities: the acquisition and disposal of long-term assets and other investments not

included in cash and cash equivalents.

4.Financing activities: activities that result in changes in the size and composition of the equity

and liabilities that are not operating activities.

5.21 Discontinued Business

A discontinued business is any component of the Group that has been sold or otherwise arranged, or

that has been classified as held for sale and, among other conditions, represents a significant

business line or area that can be considered separate from the rest.

For these types of transactions, the Group included in the consolidated income statement and in a

single line item entitled "Profit/(Loss) for the period from discontinued operations net of tax" both the

33

profit/(loss) after tax on discontinued activities and the profit/(loss) after tax recognised by fair value

measurement less costs to sell or by the disposal of the items constituting the discontinued activity.

In addition, when transactions are classified as discontinued, the Group presents in the above

accounting item the amount of the previous year corresponding to the activities that were discontinued

on the closing date of the corresponding consolidated financial statements.

At the beginning of 2022, the Group identified the activity called Net Lease as a discontinued segment,

given its commitment to divestment in the short term. On 31 December 2022, the above divestment

process was completed by adjusting comparative financial information to the reporting requirements

for discontinued activities (see Note 3).

6.    Segment reporting

a) Basis of segmentation

Group management has segmented its activities into the business segments detailed below according

to the type of assets acquired and managed:

–Office buildings

–Shopping centres

–Logistics assets

–Others: Assets not included in the above segments, which mainly correspond to 3 hotels, land

held for non-strategic purposes and other smaller assets.

Any revenue or expense that cannot be attributed to a specific line of business or relate to the entire

Group are attributed to the Parent as a "Corporate unit/Other", as are the reconciling items arising

from the reconciliation of the result of integrating the financial statements of the various lines of

business (prepared using a management approach) and the Group's consolidated financial

statements.

The profits of each segment, and each asset within each segment, are used to measure performance

as the Group considers this information to be the most relevant when evaluating the segments' results

compared to other groups operating in the same businesses.

The Group performed its business activities in Spain and Portugal in the year ended 31 December

2022.

b) Basis and methodology for business segment reporting

The segment information below is based on monthly reports prepared by Group management and is

generated using the same computer application that prepares all the Group's accounting information.

The accounting policies applied to prepare the segment information are the same as those used by

the Group, as described in Note 5.

Segment revenue relates to ordinary revenue directly attributable to the segment plus the relevant

proportion of the Group's general income that can be allocated on a reasonable basis to that segment.

Ordinary revenue of each segment does not include interest or dividend income, gains on the disposal

of investment property, debt recoveries or cancellation.

Segment expenses are calculated as the directly attributable expenses incurred in the operating

activities, plus the corresponding proportion of the expenses that can be reasonably allocated to the

segment.

The segment profit or loss is presented before any adjustment for non-controlling interests.

34

Segment assets and liabilities are those directly related to each segment's operations, plus the assets

and liabilities that can be directly attributed thereto using the above allocation system, and include the

proportional part of the assets and liabilities of joint ventures.

Segment reporting

Segment information about these businesses at 31 December 2022 is presented below:

	Thousands of euros
2022	Office buildings	Shopping centres	Logistics	Other	Corporate Unit	Group total
Revenue from non-Group customers
Rental income	230,438	114,481	70,882	12,353	-	428,154
Services rendered	7,862	1,471	-	-	1,551	10,884
Net income	238,300	115,952	70,882	12,353	1,551	439,038
Other operating income	934	318	356	2	1,040	2,650
Staff costs	-	-	-	-	(39,673)	(39,673)
Operating expenses	(31,605)	(17,282)	(2,532)	(3,509)	(18,890)	(73,818)
Gains or losses on disposals of non-current assets	3,985	544	(13)	7,045	-	11,561
Depreciation and amortisation charge	(548)	-	-	(13)	(1,324)	(1,885)
Allocation/Excess provisions	-	-	-	-	(160)	(160)
Changes in fair value of investment property	(149,149)	(81,387)	(16,374)	(2,362)	-	(249,272)
Profit/(Loss) from operations	61,917	18,145	52,319	13,516	(57,456)	88,441
Changes in fair value of financial instruments - Other	-	-	6,965	-	34,261	41,226
Finance income	-	-	-	-	3,942	3,942
Finance expenses	(295)	-	(4,546)	-	(104,362)	(109,203)
Gains on disposal of financial instruments	-	-	-	-	(283)	(283)
Share of results of companies accounted for using the equity method	-	-	-	-	24,033	24,033
Profit/(Loss) before tax	61,622	18,145	54,738	13,516	(99,865)	48,156
Income tax	(3,316)	1,174	(253)	-	(4,405)	(6,800)
Profit/(Loss) for the year	58,306	19,319	54,485	13,516	(104,270)	41,356

35

	Thousands of euros
At 31 December 2022	Office buildings	Shopping centres	Logistics	Other	Corporate Unit	Group total
Investment property	6,509,874	2,134,503	1,672,451	397,372	-	10,714,200
Non-current financial assets-	25,990	29,384	14,668	394	140,612	211,048
Derivatives	-	-	6,084	-	12,798	18,882
Other financial assets	25,990	29,384	8,584	394	127,814	192,166
Deferred tax assets	876	79	3,580	-	74,111	78,646
Other non-current assets	4,200	18	-	1,454	502,697	508,369
Non-current assets	6,540,940	2,163,984	1,690,699	399,220	717,420	11,512,263
Trade receivables	13,838	15,592	7,297	3,487	9,626	49,840
Other current financial assets	111	181	(1)	3,748	(1,079)	2,960
Other current assets	38,932	31,750	20,419	1,800	393,519	486,420
Current assets	52,881	47,523	27,715	9,035	402,066	539,220
Total assets	6,593,821	2,211,507	1,718,414	408,255	1,119,486	12,051,483
Non-current bank borrowings and debenture issues	13,196	-	68,427	-	3,387,577	3,469,200
Other non-current liabilities	336,026	222,558	86,470	25,758	111,735	782,547
Non-current liabilities	349,222	222,558	154,897	25,758	3,499,312	4,251,747
Current liabilities	48,861	31,526	29,839	8,518	831,768	950,512
Total liabilities	398,083	254,084	184,736	34,276	4,331,080	5,202,259

Segment information about these businesses at 31 December 2021 is presented below:

36

	Thousands of euros
2021 (*)	Office buildings	Shopping centres	Logistics	Other	Corporate Unit	Group total
Revenue from non-Group customers
Rental income	217,809	89,645	63,033	6,604	-	377,091
Services rendered	3,739	699	-	-	1,301	5,739
Net income	221,548	90,344	63,033	6,604	1,301	382,830
Other operating income	1,962	670	973	43	629	4,277
Staff costs	-	-	-	-	(40,779)	(40,779)
Operating expenses	(28,038)	(17,687)	(4,480)	(2,034)	(16,355)	(68,594)
Gains or losses on disposals of non-current assets	(846)	(137)	(1,024)	107	-	(1,900)
Depreciation and amortisation charge	(609)	-	-	(13)	(1,236)	(1,858)
Excess provisions	-	-	-	-	1,169	1,169
Changes in fair value of investment property	30,947	(36,023)	206,989	(6,416)	-	195,497
Negative goodwill on business combinations	-	-	-	-	-	-
Profit/(Loss) from operations	224,964	37,167	265,491	(1,709)	(55,271)	470,642
Changes in fair value of financial instruments	-	-	1,184	-	9,168	10,352
Finance income	-	-	-	-	5,421	5,421
Finance expenses	(288)	-	(1,801)	-	(114,369)	(116,458)
Gains on disposal of financial instruments	-	-	-	-	(1,347)	(1,347)
Share of results of companies accounted for using the equity method	-	-	-	-	34,560	34,560
Profit/(Loss) before tax	224,676	37,167	264,874	(1,709)	(121,838)	403,170
Income tax	(2,166)	405	-	-	(6,049)	(7,810)
Profit/(Loss) for the year	222,510	37,572	264,874	(1,709)	(127,887)	395,360

(*) Reexpresed information

37

	Thousands of euros
At 31 December 2021	Office buildings	Net Lease (*)	Shopping centres	Logistics	Other	Corporate Unit	Group total
Investment property	6,538,755	1,607,538	2,200,030	1,548,169	402,764	-	12,297,257
Non-current financial assets-	20,756	178,578	23,667	8,669	523	127,597	359,791
Derivatives	-	167,080	-	-	-	-	167,080
Other financial assets	20,756	11,498	23,667	8,669	523	127,597	192,711
Deferred tax assets	1,009	3,685	80	3,668	—	75,367	83,808
Other non-current assets	4,508	-	28	2,528	1,273	485,201	493,538
Non-current assets:	6,565,028	1,789,801	2,223,805	1,563,034	404,561	688,165	13,234,394
Trade receivables	9,415	897	13,707	6,046	2,093	7,468	39,626
Other current financial assets	182	520	231	121	9	81,855	82,919
Other current assets	51,292	26,543	185,606	30,809	47	621,601	915,898
Current assets	60,889	27,961	199,544	36,976	2,148	710,925	1,038,443
Total assets	6,625,917	1,817,762	2,423,349	1,600,010	406,710	1,399,090	14,272,837
Non-current bank borrowings and debenture issues	14,911	682,867	-	69,048	-	4,891,884	5,658,709
Other non-current liabilities	330,679	43,186	223,080	78,051	18,643	156,937	850,576
Non-current liabilities	345,590	726,053	223,080	147,099	18,643	5,048,821	6,509,285
Current liabilities	36,374	14,212	23,438	9,871	7,910	644,825	736,630
Total liabilities	381,964	740,265	246,518	156,970	26,553	5,693,646	7,245,915

(*) Discontinued and sold in 2022

C) Geographical segment reporting

For the purposes of geographical segment reporting, segment revenue is grouped according to the

geographical location of the assets. Segment assets are also grouped according to their geographical

location.

The following tables summarises ordinary income and non-current investment property for each of the

assets held by the Group by geographical area:

2022

	Thousands of euros
	Rental income	%	Investment property	%
Madrid	208,192	50%	5,954,945	56%
Catalonia	64,914	13%	1,522,841	14%
Andalusia	19,951	5%	298,314	3%
Valencia	16,662	4%	294,782	3%
Galicia	16,823	4%	302,041	3%
Castille-La Mancha	23,757	6%	631,589	6%
Basque Country	11,926	3%	273,138	3%
Rest of Spain	8,755	2%	196,049	2%
Portugal	57,174	13%	1,240,501	12%
Total	428,154	100%	10,714,200	100%

38

2021

	Thousands of euros
	Leasing income (a)	%	Investment property (b)	%
Madrid	213,591	46%	6,668,450	54%
Catalonia	75,608	16%	1,760,543	14%
Andalusia	23,928	5%	449,825	4%
Valencia	19,723	4%	413,908	3%
Galicia	17,525	4%	376,309	3%
Castille-La Mancha	21,638	5%	632,594	5%
Basque Country	17,685	4%	388,563	3%
Rest of Spain	28,331	6%	669,044	5%
Portugal	44,434	10%	1,105,101	9%
Total	462,463	100%	12,464,337	100%

(a) Includes lease income for discontinued activities in 2021 amounting to EUR 85,373 thousand.

(b) It includes the amount of the embedded derivative described in Note 10

D) Main customers

The table below lists the most important tenants as of 31 December 2022, and the primary

characteristics of each of them:

2022

Position	Name	Type	% of total	% accumulated	Maturity
			of Income
1	Endesa	Offices	4.2%	4.2%	2024-2030
2	Inditex	Shopping/Logistics centres	3.3%	7.5%	2023-2025
3	Madrid	Offices	2.5%	10.0%	2023-2031
4	Técnicas Reunidas	Offices	2.4%	12.4%	2025
5	PwC	Offices	1.8%	14.2%	2028
6	Hotusa	Hotels	1.5%	15.7%	2028
7	BPI	Offices	1.5%	17.2%	2031
8	Indra	Offices	1.5%	20.1%	2024
9	FNAC	Shopping centres	1.4%	18.6%	2023-2025
10	XPO	Logistics	1.3%	21.4%	2024-2025

39

2021

Position	Name	Type	% of total	% accumulated	Maturity
			of Income
1	BBVA	Net lease (*)	15.90%	15.90%	2039-2040
2	Endesa	Offices	3.70%	19.6%	2022-2030
3	Inditex	Shopping/Logistics centres	2.80%	22.40%	2022-2024
4	Técnicas Reunidas	Offices	2.10%	24.50%	2025
5	Madrid	Offices	2.10%	26.60%	2022-2031
6	PricewaterhouseCoopers, S.L.	Offices	1.50%	28.10%	2028
7	Indra	Offices	1.50%	29.60%	2024-2026
8	BPI	Offices	1.40%	31.00%	2031
9	FNAC	Shopping centres	1.40%	32.40%	2022-2025
10	Hotusa	Hotels	1.30%	33.70%	2028

(*) Discontinued and sold in 2022

7.    Investment property

The breakdown of and changes in items included under the Investment Property heading in the

consolidated statement of financial position in 2022 and 2021 were as follows:

	Thousands of euros
	2022	2021
Beginning balance	12,297,257	12,139,347
Additions for the financial year	370,161	182,389
Disposals	(1,703,946)	(201,487)
Changes in value of investment property	(249,272)	177,008
Closing balance	10,714,200	12,297,257

Investment property is recognised at fair value. The expense recognised in the 2022 consolidated

income statement from measuring investment property at fair value amounted to EUR 249,272

thousand (EUR 177,008 thousand from income in the 2021 financial year including the change in

value of the Net Lease segment discontinued in 2022).

Investment property mainly includes property assets in the office, shopping centre and logistics

segments.

Additions and assets acquired in the 2022 and 2021 financial years are as follows:

40

	Thousands of euros
	2022	2021
Purchases/Additions:
Offices	136,861	20,738
Logistics	7,216	18,947
Improvements to assets	226,084	142,704
	370,161	182,389

The additions made in 2022 relate to the purchase of an office building in Lisbon amounting to EUR

113 million, a plant in an office building in Barcelona amounting to EUR 5 million and several plants in

an office building in Madrid amounting to EUR 19 million and the acquisition of land in the Basque

Country for the construction of a Data Centre amounting to EUR 7 million.

The other additions for 2022 related to the improvement and adaptation work performed on certain

properties owned by the Group, highlighting, among others, certain logistics warehouses in Cabanillas

del Campo and office buildings such as Castellana 85 and the Cerro de lo Gamos Business Park in

Madrid, and the development of Data Centres.

The losses in 2022 relate mainly to the sale of the leased premises to BBVA through the sale of all the

shares that the Parent held by the subsidiary Tree Inversiones Inmobiliarias, SOCIMI, S.A. (see Note

3), the result of which is presented in the discontinued activities line item.

Also in 2022, the Group sold two business parks and premises held for non-strategic purposes in

Madrid, an office building in Zaragoza and premises in Catalonia. As a result of these divestments, the

Group obtained a gain of EUR 11,561 thousand recognised under 'Gain on disposal of assets' in the

accompanying consolidated income statement.

The additions made in 2021 related to the purchase of an office building and the purchase of a flight

right over a site used for office purposes in Madrid for EUR 21 million and the acquisition of two plots

of land to be used for logistic purposes in Madrid and Valencia for EUR 19 million.

The other additions for 2021 related to the improvement and adaptation work performed on certain

properties owned by the Group, including the office buildings Castellana 85, Avenida de Burgos 208,

Plaza Ruiz Picasso and Castellana 280 in Madrid, in Torre Glories, Pere IV in Barcelona and the

Monumental building in Lisbon. At the Porto Pí and Saler shopping centres and in the logistics

developments located in the Community of Madrid.

The losses incurred in 2021 related mainly to the sale of 32 Caprabo supermarkets, an Office in

Madrid and four logistics warehouses, with a net positive result of EUR 4,057 thousand recognised

under "Profit for the year from discontinued transactions net of tax" and "Profit for disposal of assets"

respectively in the accompanying consolidated income statement.

At 31 December 2022, the Group had real estate assets amounting to EUR 265,443 thousand (EUR

2,039,558 thousand in 2021) to guarantee various loans and derivative financial instruments. At 31

December 2022, the balance of the loans amounted to EUR 84,987 thousand, while the financial

instruments had an asset balance of EUR 6,084 thousand (at the end of 2021 the balance of the loans

amounted to EUR 756,498 thousand and the financial instruments had a liability balance of EUR

73,265 thousand) (see Note 14). The Group holds no rights of use, seizure or similar situations as

regards its investment property. The Group did not hold financial leases in 2022 or 2021.

All properties included under "Investment property" were insured as of 31 December 2022.

As of 31 December 2022, the Group has firm purchase commitments for investment property

amounting to EUR 7,022 thousand, without considering the investments committed in constructions

and improvements.

41

In 2022 and 2021 no finance costs were capitalised in the cost of constructing the properties.

Fair value measurement and sensitivity

All investment property leased or to be leased through operating leases are classified as investment

property.

According to IAS 40, the Group periodically determines the fair value of its investment property so that

the fair value reflects the actual market conditions of the investment property items at that date. This

fair value is determined each year based on the appraisals undertaken by independent experts.

The market value of the Group's investment property as of 31 December 2022 and 2021, calculated

based on appraisals performed by Savills Consultores Inmobiliarios, S.A., CBRE Valuation Advisory,

S.A. and Jones Lang LaSalle, S.A. independent appraisers not related to the Group, amounted to

EUR 10,558, 975 thousand (EUR 12,402,279 in 2021). This measurement does not include the value

of the use rights recognised by the application of IFRS 16 for EUR 37,152 thousand (EUR 34,805

thousand in 2021) or the amounts relating to advances paid by the Group to third parties for the

purchase of assets or other non-valued assets amounting to EUR 118,072 thousand (EUR 27,253

thousand in 2021) mainly assets intended for Data Centres. Likewise, the valuation for 2021 included

the value of the embedded derivative of the lease rent with BBVA for EUR 167,080 thousand, which

was recorded under "Other non-current financial assets". The valuation was performed in accordance

with the Appraisal and Valuation Standards issued by the Royal Institute of Chartered Surveyors

(RICS) of the United Kingdom and the International Valuation Standards (IVS) issued by the

International Valuation Standards Committee (IVSC). In relation to the fair value of the rights of use,

the Group also obtained valuations from independent third parties.

The method used to calculate the market value of the investment property involves drawing up ten-

year projections of income and expenses for each asset, adjusted at the reporting date using a market

discount rate. The residual amount at the end of year 10 is calculated by applying an exit yield or cap

rate to the net income projections for year 11. The market values obtained are analysed by calculating

and assessing the capitalisation of the returns implicit in these values. The projections are designed to

reflect the best estimate of future income and expenses from the investment properties. Both the exit

yield and discount rate are determined taking into account the national market and institutional market

conditions.

Fees paid by the Group to valuers for appraisal services rendered up to 31 December 2022 and 2021

were as follows:

	Thousands of euros
	2022	2021 (*)
Valuation services	459	646
Total	459	646

(*) includes valuation of Net Lease segment

Breakdown of fair value of investment property

A breakdown of assets measured at fair value by their level in the fair value hierarchy is as follows:

42

2022

	Thousands of euros
	Total	Level 1	Level 2	Level 3
Fair value measurement
Investment property:
Offices
Land	2,238,869	-	-	2,238,869
Buildings	4,271,005	-	-	4,271,005
Shopping centres
Land	433,159	-	-	433,159
Buildings	1,701,344	-	-	1,701,344
Logistics-
Land	440,305	-	-	440,305
Buildings	1,232,146	-	-	1,232,146
Other-
Land	175,439	-	-	175,439
Buildings	221,933	-	-	221,933
Total assets measured at fair value	10,714,200	-	-	10,714,200

2021

	Thousands of euros
	Total	Level 1	Level 2	Level 3
Fair value measurement
Investment property:
Offices
Land	2,262,569	-	-	2,262,569
Buildings	4,276,185	-	-	4,276,185
Net lease-
Land	336,624	-	-	336,624
Buildings	1,270,914	-	-	1,270,914
Shopping centres
Land	458,729	-	-	458,729
Buildings	1,741,301	-	-	1,741,301
Logistics-
Land	352,703	-	-	352,703
Buildings	1,195,467	-	-	1,195,467
Other-
Land	184,524	-	-	184,524
Buildings	218,240	-	-	218,240
Total assets measured at fair value	12,297,257	-	-	12,297,257

No assets were reclassified from one level to another during 2022 or 2021. At 31 December 2022, the

gross surface areas and occupancy rates of the assets were as follows:

43

2022

	Square metres (*)										Occupancy rate (%)
	Gross leasable area
	Comm. of Madrid	Catalonia	Comm. of Valencia	Galicia	Andalusia	Basque Country	Castille- La Mancha	Rest of Spain	Portugal	Total
Offices												814,938	205,312	-	-	15,078	-	-	-	137,547	1,172,874	92.5%
Shopping centres	75,685	64,096	64,352	100,577	37,956	25,922	-	32,758	60,049	461,394	95.0%
Logistics	330,375	132,100	61,604	-	138,777	99,491	633,926	42,343	45,171	1,483,786	97.0%
Other	38,043	20,540	-	5,898	-	46	-	-	-	64,527	97.3%
Total surface area	1,259,040	422,048	125,956	106,475	191,811	125,459	633,926	75,101	242,766	3,182,582	95.1%
% weight	39.6%	13.3%	4.0%	3.3%	6.0%	3.9%	19.9%	2.4%	7.6%	100.0%

2021

	Square metres (*)										Occupancy rate (%)
	Gross leasable area
	Comm. of Madrid	Catalonia	Comm. of Valencia	Galicia	Andalusia	Basque Country	Castille- La Mancha	Rest of Spain	Portugal	Total
Offices												852,268	211,179	—	—	15,078	—	—	4,488	121,036	1,204,049	90.1%
Net lease	56,639	44,931	26,799	16,143	26,889	23,102	8,354	84,196	—	287,053	100.0%
Shopping centres	75,689	64,096	64,341	100,577	37,956	25,922	—	32,795	60,098	461,474	94.2%
Logistics	330,374	131,624	61,604	—	138,777	99,491	518,694	42,343	45,171	1,368,078	97.1%
Other	38,354	20,540	—	5,898	—	46	—	—	—	64,838	97.3%
Total surface area	1,353,324	472,370	152,744	122,618	218,700	148,561	527,048	163,822	226,305	3,385,492	94.5%
% weight	40.0%	14.0%	4.4%	3.6%	6.5%	4.4%	15.6%	4.8%	6.7%	100.0%

(*) Not including square metres of ongoing projects or land

Hypotheses used in the valuation

In relation to the determination of the fair value of investment property, the significant non-observable

input data used in the measurement of fair value corresponds to the rental income, the future rates of

return ('exit yield') and the rate used to discount the cash flows of the projections.

The quantitative information on the significant non-observable input data used in measuring fair value

is shown below.

2022

	Exit yield	Discount rate
Offices	3.15% - 7.25%	5.15% - 10.25%
Shopping centres	3.75% - 8.50%	6.25% - 11.50%
Logistics	4.25% - 6.75%	5.50% - 15.00%
Other	4.00% - 7.75%	4.00% - 15.50%

44

2021

	Exit yield	Discount rate
Offices	3.00% - 7.25%	4.75% - 10.50%
Net Lease (*)	7.00% (*)	8.75% (*)
Shopping centres	3.50% - 8.00%	5.75% - 10.75%
Logistics	4.00% - 6.25%	5.25% - 15.00%
Other	4.00% - 7.50%	4.00% - 15.50%

(*) Discontinued activity and disposed of in 2022

Market rents: the amounts per square metre used in the valuation have ranged between 107.33 and

2.25 euros depending on the type of asset and location. The growth rates of the rents used in the

projections are mainly based on the CPI. It should be noted that the minimum range relates to a

logistics asset and the maximum range is a retail asset located in a prime zone.

Analysis of the sensitivity of the hypotheses

The effect of one-quarter, half and one point change in the required rates of return (the "IRR", the rate

used to discount the cash flows of the projections) on the consolidated assets and in the consolidated

income statement with respect to investment properties, would be as follows:

31 December 2022

	Thousands of euros
	31.12.2022
	Assets			Consolidated profit/(loss) before tax
	0.25%	0.50%	1%	0.25%	0.50%	1%
Increase in IRR	(209,672)	(414,387)	(809,469)	(209,672)	(414,387)	(809,469)
Decrease in IRR	214,765	434,763	891,041	214,765	434,763	891,041

31 December 2021 (*)

	Thousands of euros
	31.12.2021
	Assets			Consolidated profit/(loss) before tax
	0.25%	0.50%	1%	0.25%	0.50%	1%
Increase in IRR	(212,595)	(420,133)	(820,576)	(212,595)	(420,133)	(820,576)
Decrease in IRR	217,791	440,921	903,798	217,791	440,921	903,798

(*) Reexpresed information

The effect of a 1%, 5% and 10% change in the rents considered has the following impact on

investment property in consolidated assets and in the consolidated income statement:

45

31 December 2022

	Thousands of euros
	Assets			Consolidated profit/(loss) before tax
	1%	5%	10%	1%	5%	10%
Increase in rents	84,038	420,192	840,385	84,038	420,192	840,385
Decrease in rents	(84,038)	(420,192)	(840,385)	(84,038)	(420,192)	(840,385)

31 December 2021

	Thousands of euros
	Assets			Consolidated profit/(loss) before tax
	1%	5%	10%	1%	5%	10%
Increase in rents	82,531	412,657	825,314	82,531	412,657	825,314
Decrease in rents	(82,531)	(412,657)	(825,314)	(82,531)	(412,657)	(825,314)

The effect of the quarter, half, and one point change in the considered exit yield, in the assumption

based on return calculated as the result of dividing the net operating income of the last year of the

period analysed by the estimated exit yield, on investment property in the consolidated asset and in

the consolidated income statement, would be as follows:

31 December 2022

	Thousands of euros
	Assets			Consolidated profit/(loss) before tax
	0.25%	0.50%	1%	0.25%	0.50%	1%
Increase in exit yield	(324,196)	(619,262)	(1,136,413)	(324,196)	(619,262)	(1,136,413)
Decrease in exit yield	357,865	754,929	1,695,592	357,865	754,929	1,695,592

31 December 2021 (*)

	Thousands of euros
	Assets			Consolidated profit/(loss) before tax
	0.25%	0.50%	1%	0.25%	0.50%	1%
Increase in exit yield	(336,046)	(641,355)	(1,175,217)	(336,046)	(641,355)	(1,175,217)
Decrease in exit yield	371,671	784,948	1,767,791	371,671	784,948	1,767,791

(*) Reexpresed information

Details of the "Change in value of investment property" in the accompanying consolidated income

statement are as follows:

46

Type of asset	Thousands of euros
	2022	2021 (*)
Offices	(149,149)	30,948
Shopping centres	(81,387)	(36,023)
Logistics	(16,374)	206,989
Other	(2,362)	(6,417)
	(249,272)	195,497
(*) Reexpresed information

8.    Operating leases

8.1 Operating Leases - Tenant

The Group, in its position as a tenant, only maintains short-term and low-value leases, which, following

an analysis of the application of IFRS 16, recognises them as a straight-line expense over the lease

term. In 2022, the Group recorded an expense of EUR 705 thousand (EUR 699 thousand in 2021)

included under "Other operating expenses" in the accompanying consolidated income statement.

8.2 Operating leases – Landlord

The occupancy rates of the leased buildings at 31 December 2022 were as follows:

	% occupancy
	2022	2021
Offices	92.5	90.1
Shopping centres	95.0	94.2
Logistics	97.0	97.1
Other	97.3	97.3

At 31 December 2022, gross lease income and the fair value of each of the assets were as follows:

2022

	Thousands of euros
	Rent	Value
	Gross (a)	Value
Offices	242,716	6,509,874
Shopping centres	123,840	2,134,503
Logistics	73,563	1,672,451
Other	12,723	397,372
Total	452,842	10,714,200

(a)The gross income indicated in the table above refers to income from leases (Note 6)

of the properties accrued since their incorporation into the Group, without taking into

account credits or rent straight-lining.

47

2021

	Thousands of euros
	Rent	Value
	Gross (a)	Fair (b)
Offices	228,560	6,538,755
Net lease (*)	85,631	1,774,619
Shopping centres	114,894	2,200,030
Logistics	65,950	1,548,169
Other	10,285	402,764
Total	505,319	12,464,337

(*) Activity discontinued in 2022

(a)The gross income indicated in the table above refers to income from leases (Note 6)

of the properties accrued in 2021 since their incorporation into the Group, without

taking into account credits and rental income straight-lining.

(b)Includes investment property and the Tree embedded derivative (Note 10).

The leases entered into between the Group and its customers include a fixed rent and, where

applicable, a variable rent linked to the lessee's performance.

At 31 December 2022, the future minimum lease payments under non-cancellable operating leases

(calculated at the nominal amount) are as follows:

	Thousands of euros
	2022	2021 (*)
Up to a year	384,244	391,461
1 to 5 years	759,723	745,627
2023	291,031	289,835
2024	212,671	211,327
2025	147,920	143,316
2026	108,101	101,149
Over 5 years	186,838	223,196
	1,330,805	1,360,284

(*) Reexpresed information

In 2022, the Group recorded EUR 6,707 thousand (EUR 4,477 thousand in 2021) due to lease income

relating variable lease payments not benchmarked against a rate or index.

9.    Investments accounted for using the equity method

The changes in 2022 in investments in companies accounted for using the equity method are as

follows:

48

	Thousands of euros
	2022	2021
Beginning balance	482,784	434,127
Additions made during the year	1,824	3,018
Payments made in the financial year	(4,189)	(4,003)
Transfers	-	18,650
Dividends	(4,152)	(3,568)
Profit/(Loss) for the year	24,033	34,560
Closing balance	500,300	482,784

In relation to the shares held using the equity method, the additions for the year relate mainly to the

subscription of the capital increase made by Crea Madrid Nuevo Norte, S.A. as a result of the capital

increase performed in the year, which has resulted in an increase of EUR 1,511 thousand for the

Group. For its part, the decreases relate mainly to the liquidation of the investee PK Hoteles 22, S.L..

(Note 3) and the return of contributions to G36 Developments, S.L.

The remaining amount of the movements came from the results obtained from the investees in 2022.

The main changes in 2021 were as follows:

In 2021, the amount associated with the value of the purchase option that Silicius Real Estate

SOCIMI, S.A. held on the Group's share was transferred to "Other non-current financial

liabilities" (Derivatives). Its final settlement will not be in cash, but will entail, where appropriate, an

adjustment to the value of the ownership interest in Silicius Real Estate SOCIMI, S.A. (see Note 14.3).

The additions for the year related mainly to the capital contribution made by the Group as a result of

the capital increase performed in 2021 by Crea Madrid Nuevo Norte, S.A., which resulted in an

increase for the Group of EUR 2,922 thousand. On the other hand, the decreases corresponded in

their entirety to the return of Silicius Real Estate SOCIMI's S.A. Share Premium.

The remaining amount of the movements came from the results obtained from the investees in 2021

and to the acquisition of Edged Spain, S.L. (Note 3).

A breakdown of investments in companies accounted for using the equity method and the profit or loss

attributable to the Group at 31 December 2022 is as follows:

49

2022

				Thousands of euros
Associate	Line of business	Registered office	Percentage of ownership	Investment	Profit/(loss) attributed to the Group
Madrid Nuevo Norte, S.A.	"Operación Chamartín" construction development and property operation	Madrid	14.46%	172,794	(616)
Silicius Real Estate SOCIMI, S.A.	Sale and lease of property	Madrid	17.80%	95,855	2,667
Centro Intermodal de Logística, S.A.	Management of the port concession of the logistics activity area	Barcelona	48.50%	194,982	18,556
Paseo Comercial Carlos III, S.A.	Lease of shopping centre	Madrid	50%	32,205	2,487
Provitae Centros Asistenciales, S.L.	Healthcare services	Madrid	50%	3,316	(198)
Other investments				1,148	1,137
				500,300	24,033

2021

				Thousands of euros
Associate	Line of business	Registered office	Percentage of ownership	Investment	Profit/(loss) attributed to the Group
Madrid Nuevo Norte, S.A.	'Operación Chamartín' construction development and property operation	Madrid	14.46%	171,899	(410)
Silicius Real Estate SOCIMI, S.A.	Sale and lease of property	Madrid	15.26%	93,182	7,991
Centro Intermodal de Logística, S.A.	Management of the port concession of the logistics activity area	Barcelona	48.50%	178,982	28,021
Paseo Comercial Carlos III, S.A.	Lease of shopping centre	Madrid	50%	29,718	(1,712)
Provitae Centros Asistenciales, S.L.	Healthcare services	Madrid	50%	3,514	5
Other investments				5,490	664
				482,784	34,560

All companies detailed in the table above are accounted for using the equity method.

The key business indicators at 100% for the Group's associates (standardised using the regulatory

framework applicable to the Group) are as follows:

50

2022

	Thousands of euros
	Provitae Centros Asistenciales, S.L.	Paseo Comercial Carlos III, S.A.	Centro Intermodal de Logística, S.A. (CILSA)	Madrid Nuevo Norte, S.A.	Silicius Real Estate SOCIMI, S.A.	Other
Non-current assets	17,413	242,953	974,673	5,349	727,972	8,603
Current assets	2	5,861	31,070	175,060	11,569	3,987
Non-current liabilities	(6,824)	(3,795)	(300,743)	984	300,388	(2,391)
Current liabilities	2,268	3,275	19,695	7,356	48,302	1,974
Revenue	-	8,359	79,272	-	40,044	579
Operating profit/(loss)	(396)	4,974	32,990	(4,258)	13,259	(453)

2021

	Thousands of euros
	Provitae Centros Asistenciales, S.L.	Paseo Comercial Carlos III, S.A.	Centro Intermodal de Logística, S.A. (CILSA)	Madrid Nuevo Norte, S.A.	Silicius Real Estate SOCIMI, S.A.	Other
Non-current assets	17,187	244,246	985,619	6,449	760,574	9,412
Current assets	8	5,312	10,868	168,903	15,830	10,843
Non-current liabilities	(7,666)	6,984	(250,915)	499,153	257,725	(9,665)
Current liabilities	2,212	2,588	20,793	8,976	123,382	2,346
Revenue	-	6,702	66,586	-	28,754	1,905
Operating profit/(loss)	11	(3,424)	54,089	(2,833)	52,369	(3,325)

At the end of the year, there were no indications of impairment on the recoverable value of the

investments held, in addition to those already recorded.

51

10.    Current and non-current financial assets

The breakdown, by type, of the balance of this heading in the consolidated statement of financial

position at 31 December 2022 is as follows:

Classification of financial assets by category:

	Thousands of euros
	2022	2021
Non-current:
At fair value-
Derivative embedded in BBVA lease	-	167,080
Interest rate derivatives	18,882	-
At cost-
Equity instruments	9,191	6,796
At amortised cost-
Loans to third parties	126,230	117,702
Loans to associates	3,268	2,773
Deposits and guarantees	53,477	65,440
	211,048	359,791
Current:
At fair value-
Financial assets through profit or loss.	-	80,964
At cost-
Investments in associates	2,498	784
At amortised cost-
Loans to third parties	236	236
Other financial assets	226	936
Trade and other receivables	49,840	39,625
	52,800	122,545

The carrying amount of financial assets recognised at amortised cost does not differ from their fair

value.

Derivatives

At year-end 2022, the measurement of interest rate derivatives is recognised under 'Derivatives' (see

Note 14).

At year-end 2021, "Derivatives" included the value of the embedded derivative corresponding to the

inflation multiplier included in the lease with BBVA to revise rents annually. This derivative was part of

the Net Lease segment that was divested in 2022 (see Note 3).

Financial assets at fair value through profit or loss

At the end of 2020, this heading included 15.29% in Silicius Real Estate, SOCIMI, S.A. for EUR

86,521 thousand acquired by the Parent through an asset contribution. In the first half of 2021, the

Parent sold 353,966 shares for EUR 5,418 thousand, which did not have a significant impact on

results. The amount of the share after the sale was reduced to EUR 80,964 thousand, which the

Group reclassified to 'Current financial assets,' classified as financial assets with changes to the

income statement, of the accompanying consolidated statement of financial position. On 27 July 2022,

52

the Group sold 14.28% of the shares of Silicius Real Estate SOCIMI, S.A. for EUR 80,964 thousand,

the full amount of which was paid in cash.

Loans to third parties

"Other non-current financial assets" included the loan granted to Urbanísticos Udra, S.A.U.,

shareholder of Crea Madrid Nuevo Norte, S.A., amounting to EUR 86,397 thousand, which accrues

market interest. At 31 December 2022, due to the annual capitalisation of interest, the outstanding

amount was EUR 90,728 thousand in principal and EUR 313 thousand in interest. In relation to this

loan, the Group has guarantees from the creditor associated with 10% of shares in Crea Madrid

Nuevo Norte, S.A., and no credit risk has been identified for the debtor.

Likewise, this heading also includes rental straight lining, marketing expenses and tenant set-up

expenses amounting to 35,189 thousand euros (30,700 thousand euros in 2021).

Deposits and guarantees

"Deposits and guarantees" primarily includes the guarantees provided by lessees as security

amounting to EUR 51,988 thousand (EUR 64,124 thousand at 31 December 2021), which the Group

has deposited with the housing authority (Instituto de la Vivienda) in each region. At 31 December

2022, guarantees provided by lessees as security amounted to EUR 62,964 thousand (EUR 73,842

thousand at 31 December 2021) and were recognised under "Non-current liabilities – Other financial

liabilities" on the liability side of the accompanying consolidated statement of financial position for 2022

(see Note 15).

Classification of financial assets by maturity:

The classification of financial assets by maturity at 31 December 2022 and 2021 is as follows:

2022

	Thousands of euros
	Less than 1 year	From 1 to 5 years	Over 5 years	Undetermined maturity	Total
Interest rate derivatives	-	6,084	12,798	-	18,882
Equity instruments	-	-	-	9,191	9,191
Loans to third parties and associates	236	20,863	108,635	-	129,734
Deposits and guarantees	-	-	-	53,477	53,477
Financial assets at fair value through profit or loss	2,498	-	-	-	2,498
Other financial assets	226	-	-	-	226
Trade and other receivables	49,840	-	-	-	49,840
Total financial assets	52,800	26,947	121,433	62,668	263,848

53

2021

	Thousands of euros
	Less than 1 year	From 1 to 5 years	Over 5 years	Undetermined maturity	Total
Derivative embedded in BBVA lease(*) (*)	-	-	167,080	-	167,080
Equity instruments	-	-	-	6,796	6,796
Loans to third parties and associates	236	16,840	103,636	-	120,712
Deposits and guarantees	-	-	-	65,440	65,440
Financial assets at fair value through profit or loss	81,747	-	-	-	81,747
Other financial assets	936	-	-	-	936
Trade and other receivables	39,625	-	-	-	39,626
Total financial assets	122,545	16,840	270,716	72,236	482,337

(*) Activity discontinued in 2022

11.    Trade and other receivables

At 31 December 2022, the heading "Trade and other receivables" includes the following items:

	Thousands of euros
	2022	2021
Trade and notes receivable	34,411	26,993
Sales debentures	6,718	1,124
Associates	549	525
Sundry accounts receivable	1,524	4,809
Remuneration payable	184	184
Other receivables from public authorities (Note 17)	17,849	19,315
Impairment of trade receivables	(11,394)	(13,324)
	49,840	39,625

"Trade and notes receivable" in the accompanying consolidated statement of financial position at 31

December 2022 mainly included the balances receivable from leasing investment property. In general

these receivables are interest free and the terms of collection range from immediate payment on billing

to payment at 30 days, while the average collection period is approximately 5 days (5 days in 2021).

At 31 December 2022, a breakdown by age of overdue receivables not considered impaired is as

follows:

	Thousands of euros
	2022	2021
Less than 30 days	1,947	1,805
31 to 60 days	1,987	1,136
61 to 90 days	1,469	230
Over 90 days	17	697
	5,420	3,868

54

At 31 December 2022 and 2021, no collection rights had been transferred to financial institutions.

In accordance with IFRS 9, the Group periodically analyses the risk of insolvency of its accounts

receivable by updating the related provision for impairment losses. The Group's directors consider that

the amount of trade and other receivables approximates their fair value.

The changes in the impairment losses and bad debt in 2022 and 2021 were as follows:

	Thousands of
	Euros
Balance at 31 December 2020	(12,033)
Charges for the year	(2,245)
Reversals/amounts used	1,906
Other	(952)
Balance at 31 December 2021	(13,324)
Charges for the year	(1,408)
Reversals/amounts used	3,279
Other	59
Balance at 31 December 2022	(11,394)

Losses from bad debts amounted to EUR 2,051 thousand in 2022. The majority of impaired

receivables are overdue by more than six months.

Details of the concentration of customers (customers that account for a significant share of business)

are included in the segment information in Note 6.

12.    Cash and cash equivalents

"Cash and cash equivalents" includes the Group's cash and short-term bank deposits with an original

maturity of three months or less. The carrying amount of these assets does not differ from their fair

value.

At 31 December 2022 and 2021, the balance of "Cash and cash equivalents" is freely available,

except for EUR 4,720 thousand and EUR 6,534 thousand, respectively, which mainly include in 2022 a

deposit account associated with the purchase of an office building and in 2021 a reserve account to

pay the debt service for one quarter of a syndicated mortgage loan, maintained by the Group.

13.    Equity

A breakdown of "Equity" and of the changes therein is presented in the consolidated statement of

changes in equity.

13.1 Share capital

As of 31 December 2022, the share capital of Merlin Properties SOCIMI, S.A., amounted to EUR

469,771 thousand, represented by 469,770,750 fully subscribed and paid shares of EUR 1 par value

each, all of which are of the same class and confer the holders thereof the same rights.

All the Parent's shares can be publicly traded and are listed on the Madrid, Barcelona, Bilbao and

Valencia and Lisbon Stock Exchanges. The market price of the Parent's shares at 31 December 2022

55

and the average market price for the fourth quarter amounted to EUR 8.78 and EUR 8.65 per share,

respectively.

At 31 December 2022, according to information extracted from the CNMV, in relation to Royal Decree

1362/2007, of 19 October and Circular 2/2007, of 19 December, the shareholders with significant

holdings in the share capital of Merlin Properties SOCIMI, S.A., both direct and indirect, in excess of

3% of the share capital, are the following according to public information:

	Shares			% of share capital
	Direct	Indirect	Total
Banco Santander, S.A.	89,311,859	26,072,123	115,383,982	24.562%
Nortia Capital Investment Holding, S.L.	38,371,083	-	38,371,083	8.168%
BlackRock, INC	-	23,528,172	23,528,172	5.008%

Information from Banco Santander and Manual Lao Hernández (Nortia Capital Investment Holding,

S.L.) was obtained from the Register of Members book at year-end 2022.

13.2 Share premium

The Consolidated Text of the Corporate Enterprises Act expressly permits the use of the share

premium to increase capital and establishes no specific restrictions as to its use.

This reserve is unrestricted so long as its allocation does not lower equity to below the amount of

share capital.

On 4 May 2022, the General Meeting approved the distribution of an interim dividend charged to share

premium in the amount of EUR 106,497 thousand.

13.3 Other reserves

A breakdown of reserves at 31 December 2022 and 2021 is as follows:

	Thousands of euros
	2022	2021
Legal reserve	74,094	65,133
Reserves of consolidated companies	2,935,533	2,467,203
Other reserves	14,003	33,940
Total other reserves	3,023,630	2,566,276

Legal reserve

The legal reserve will be in accordance with Article 274 of the Consolidated Text of the Corporate

Enterprises Act, which stipulates, in all cases, that 10% of net profit for each year must be transferred

to the legal reserve until the balance of this reserve reaches at least 20% of the share capital.

This reserve cannot be distributed, and if it is used to offset losses, in the event no other reserves are

available for this purpose, it must be restored with future profits.

At 31 December 2022, the Group had not yet reached the legally required minimum in the

Consolidated Text of the Corporate Enterprises Act.

56

The legal reserve of companies which have chosen to avail themselves of the special tax regime in

Law 11/2009, , governing REITs, must not exceed 20% of share capital. The bylaws of these

companies may not establish any other type of restricted reserves.

Reserves in consolidated companies

The changes in 2022 in the heading "Reserves in consolidated companies" are as follows:

	Thousands of euros
	Begining balance	Incorporation of prior year´s results	Distribution of reserves	Other changes	Ending balance
Reserves in consolidated companies	2,467,203	512.217	(89,608)	45,720	2,935,532

Dividends

On 4 May 2022, the General Meeting approved the distribution of a dividend charged to "share

premium" in the amount of EUR 106,497 thousand, and the distribution of an additional dividend

charged to 2021 profit for EUR 10,614 thousand, both dividends being paid on 27 May 2022.

On 28 July 2022, the Board approved the distribution of an interim dividend charged to earnings for

2022 in the amount of EUR 351,169 thousand.

On 10 November 2022, the Board approved the distribution of a dividend of EUR 93,646 thousand

charged to the profit for 2022.

13.4 Treasury shares

At 31 December 2022, the Parent held treasury shares amounting to EUR 17,166 thousand.

The changes in 2022 were as follows:

	Number of	Thousands of
	Shares	euros
Balance at 1 January 2021	4,836,503	54,149
Additions	374	3
Disposals	(1,951,386)	(21,847)
Balance at 31 December 2021	2,885,491	32,305
Additions	6,625	122
Disposals	(1,355,932)	(15,261)
Balance at 31 December 2022	1,536,184	17,166

The General Meeting held on 10 April 2019 revoked the authorisation granted by the General Meeting

of April 2018 in the part not used and then authorised the acquisition of shares by the Company itself

or by a Group company, under Article 146 and related provisions of the Corporate Enterprises Act, in

accordance with the requirements and restrictions under the current law during the five-year period.

The withdrawals of treasury shares amounting to EUR 15,261 thousand (average cost of EUR 11.20

per share) mainly correspond to the second and final delivery of shares within the so-called 2017-2019

Incentive Plan (see Note 15) for EUR 14,133 thousand and to the delivery of shares to employees

within the flexible remuneration plan for EUR 864 thousand.

57

The Group had a liquidity agreement for the securities listed on the Lisbon Stock Exchange, with net

sales of 9,740 shares in 2022 (EUR 142 thousand).

At 31 December 2022, the Parent held treasury shares representing 0.327% of its share capital.

13.5 Capital management

The Group's capital management objectives are to safeguard its capacity to continue operating as a

going concern so that it can continue to provide returns to shareholders and to benefit interest groups,

and to maintain an optimum financial structure to reduce the cost of capital.

In line with the practices of other groups present in the sector, the Group controls its capital structure

through the debt ratio, calculated as net debt divided by total capital. Net debt is determined as the

sum of financial liabilities less cash and cash equivalents. Total capital is calculated as the sum of

equity plus net debt.

	Thousands of euros
	2022	2021
Total financial debt (b)	4,238,774	6,226,854
Less - Cash and cash equivalents and Other current financial assets (a)	(446,615)	(979,990)
Net debt	3,792,159	5,246,538
Equity	6,849,224	7,026,922
Total capital	10,641,383	12,273,460
Debt-to-equity ratio	36%	43%

1.In 2021 the current financial asset, net of the value of the option corresponding to

15.26% of Silicius Real Estate SOCIMI shares, was included (see Note 10) for EUR

80,964 thousand. Also, financial assets contributed in 2021 for the discontinued activity

are included (see Note 3) .In both 2022 and 2021, the amount of shares in the portfolio

is included as other current financial assets.

2.Gross debt amounts without considering debt formalisation expenses. 2021 includes

financial debt for the discontinued segment (see Note 3).

13.6 Earnings per share

Basic

Basic earnings per share are calculated by dividing the net profit attributable to common equity holders

of the Parent by the weighted average number of ordinary shares outstanding during the period,

excluding treasury shares.

A breakdown of the calculation of basic earnings per share is as follows:

58

	2022	2021 (*)
Weighted average number of shares outstanding (thousands)	467,890	466,397
Continuing operations
Profit for the period attributable to the Parent (thousands of euros)	41,356	395,360
Basic earnings per share (euros)	0.09	0.85
Discontinued Activities
Profit for the period attributable to the Parent (thousands of euros)	221,731	116,857
Basic earnings per share (euros)	0.47	0.25

(*) Reexpresed information

The average number of ordinary shares outstanding is calculated as follows:

	Number of Shares
	2022	2021
Ordinary shares at beginning of period	469,770,750	469,770,750
Treasury shares	(1,536,184)	(2,885,491)
Average adjustment of outstanding shares	(344,319)	(488,735)
Weighted average number of ordinary shares outstanding at 31 December (shares)	467,890,247	466,396,524

Diluted

In accordance with paragraph 41 of IAS 33, potential ordinary shares are treated as dilutive when, and

only when, their conversion to ordinary shares could reduce the earnings per share of the continuing

activities. At 31 December 2022, there was no potential dilutive effect arising from the variable

remuneration that the Group had granted to its executives and key staff (see Note 20), basic profit

being in line with diluted profit.

13.7 Valuation adjustments

This heading of the consolidated statement of financial position includes changes in the value of

financial derivatives designated as cash flow hedges. Changes in this heading in 2022 were as

follows:

	Thousands of
	euros
Balance at 31 December 2020	(99,537)
Changes in the fair value of hedges in the year	32,117
Balance at 31 December 2021	(67,420)
Changes in the fair value of hedges in the year	80,218
Balance at 31 December 2022	12,798

The change in the derivative mainly relates to the reclassification to discontinued activities of the Net

Lease segment, which was settled in the sale made in the first half of the year, and recorded in the

income statement, in profit or loss for the year from discontinued operations net of tax (Note 3) for

EUR 67,420 thousand.

59

The balance at year-end 2022 relates to the valuation of the new interest rate hedges that the Group

has subscribed to cover the new syndicated financing for April 2023 to April 2028 (see Note 14).

.

60

14.    Current and non-current financial liabilities

At 31 December 2022, current and non-current liabilities were as follows:

	Thousands of euros
	2022	2021
Non-current:
Measured at amortised cost-
Syndicated loan	-	850,000
Syndicated loan arrangement expenses	-	(7,758)
Total syndicated loan	-	842,242
Senior syndicated mortgage loan (Tree)	-	659,771
Syndicated mortgage loan arrangement costs (Tree)	-	(48,106)
Total senior syndicated mortgage loan (Tree)	-	611,665
Non-mortgage loan	111,000	29,000
Mortgage loans	83,256	84,987
Loan arrangement expenses	(4,390)	(5,220)
Total other loans	189,866	108,767
Debentures and bonds	3,300,000	4,042,786
Debenture issue expenses	(20,666)	(25,216)
Total debentures and bonds	3,279,334	4,017,570
Total amortised cost	3,469,200	5,580,244
Measured at fair value
Derivative financial instruments	-	78,465
Total at fair value	-	78,465
Total non-current	3,469,200	5,658,709
Current:
Measured at amortised cost
Syndicated loan	195	644
Senior syndicated mortgage loan (Tree)	-	10,573
Debentures and bonds	775,152	588,622
Mortgage loans	1,843	1,814
Revolving credit facility	410	410
Non-mortgage loan	347	123
Loan arrangement expenses	(116)	(467)
Total amortised cost	777,831	601,719
Measured at fair value
Derivative financial instruments	11	1,289
Total at fair value	11	1,289
Total current	777,842	603,008

There is no material difference between the carrying amount and the fair value of financial liabilities at

amortised cost.

On 20 April 2016, the Parent was given a credit rating of "BBB" with stable outlook by Standard &

Poor's Rating Credit Market Services Europe Limited. On 2 May 2018, Standard & Poor's updated this

rating to "BBB" with a positive outlook, changing it to stable outlook due to the COVID-19 pandemic on

27 March 2020. On 12 April 2022, as a result of the sale of TREE Inversiones Inmobiliarias SOCIMI,

S.A.,& Standard & Poor's updated this outlook to positive.

Additionally, on 17 October 2016, the Company was given a credit rating of "investment grade" "Baa2"

by Moody's. On 27 May 2020, Moody's updated this rating to "Baa2" with a negative outlook due to the

COVID-19 pandemic. On 2 May 2022, as a result of the sale of TREE Inversiones Inmobiliarias

SOCIMI, S.A., Moody's updated this outlook to positive.

61

14.1 Loans

A breakdown of loans at 31 December 2022 is as follows:

2022

	Thousands of euros
	Bank borrowings
	Initial loan/ Limit	Expenses incurred from formalising loans (Note 14.5)	31.12.2022
			Long-term	Short-term	Short-term interest
Syndicated loan	600,000	-	-	-	195
Non-mortgage loan	220,225	(271)	111,000	-	347
Revolving credit facilities	700,000	(2,486)	-	-	410
Mortgage loans - other assets	91,000	(1,633)	83,256	1,731	112
Total	1,611,225	(4,390)	194,256	1,731	1,064

2021

	Thousands of euros
	Bank borrowings
	Initial loan/ Limit	Expenses incurred from formalising loans (Note 14.5)	31.12.2021
			Long-term	Short-term	Short-term interest
Syndicated loan	850,000	(7,758)	850,000	-	644
Non-mortgage loan	160,225	(42)	29,000	-	123
Revolving credit facilities	700,000	(3,055)	-	-	410
Senior syndicated mortgage loan (Tree)	716,894	(48,106)	659,771	9,990	583
Mortgage loans - other assets	91,000	(2,123)	84,987	1,750	64
Total	2,518,119	(61,084)	1,623,758	11,740	1,824

Syndicated loans and revolving credit facility - Parent Company

On 25 April 2019, the Group arranged a senior syndicated loan amounting to EUR 1,550million,

including two tranches, a corporate loan of EUR 850 million and a corporate credit facility of EUR 700

million due in 2024.

The initial maturity date for this revolving credit facility was 2024, with the possibility of two optional

one-year extensions. The second one-year extension was approved on 30 June 2021, and the new

maturity date is 9 May 2026.

The EUR 850 million corporate loan accrued an interest rate of the one-month EURIBOR + 120 basis

points, while the revolving credit facility yielded an interest rate of the one-month EURIBOR + 90 basis

points, and both incorporated a cost adjustment mechanism based on four sustainability criteria.

On 21 June 2022, the Group performed an early cancellation of the corporate loan for EUR 850

million.

In 2022, as a result of the early cancellation of this financing, the application of amortized cost in

relation to IFRS 9 represented a financial cost of EUR 4,213 thousand (EUR 1,790 thousand in 2021).

62

On 18 November 2022, the Parent arranged a new senior syndicated loan amounting to EUR 600

million with the possibility of being arranged before 24 April 2023 for the repayment of the bond

maturing in 2023. This financing will have a maturity of 5 years from its disposal and will accrue a

market rate of EURIBOR plus 130 basis points. For the period in which the financing is not drawn

down, a commission will be applied for the unarranged balance of 26 basis points. At year-end 2022,

the loan was not drawn down.

These funds incorporate commitments to maintain certain coverage ratios existing in the previous

financing, in Group bonds and in the financing from Banco Sabadell. These ratios are defined as the

ratio between the value of the assets over the outstanding debt ("Loan to Value"), the ratio between

the Group's revenue and the debt service ("ICR") and the ratio between assets and debt, both without

mortgage guarantee ("Unissued Ratio"). In addition, they contemplate certain conditions linked to

compliance with environmental and sustainability factors that may result in certain savings in their

financial burden. The Parent Company's directors have confirmed that these ratios were met at 31

December 2022 and do not expect that they will not be fulfilled in the coming years.

Unsecured loans of the Parent

Banco Sabadell loan

On 18 November 2022, the Parent arranged a loan without mortgage guarantee with Banco Sabadell

amounting to EUR 60 million, maturing in January 2028 and accruing a market rate of EURIBOR 120

basis points.

This financing includes commitments to maintain certain coverage ratios described in the previous

section. The Parent Company's directors have confirmed that these ratios were met at 31 December

2022 and do not expect that they will not be fulfilled in the coming years.

Loans from the European Investment Bank

On 20 December 2018, the Parent formalised a loan without mortgage security with the European

Investment Bank in an amount of EUR 51 million. On 4 November 2019, the Parent formalised the

second tranche of the mortgage-free loan with the European Investment Bank amounting to EUR 64

million, amounting to EUR 115 million. This financing can be arranged through several loans with a

maturity of 10 years on each drawdown. This credit facility must be allocated to the development of

logistical assets in the Castille–La Mancha region.

On 10 March 2020 and 26 October 2020, the Group drew down EUR 23.4 million and EUR 5.6 million

corresponding to the first tranche of the financing. This loan accruals a fixed interest rate of 60 basis

points. On 20 December 2022, the Group had drawn down EUR 22 million and 370 basis points.

These three loans complete the provision for the first tranche of EUR 51 million.

On 16 December 2021, the Parent formalised a loan without mortgage security with the European

Investment Bank in an amount of EUR 45.2 million and with 10-year maturity. This financing will be

used to make investments in energy efficiency. At year-end, this loan was not drawn down.

This financing includes commitments to maintain certain coverage ratios. These ratios are defined as

the ratio between the value of the assets over the outstanding debt ("Loan to Value"), the ratio

between the Group's revenue and the debt service ("ICR") and the ratio between assets and debt,

both without mortgage guarantee ("Unissued Ratio"). The Parent Company's directors have confirmed

that these ratios were met at 31 December 2022 and do not expect that they will not be fulfilled in the

coming years.

"Senior" syndicated mortgage loan (Tree):

The senior syndicated mortgage loan of the subsidiary, Tree Investments Inmobiliarias SOCIMI, S.A.,

was signed on 29 July 2010 and novated for the first time on 30 December 2014.

63

The refinancing for 2014 and the first application of IFRS 9 'Financial Instruments' resulted in an

increase in reserves and a decrease in debt amounting to EUR 30,592 thousand at 1 January 2018,

and an increase in financial expenditure amounting to EUR 10,083 thousand in 2018.

On 29 November 2018, the senior syndicated loan was novated so that the initially scheduled maturity

in 2024 was postponed until 31 March 2031 with the possibility of extending the maturity annually for

the next 3 years until 31 March 2034. The third of these extensions was approved in 2022. This

financing accrues interest at a rate of 3-month EURIBOR + 120 basis point.

On 15 June 2022, as a result of the sale of the shares of TREE Inversiones Inmobiliarias S.A. to

BBVA, the Group repaid in advance the mortgage financing associated with the bank branches.

Mortgage loans - other assets

At 31 December 2022, the Group's subsidiaries had taken out the following mortgage loans:

2022

	Thousands of euros
	Loan	Long-term	Short-term
Financial institution	Original	Term	Term	Interest	Collateral
Caixabank	21,000	13,256	1,731	100	Mortgage
ING	70,000	70,000	-	12	Mortgage
Total	91,000	83,256	1,731	112

2021

	Thousands of euros
	Loan	Long-term	Short-term
Financial institution	Original	Term	Term	Interest	Collateral
Caixabank	21,000	14,987	1,750	63	Mortgage
ING	70,000	70,000	-	1	Mortgage
Total	91,000	84,987	1,750	64

On 26 March 2015, the Group subrogated a mortgage-backed loan taken out with Caixabank, S.A.

with a mortgage guarantee on the Alcalá 38-40 office building. This loan has a principal of EUR 21

million, a term of 15 years, an interest rate of 3-month EURIBOR + 150 basis points, a 4-year grace

period for the principal, and the principal is repayable in full using the French method over the

following 11 years.

On 26 April 2019, the Group entered into a novation agreement modifying the mortgage loan

subscribed on 4 December 2015 with ING Bank N.V. by the subsidiary Merlin Logística S.L.U. The due

date for this financial arrangement, originally set to be in 2020, was extended until 2026. This financial

arrangement accrues an interest rate of EURIBOR at three months + 100 basis points; it includes a

financial cost adjustment mechanism based on meeting four sustainability criteria. On 26 March 2021,

the mortgage financing agreement was changed, extending the loan amount by EUR 2.1 million to a

total of EUR 70 million.

This loan requires that the company maintain and comply with certain coverage ratios, such as the

loan-to-value ratio and the ratio of the company's income used to service the debt (interest coverage

ratio, ICR). Additionally, it contemplates certain conditions linked to compliance with the following

factors associated with the environment and sustainability: i) sustainable capex, ii) LEED and BREAM

certifications, iii) AIS certifications and iv) green energy consumption, which may result in certain

64

savings in the financial burden. The Parent Company's directors have confirmed that these ratios were

met at 31 December 2022 and do not expect that they will not be fulfilled in the coming years.

In accordance with IFRS 9, the Group evaluated the nature of the refinancing undertaken of the

previous ING loan and concluded that it did not represented a material change (10% test). Therefore,

the difference between the value of the old debt at amortised cost and the new debt discounted at the

effective interest rate of the old debt was recognised as a lower financial expenses of EUR 2,291

thousand under "Financial expenses" on the 2019 consolidated income statement. This amount will

revert to the consolidated income statement for subsequent years in accordance with the effective

interest rate of the debt.

In 2022, the application of the amortised cost in relation to these concepts involved a financial cost of

EUR 362 thousand (EUR 363 thousand in 2021).

Maturity of debt

The breakdown by maturity of these loan principals is as follows:

2022

	Thousands of euros
			Revolving
	Loans	Loans	line of
	Syndicated and other loans	Secured	credit	Total
2023	-	1,731	-	1,731
2024	-	1,654	-	1,654
2025	-	1,743	-	1,743
2026	-	71,818	-	71,818
2027	-	1,890	-	1,890
Over 5 years	111,000	6,151	-	117,151
	111,000	84,987	-	195,987

2021

	Thousands of euros
		Loan H.		Revolving
	Loans	Senior Syndicated	Loans	line of
	Syndicated and other loans	Tree	Secured	credit	Total
2022	-	9,990	1,750	-	11,740
2023	-	9,841	1,777	-	11,618
2024	850,000	9,694	1,803	-	861,497
2025	-	17,426	1,829	-	19,255
2026	-	18475	71,855	-	90,330
Over 5 years	29,000	604,335	7,723	-	641,058
	879,000	669,761	86,737	-	1,635,498

The Group had undrawn loans and credit facilities at 31 December 2022 with a number of financial

institutions totalling EUR 1,409 million (EUR 831.2 million at 31 December 2021).

None of the Group's debt was denominated in non-euro currencies at 31 December 2022 or 2021.

65

There are no significant differences between the fair values and carrying amounts of the Group's

financial liabilities.

The finance cost for interest on the loans totalled EUR 8,595 thousand in 2022 (EUR 13,257 thousand

in 2021) and is recognised in the accompanying consolidated income statement for 2022.

At 31 December 2022 and 2021, the debt arrangement expenses had been deducted from the

balance of "Bank borrowings". During the 2022 financial year, the Group has allocated an expense of

EUR 8,827 thousand (in 2021 EUR 4,433 thousand were allocated) under the heading "Financial

expenses" of the attached consolidated income statement (see Note 18.d) associated with additional

loans additional to those associated with the discontinued activity. This allocation in the accompanying

consolidated income statement includes both the first application of IFRS 9 and the allocation of the

debt to the income statement at amortised cost.

14.2 Debenture issues

On 12 May 2017, the Parent subscribed a Euro Medium Term Notes (EMTN) issue programme of up

to EUR 4,000 million, which will replace the original bond issue programme and its supplements

subscribed on 6 April 2016 and 14 October 2016, respectively, for an overall maximum amount of EUR

2,700 million.

On 18 May 2018, the Parent extended that bond-issue scheme (Euro Medium Term Notes - EMTN) up

to an amount of EUR 5,000 million.

On 17 June 2020, the General Meeting approved the extension of this bond issuance program up to

an amount of EUR 6,000 million, the increase being performed on 21 March 2021. On 4 August 2022,

the program was renewed for another year.

On 30 June 2021, the Parent issued a 9-year bond of EUR 500 million at 99.196% of the par value

and a coupon of 1.375%. These funds were used to prepay the bond maturing in May 2022 on 23

February 2022.

On 1 June 2022, the Group obtained the conversion of all its bonds into green bonds in accordance

with the Green Financing Framework published on 25 April 2022. The reclassification of bonds to

green bonds does not entail any changes in any other characteristics of the bonds, irrespective of their

terms, interest or maturities.

The terms of the bonds issued by the Group abide by UK laws and are traded on the Luxembourg

Stock Exchange. The bond issue scheme has the same guarantees and new ratio compliance

obligations as the syndicated loan and the revolving credit facility. At year-end 2022, the Group

complied with the covenants set forth in this contract and the directors consider that they will be met in

2023.

The breakdown at 31 December 2022 of the bonds issued by Parent Company is as follows:

66

2022

Maturity	Face value	Coupon	Listed price	Return	Market
	(Millions of Euros)
April 2023	743	2.225%	MS +98 p.b.	3.32%	Luxembourg
May 2025	600	1.750%	MS +115 p.b.	4.44%	Luxembourg
November 2026	800	1.875%	MS +168 p.b.	4.88%	Luxembourg
July 2027	500	2.375%	MS +183 p.b.	5.01%	Luxembourg
September 2029	300	2.375%	MS +210 p.b.	5.24%	Luxembourg
June 2030	500	1.375%	MS +205 p.b.	5.18%	Luxembourg
December 2034	600	1.875%	MS +232 p.b.	5.46%	Luxembourg
	4,043	1.958%

2021

Maturity	Face value	Coupon	Listed price	Return	Market
	(Millions of Euros)
May 2022	548	2.375%	MS + 53 p.b.	(0,01)%	Ireland (a)
April 2023	743	2.225%	MS + 65 p.b.	0.169%	Luxembourg
May 2025	600	1.750%	MS + 55 p.b.	0.405%	Luxembourg
November 2026	800	1.875%	MS + 73 p.b.	0.708%	Luxembourg
July 2027	500	2.375%	MS + 87 p.b.	0.897%	Luxembourg
September 2029	300	2.375%	MS + 117 p.b.	1.319%	Luxembourg
June 2030	500	1.375%	MS + 139 p.b.	1.603%	Luxembourg
December 2034	600	1.875%	MS + 165 p.b.	2.058%	Luxembourg
	4,591	2.008%

(1)Due to the business combination with Metrovacesa performed in 2016, the Group recognised a bond issue launched

by Metrovacesa for EUR 700 million. The terms of the bonds were governed and interpreted according to UK laws

and were traded on the Irish Stock Exchange. This issue also included a series of compliance obligations and

guarantees, which is common in these types of transactions. The bond was paid in advance on 23 February 2022.

These bond issues include commitments to maintain certain coverage ratios. These ratios are defined

as the ratio between the value of the assets over the outstanding debt ("Loan to Value"), the ratio

between the Group's revenue and the debt service ("ICR") and the ratio between assets and debt,

both without mortgage guarantee ("Unissued Ratio"). The Parent Company's directors have confirmed

that these ratios were met at 31 December 2022 and do not expect that they will not be fulfilled in the

coming years.

The finance cost for interest on the debenture issues amounted to EUR 81,040 thousand (EUR 89,330

thousand in 2021) and is recognised in the accompanying consolidated income statement for 2022.

The accrued interest payable at 31 December 2022 amounted to EUR 32,366 thousand (EUR 40,322

thousand in 2021). Debt arrangement expenses taken to the consolidated income statement in 2022

amounted to EUR 4,901 thousand (EUR 5,370 thousand in 2021).

14.3 Derivatives

A breakdown of the financial instruments as of 31 December 2022 is as follows:

67

	Thousands of euros
	2022	2021
Non-current:
Asset interest rate	(18,882)	-
Liability interest rate	-	78,465
Other (Note 9)	9,256	15,134
Total non-current	(9,626)	93,599
Current:
Interest rate derivatives	11	1,289
Total current	11	1,289

To determine the fair value of the interest rate derivatives, the Group discounts the cash flows based

on the embedded derivatives determined by the Euribor interest rate curve in accordance with market

conditions on the measurement date.

These financial instruments were classified as level 2 according to the calculation hierarchy in IFRS 7,

except for those related to the investment in Silicius (see Note 9) classified as level 3.

A breakdown of the derivative financial instruments included in the consolidated statement of financial

position at 31 December 2022 is as follows:

2022

	Thousands of euros
	Assets	Liabilities
	Financial	Financial
Non-current:
Interest rate derivatives	18,882	-
Current:
Interest rate derivatives	-	11
Total derivatives recognised	18,882	11

2021

.

	Thousands of euros
	Assets	Liabilities
	Financial	Financial
Non-current:
Interest rate derivatives	-	78,465
Derivative embedded in contract
BBVA lease (Note 10)	167,080	-
Current:
Interest rate derivatives	-	1,289
Total derivatives recognised	167,080	79,754

On 26 April 2019, the subsidiary Merlin Logistics S.L.U., in the framework of the refinancing of the

mortgage loan with ING Bank N.V., signed a new interest rate swap (IRS) to hedge the extension of

the maturity of the financing from 2020 to 2026. The notional contract amounts to EUR 67.9 million at

a cost of 0.31%.In addition to the early cancellation of the syndicated loan for 850 million euros, in

June 2022, the Group cancelled the interest rate hedging instruments associated with the corporate

syndicated loan.

68

In 2022 the Group subscribed new interest rate hedges to cover the new syndicated financing for April

2023 to April 2028. The notional contract amounts to EUR 500,000 thousand at a fixed cost of 2,574%.

In addition, interest rate coverage was contracted to cover Sabadell's mortgage loan until its maturity

in January 2028 for a notional amount of EUR 60,000 thousand and a fixed cost of 2.512%.

The interest rate derivatives contracted by the Group and their fair values are as follows:

2022

		Thousands of euros
			Outstanding notional amount at each date
Interest rate	Interest	Value					Years
	Contracted	Value	2022	2023	2024	2025	years
Syndicated Parent Company (starting 2023)	2,574%	(11,394)	-	500,000	500,000	500,000	500,000
Non-mortgage - Parent Company	2.512%	(1,386)	60,000	60,000	60,000	60,000	60,000
Other subsidiaries	0.31%	(6,091)	67,900	67,900	67,900	67,900	67,900
		(18,871)	127,900	627,900	627,900	627,900	627,900

2021

		Thousands of euros
			Outstanding notional amount at each date
Interest rate	Interest	Value					Years
	Contracted	Value	2021	2022	2023	2024	years
Syndicated Parent Company (starting 2021)	0.0154%	(6,488)	850,000	850,000	850,000	-	-
Tree Inversiones (ended 2024)	0.959%	(22,914)	688,405	677,196	665,987	-	-
Tree Inversiones (start 2024)	1.693%	(49,255)	-	-	-	660,029	642,065
Other subsidiaries	0.31%	(1,096)	67,900	67,900	67,900	67,900	67,900
		(79,754)	1,606,305	1,595,096	1,583,887	727,929	709,965

The Group has opted for hedge accounting, suitably designating the hedging relationships in which

these financial instruments are hedging instruments of the financing used by the Group. In this

manner, the Group has neutralized flow variations stemming from interest payments and fixed the rate

to be paid for said financing. The derivatives that are highly effective prospectively and retrospectively,

cumulatively, since the date of designation, are those associated with the Banco Sabadell new

syndicated financing and bilateral loan, so their changes in value are recognised in equity.

The Group has recognised in equity the fair value of the derivatives that meet the effectiveness

requirements, without considering any tax effect due to adhering to the REIT regime. Under the

heading 'Changes in fair value in financial instruments' of the consolidated income statement, the

Group has registered as a result of derivative financial instruments that have not met the hedge

requirements due to inefficiency and due to cancellation of income in the amount of EUR 35,348

thousand in 2022 (negative EUR 9,804 thousand in 2021).

On adopting IFRS 13, the Group adjusted the measurement techniques for calculating the fair value of

its derivatives. The Group includes a bilateral credit risk adjustment to reflect both the own credit risk

and the counterpart party risk in the measurement of the fair value of the derivatives. The Group

applied the discounted cash flow method, considering a discount rate affected by its own credit risk.

To calculate the fair value of the financial derivatives, the Group used generally accepted

measurement techniques in the market, which account for current and future expected exposure,

adjusted by the probability of default and the potential loss given default affecting the contract. The

69

CVA (Credit Value Adjustment) or counterparty credit risk and DVA (Debt Value Adjustment) or own

credit risk were therefore estimated.

Current and expected exposure in the future is estimated using simulations of scenarios of fluctuations

in market variables, such as interest rate curves, exchange rates and volatilities as per market

conditions at the measurement date.

Furthermore, for the credit risk adjustment, the Group's net exposure has been taken into account with

regards to each of the counterparties, if the financial derivatives arranged with them are within a

financial transaction framework agreement that provides for netting positions. For counterparties for

whom credit information is available, the credit spreads have been obtained from the CDS (Credit

Default Swaps) quoted in the market; whereas for those with no available information, references from

peers have been used. The Group hired an independent expert to measure the fair value of the

derivatives.

The impact of interest rate derivatives on liabilities and profit or loss before tax of a 5% in the

estimated credit risk rate at 31 December 2022 and 2021 would be as follows:

2022

	Thousands of euros
Scenario	Liabilities	Equity	Consolidated profit before tax
5% rise in credit risk rate	(13,030)	12,130	901
5% reduction in credit risk rate	13,446	(12,524)	(921)

2021

	Thousands of euros
Scenario	Liabilities	Equity	Consolidated profit before tax
5% rise in credit risk rate	(40,881)	28,041	12,840
5% reduction in credit risk rate	42,611	(23,296)	(19,315)

70

14.4 Reconciliation of the carrying amount of the liabilities arising from financing activities

The breakdown of the financing activities and their impact on the Group's cash flows in 2022 was as

follows:

2022

		Thousands of euros
	31/12/2021	Impact on cash			No impact on cash
		Principal Debt	Interest paid	Discount option	Principal Debt		Accrued interest	Interest accrued Discount option	Other adjustme nts	31 December 2022
Long-term loans	1,623,758	(768,000)	-	(659,771)	(1,731)		-	-	-	194,256
Short-term loans	13,154	(1,750)	(6,574)	(13,482)	1,731		6,398	2,908	-	2,385
Short-term revolving credit facilities	410	-	(2,198)	-	-		2,197	-	1	410
L/p bonds	4,042,786	-	-	-	(742,786)		-	-	-	3,300,000
C/p bonds	588,622	(548,300)	(88,999)	-	742,786		81,040	-	3	775,152
	6,268,730	(1,318,050)	(97,770)	(673,253)	-		89,635	2,908	4	4,272,203

2021

		Thousands of euros
	31/12/2021	Impact on cash			No impact on cash
		Principal Debt	Interest paid	Discount option	Principal Debt		Accrued interest	Interest accrued Discount option	Other adjustme nts	31 December 2022
Long-term loans	1,633,770	2,100	-	-	(12,112)		-	-	-	1,623,758
Short-term loans	11,580	(1,724)	(11,057)	(15,299)	12,112		11,052	6,495	(5)	13,154
Short-term revolving credit facilities	404	-	(2,198)	-	-		2,205	-	-	410
L/p bonds	4,091,086	500,000	-	-	(548,300)		-	-	-	4,042,786
C/p bonds	36,291	-	(85,299)	-	548,300		89,330	-	-	588,622
	5,773,131	500,376	(98,554)	(15,299)	-		102,587	6,495	(5)	6,268,730

71

	Thousands of euros
	31 December 2022	31/12/2021
Long-term loans	194,256	1,623,758
Short-term loans	2,385	13,154
Short-term revolving credit facilities	410	410
Non-current bonds	3,300,000	4,042,786
Short-term bonds	775,152	588,622
	4,272,203	6,268,730
Non-current derivatives	-	78,465
Current derivatives	11	1,289
Loan arrangement expenses
Syndicated loan	-	(7,758)
Senior syndicated mortgage	-	(48,106)
Debenture issues	(20,782)	(25,683)
Other	(4,390)	(5,220)
Total current and non-current liabilities	4,247,042	6,261,717

In addition, under the interest rate hedging agreements signed (see Note 14.3), the net balance of the

settlements amounted to EUR 2,819 thousand in 2022 (EUR 5,306 thousand in 2021).

14.5 Debt arrangement expenses

Changes in debt arrangement expenses during 2022 and 2021 are as follows:

	Thousands of euros
		31/12/2021	Allocation to profit and loss account – Amortised cost	Impact of IFRS 9 on income statement		Capitalisation s	31 December 2022
					Discount option	of arrangement expenses
Non-mortgage finance		10,855	(4,125)	(4,213)	-	240	2,757
Senior syndicated loan (Tree)		48,106	-	-	(48,106)	-	-
Mortgage loans - other assets		2,123	(127)	(362)	-	-	1,633
Debentures and bonds		25,683	(4,901)	-	-	-	20,782
		86,767	(9,153)	(4,575)	(48,106)	240	25,172

	Thousands of euros
		31/12/2020	Allocation to profit and loss account – Amortised cost	Impact of IFRS 9 on income statement		Capitalisations	31/12/2021
					Discount option	of arrangement expenses
Non-mortgage finance		14,127	(2,151)	(1,790)	-	669	10,855
Senior syndicated loan (Tree)		52,276	-	-	(5,183)	1,014	48,106
Mortgage loans - other assets		2,615	(129)	(363)	-	-	2,123
Debentures and bonds		25,284	(5,370)	-	-	5,769	25,683
		94,302	(7,650)	(2,153)	(5,183)	7,452	86,767

72

.

15.    Other current and non-current liabilities

Details of this heading at 31 December 2022 are as follows:

	Thousands of euros
	2022		2021
	Non-current	Current	Non-current	Current
Other provisions	12,670	-	11,210	-
Guarantees and deposits received	86,407	3,791	93,035	1,369
Deferred tax liabilities	613,479	-	681,013	-
Other payables	58,485	5,229	46,134	6,495
Other (Note 9)	9,256	-	15,134	-
Borrowings from Group companies and associates	2,250	-	4,050	-
Other current liabilities	-	11,566	-	7,668
Total	782,547	20,586	850,576	15,532

"Other provisions" includes provisions for the risk assessment associated with a series of litigation and

third-party claims arising from the exercise of the Group's activity, which have been recognised in

accordance with the best existing estimates, and the provision corresponding to the variable

remuneration that will be paid in the long term for EUR 4,619 thousand (EUR 3,338 thousand in 2021).

"Other provisions" also includes liabilities for tax debts for which there are uncertainties as to their

amount or timing, whereby it is likely that the Group may have to dispose of resources to cancel these

obligations as the result of a present obligation.

"Guarantees and deposits received" primarily comprise the amounts deposited by lessees to secure

leases, which will be reimbursed at the end of the lease term.

The Parent Company and the majority of its subsidiaries adhere to the SOCIMI regime. Under this

regime, gains from the sale of assets are taxed at 0%, provided that certain requirements are met

(basically, the assets must have been held by the REIT for at least three years). Any gains from the

sale of assets acquired prior to joining the REIT tax regime will be distributed on a straight-line basis

(unless proven to be distributed otherwise) over the period during which the REIT owned them. Any

gains generated prior to joining the REIT tax regime will be taxed at the general rate, while a rate of

0% will be applied for the other years. In this regard, the Parent's directors estimated the tax rate

applicable to the tax gain on the assets acquired prior to their inclusion to the REIT regime (calculated

in accordance with the fair value of the assets obtained from expert appraisals at the date of the

business combination and as of 31 December 2022), recognising the related deferred tax liability.

The Parent's directors do not envisage disposing of any of the investment property acquired after the

Parent and its subsidiaries adhered to the REIT regime within three years, and have therefore not

recognised the deferred tax liability corresponding to the changes in fair value since the assets were

acquired as the applicable tax rate is 0%.

73

16.    Trade and other payables

Details of this heading at 31 December 2022 are as follows:

	Thousands of euros
	2022	2021
Current:
Providers	74,814	45,698
Payables to suppliers - Group companies and associates	1,800	63
Sundry accounts payable	9,341	7,240
Remuneration payable	16,190	21,621
Other payables to public authorities (Note 17)	27,044	22,771
Advances from customers	17,661	16,762
	146,850	114,155

The carrying amount of the trade payables is similar to their fair value.

Information on the average period of payment to suppliers. Final Provision Two of Law 31/2014,

of 3 December

The information required by additional provision three of Spanish Law 15/2010, of 5 July (amended by

final provision two of Spanish Law 31/2014, of 3 December), prepared in accordance with the Spanish

Accounting and Audit Institute (ICAC) Resolution of 29 January 2016 on the disclosures to be included

in the notes to financial statements in relation to the average period of payment to suppliers in

commercial transactions, is detailed below.

	Days
	2022	2021
Average period of payment to suppliers	25.2	31.6
Ratio of transactions settled	23.5	31.5
Ratio of transactions not yet settled	32.9	33.7

	Thousands of euros
	2022	2021
Total payments made	345,878	239,013
Total payments outstanding	71,590	4,129

In accordance with the ICAC Resolution, the average period of payment to suppliers was calculated by

taking into account the commercial transactions relating to the supply of goods or services for which

payment has accrued since the date of entry into force of Law 31/2014, of 3 December.

For the exclusive purpose of providing the information envisaged in this Resolution, payable to

suppliers are considered trade payables for debts with suppliers of goods and services, included under

"Trade receivables and other payables" under current liabilities in the attached balance sheet.

"Average period of payment to suppliers" is taken to be the period that elapses from the delivery of the

goods or the provision of the services by the supplier to the effective payment of the transaction.

74

The maximum legal period applicable to the Group in accordance with Law 11/2013, of 26 July was 30

days following the publication of the above law to date (unless the terms established therein are met

that would enable the above maximum period to be extended up to 60 days).

The monetary volume and number of invoices paid within the established legal period (60 days) are

detailed below.

	2022
Monetary volume (thousands of euros)	345,129
Percentage of total payments made	99,7%
Number of invoices	36,196
Percentage of total invoices	99,9%

17.    Tax situation

a) Tax receivables and tax payables

The breakdown of the main tax receivables and payables at 31 December 2022 is as follows:

2022

	Thousands of euros
	Tax assets		Tax liabilities
	No		No
	Current	Current	Current	Current
Public Treasury for withholdings and other items	-	14,572	-	21,095
VAT	-	3,277	-	5,650
Tax assets	78,646	-	-	-
Corporate income tax	-	-	-	5,234
Payable to the Social Security	-	-	-	299
Deferred tax liabilities	-	-	613,479	-
	78,646	17,849	613,479	32,279

75

2021

	Thousands of euros
	Tax assets		Tax liabilities
	No		No
	Current	Current	Current	Current
Public Treasury for withholdings and other items	-	10,705	-	16,450
VAT	-	8,610	-	6,017
Tax assets	83,808	-	-	-
Corporate income tax	-	-	-	3,935
Payable to the Social Security	-	-	-	304
Deferred tax liabilities	-	-	681,013	-
	83,808	19,315	681,013	26,706

b) Reconciliation of the accounting profit/loss to the taxable profit/tax loss

At 31 December 2022, the taxable profit was calculated as the accounting profit for the year plus the

effect of changes in the fair value of investment property, and temporary differences due to the existing

limitations. At the reporting date of these financial statements, the Group did not recognise any

deferred tax assets in this regard, as it is generally subject to a tax rate of 0% as the Parent and the

majority of the subsidiaries adhere to the REIT regime.

The reconciliation of the accounting profit to consolidated income tax expense for the year at 31

December 2022 is as follows:

	Thousands of euros
	2022	2021
Profit/(Loss) before tax	48,156	518,798
Permanent differences:
-Consolidation adjustments to profit or loss	5,847	(38,525)
-Tax adjustments Operating profit	786,007	(46,522)
-Non-deductible finance costs	-	22,300
-Profit and loss accounted for using the equity method	(24,033)	(34,560)
-Other permanent differences	19,972	(92,419)
Temporary differences:
-Changes in the value of investment property	249,272	(177,008)
-Adjustments to depreciation and amortisation	(50,308)	(79,589)
Tax loss carryforwards	(1,469)	(4,126)
Adjusted taxable profit	1,033,445	68,349

The Parent Company and a significant number of its subsidiaries adhere to the REIT regime. As

indicated in Note 5.13, the taxation of this scheme is constructed at a rate of 0%, provided that certain

requirements are met.

In relation to the permanent differences/consolidation adjustments to profit or loss, the results of the

companies integrated by the equity method are mainly included, as well as the tax capital gains

obtained from the disposal of Tree Inversiones Inmobiliarias, SOCIMI, S.A. (see Note 3) and the

incorporation of the amortisation expenses of the real estate investments not included under Income

before taxes on the accompanying consolidated income statement.

76

Temporary differences arose from the change in value of investment property (IAS 40 - Fair value

model). As the Parent's directors plan and state that investment property acquired by subsidiaries

already subject to the REIT tax regime will not be sold within three years, the fair value adjustment in

2022 and 2021 is taxed at 0% and therefore the deferred tax liability is also zero.

c) Reconciliation of accounting profit and tax expense

	Thousands of euros
	2022	2021
Expense/(Income):
Expense for increase in value of investment property (a)	(1,684)	(300)
Expense for disposal of properties within the REIT regime (b)	(1,102)	(3,095)
Expense for disposal of properties outside the REIT regime	-	(179)
Expense for gain/(loss) at standard rate	(5,836)	(3,833)
Other items	1,822	826
Total corporate income tax expense	(6,800)	(6,581)
Current tax	(5,836)	(6,318)
Deferred tax and other adjustments to taxation	(964)	(263)
Total corporate income tax expense	(6,800)	(6,581)

(1)This corresponds to the increase in the value of the assets of the non-REIT subsidiaries

(resident in Portugal, which meet the requirements of article 2.1 [c] of the REITs Act to be

considered as eligible assets for the purposes of the above tax regime). The amount is the

result of applying the tax rate that the directors consider will be applicable to the capital gains.

(2)Adjustment corresponding to the profit arising in the Parent's individual financial statements for

the sale of an asset from the integration of Metrovacesa, the portion of which is taxed at the

general tax regime despite being sold within a period exceeding 3 years of its acquisition.

77

d) Deferred tax assets recognised

A breakdown of the tax loss carryforwards at 31 December 2022 is as follows:

2022

	Thousands of euros
	Recognised	Credit
	Tax base	credit
Tax loss carryforwards:
2009	134,928	33,732
2010	1,650	413
2011	86,402	21,600
2014	13,313	3,328
2015	2,326	581
2018	718	180
2019	462	116
2022	128	32
Total tax loss carryforwards	239,927	59,982
Other deferred taxes recognised	74,656	18,664
Total capitalised deferred tax assets	314,583	78,646

The "Other deferred taxes recognised" heading mainly includes the timing differences caused by the

limitation of the depreciation of the assets generated by the acquisition of the Testa and Metrovacesa

subgroup and the tax deductions pending application mainly due to reinvestment, and credits for

losses from companies absorbed in previous years.

The above deferred tax assets were recognised in the consolidated statement of financial position

since the Group's directors consider that, based on the best estimates of the Group's future results,

including certain tax planning measures, it is likely that these assets will be recovered.

78

A breakdown of the tax assets not recognised at 31 December 2022 is as follows:

	Thousands of euros
	Not recognised
	Tax base
Tax loss carryforwards:
2009	52,955
2010	5,673
2011	1,214
2012	1,676
2013	440
2014	20,158
2015	264
2016	456
2017	2,199
2018	1,236
2019	4,046
2020	14,455
2021	-
Total tax loss carryforwards	104,772

e)Deferred tax liabilities

As indicated above, the deferred tax liabilities arise mainly from the business combinations performed

in recent years and the non-REIT subsidiaries (resident in Portugal, which meet the requirements of

article 2.1 (c) of the REIT Law to be considered as eligible assets for that regime).

The changes at 31 December 2022 are as follows:

	Thousands of
	euros
Total deferred tax liabilities at 31 December 2020	684,454
Increase in value of investment property	300
Reductions due to sales	(4,064)
Temporary differences	323
Total deferred tax liabilities at 31 December 2021	681,013
Increase (decrease) in value of investment property	1,684
Reductions due to sales	(68,944)
Temporary differences	(274)
Total deferred tax liabilities at 31 December 2022	613,479

The sales losses relate mainly to the sale of the leased premises to BBVA through the sale of all the

shares held by the Parent from the subsidiary Tree Inversiones Inmobiliarias, SOCIMI, S.A. (see Note

3).

79

As in Note 17.b, the increase in value of investment property acquired by subsidiaries subject to the

REIT tax regime generate temporary differences at a tax rate of 0%, whereby no deferred tax liability

has been recognised.

f) Years open to audit and tax inspections

Under current law, taxes cannot be deemed to have been definitively settled until the tax returns filed

have been reviewed by the tax authorities or until the four-year limiation period has expired. At year-

end 2022, the Parent and its subsidiaries were open for income tax audit for the periods 2018 to 2021,

VAT and income tax withholdings for 2019 to 2022, and Business Tax (IAE) and Property Tax (IBI) for

2020 to 2023. In accordance with Additional Provision Nine of Royal Decree Law 11/2020 of 31 March

and Additional Provision One of Royal Decree Law 15/2020 of 21 April, the period between 14 March

and 30 May 2020 will not count for the purposes of the limitation periods in Law 58/2003 of 17

December, on General Taxation, so that the usual deadlines are extended by 78 additional days.

The Parent's directors consider that the tax returns for the above taxes have been filed correctly and,

therefore, even in the event of discrepancies in the interpretation of current tax legislation in relation to

the tax treatment afforded to certain transactions, such liabilities as might arise would not have a

material effect on the accompanying financial statements. Also, Law 34/2015, of 21 September,

partially amending Law 58/2003, of 17 December, on General Taxation establishes the right of the tax

authorities to initiate a review and investigation procedure of the tax losses offset or carried forward or

tax credits taken or carried forward, which will become statute barred after ten years from the day on

which the regulatory period established for filing the tax return or self-assessment relating to the year

or the tax period in which the right to offset the tax loss or to apply the tax credits arose.

On 10 February 2022, the Tax Agency notified the Parent of the initiation of an audit and investigation

actions regarding income tax in 2016 to 2019 and value added tax and withholdings for the period of

2018 to 2019. At the date of authorization for issue of these consolidated financial statements, the

Parent was in the process of collecting the information required by the tax agency without any

proceedings having taken place on the date that they questioned the reports submitted in the years

being audited.

g) Disclosure requirements arising from REIT status, Law 11/2009, amended by Law 16/2012

and 11/2021

The disclosure requirements arising from the Parent and certain subsidiaries being considered REITs

are included in the related notes of the separate financial statements.

18.    Revenue and expenses

a) Net income

At 31 December 2022, the Group's revenue breakdown is as follows:

	Thousands of euros
	2022	2021 (*)
Rental income	428,154	377,090
Income from services rendered	10,884	5,740
	439,038	382,830

(*) Reexpresed information

80

b) Other operating expenses

At 31 December 2022, a breakdown of "Other operating expenses" in the consolidated income

statement is as follows:

	Thousands of euros
	2022	2021 (*)
Non-recoverable expenses of leased properties	49,096	46,331
Overheads-
Professional services	11,821	10,291
Travel expenses	976	548
Insurance	794	633
Other	2,856	2,790
Costs associated with asset acquisitions and financing	2,112	1,622
Losses on, impairment of and change in provisions	180	2,312
Other current operating expenses	5,652	3,230
Other exceptional expenses	331	837
	73,818	68,594

(*) Reexpresed information

c) Staff costs and average headcount

A breakdown of "Staff costs" at 31 December 2022 is as follows:

	Thousands of euros
	2022	2021
Wages, salaries and similar expenses	32,056	25,790
Termination benefits	-	152
Social security costs	3,085	2,745
Other employee benefit costs	518	594
Long-term incentive plan	4,014	11,498
	39,673	40,779

The average number of employees at the various Group companies in 2022 and 2021 was 250 and

222 respectively.

A breakdown of the headcount at 2022 and 2021 year-end, by category, is as follows:

2022

	Women	Men	Total
Senior management	1	27	28
Middle management	27	55	82
Other professionals	89	61	150
	117	143	260

81

2021   

	Women	Men	Total
Senior management	1	26	27
Middle management	26	51	77
Other professionals	83	52	135
	110	129	239

The average number of employees at the Group in 2022 and 2021 with a disability equal to or

greater than 33%, by category, was as follows:

	2022	2021
Senior management	-	-
Middle management	1	-
Other professionals	6	5
	7	5

d) Finance income and costs

The breakdown of these items in the consolidated income statement is as follows:

	Thousands of euros
	2022	2021 (*)
Finance income:
Interest on loans	2,098	4,273
Interest on deposits and current accounts	1,844	1,148
	3,942	5,421
Finance costs:
Interest on loans and other credits	(103,382)	(113,014)
Other finance costs	(5,821)	(3,444)
	(109,203)	(116,458)
Net finance expense	(105,261)	(111,037)

(*) Reexpresed information

In 2022 finance costs include mainly the interest corresponding to the bank borrowings and obligations

detailed in the Note 14 amounting to EUR 8,595 thousand and EUR 81,040 thousand, respectively

(EUR 13,257 and EUR 89,330 thousand in 2021 respectively). The amounts above does not include

amortisation of debt formalisation costs amounting to EUR 13,729 thousand (EUR 9,540 thousand in

2021), from application of the effective interest rate on financial debt (see Note 14.5), and the financial

costs associated with interest rate derivatives amounting to EUR 18 thousand (EUR 625 thousand in

2021).

e) Contribution to consolidated profit

The contribution of each company included in the scope of consolidation to profit for 2022 was as

follows:

82

	Thousands of euros
Company	2022	2021
Full consolidation:
Merlin Properties SOCIMI, S.A. (*)	122,450	28,391
Tree Inversiones Inmobiliarias, SOCIMI, S.A.	6,279	103,758
Merlin Retail, S.L.	11,975	26,887
Merlin Oficinas, S.L.	(5,279)	32,758
Merlin Logística, S.L.	26,363	203,220
Varitelia Distribuciones, S.L.U.	3,489	2,725
Metroparque, S.A.	1,366	7,949
La Vital Centro Comercial y de Ocio, S.L.	3,355	2,543
Global Carihuela Patrimonio Comercial, S.L.U.	2,258	(4,814)
Parques Logísticos de la Zona Franca, S.A.	(2,548)	24,471
Sevisur Logística, S.A.	10,931	17,266
The Exhibitions Company, S.A.	(1,467)	(787)
Innovación Colaborativa, S.L.U.	1,715	(534)
Promosete Invest. Inmobiliaria, S.A.	1,072	2,480
Praça do Marqués - Servicios auxiliares, S.A.	2,515	1,996
MPCVI - Compra e Venda Imobiliária, S.A.	1,340	1,393
MPEP - Properties Escritórios Portugal, S.A.	681	1,282
MP Monumental, S.A.	20,296	7,048
MP Torre A, S.A.	(657)	2,418
Forum Almada – Gestao Centro Comercial, Lda	18,870	14,004
Torre dos Oceanus Investimentos Inmobiliarios,S.A.	1,377	2,023
Torre Arts Investimentos Inmobiliarios,S.A.	3,970	4,271
Torre Fernão Magalhães Investimentos Inmobiliarios,S.A.	1,418	1,868
VFX Logística, S.A.	7,210	(5,702)
Other companies	75	744
Equity method:
Paseo Comercial Carlos III, S.A.	2,487	(1,712)
Centro Intermodal de Logística, S.L.	18,556	28,021
Provitae, S.L.	(198)	5
Sicilius Real Estate S.L.	2,667	7,991
Madrid Crea Nuevo Norte, S.A.	(616)	(410)
Other investments	1,137	665
Total	263,087	512,217

(*) Includes EUR 215,452 thousand associated with discontinued activity sold

83

19.    Related party transactions

Related transactions performed by the Parent or its Subsidiaries with directors, with a holding of 10%

or more of the voting rights or represented on the Parent's Board, or with any other persons that must

be considered related parties in accordance with International Accounting Standards, adopted in

accordance with Regulation (EC) 1606/2002 of the European Parliament and of the Council of 19 July

2002 on the application of international accounting standards, are considered related transactions.

At 31 December 2022, a breakdown of any significant transactions, given their amount or importance,

performed between the Parent or its Group companies, and related parties, is as follows:

2022

	Nature of relationship	Thousands of euros
Related party		Revenue	Expense	Assets	Liabilities
Banco Santander, S.A. (a)	Financing	5,860	2,326	-	-
Banco Santander, S.A. (a)	Cash	-	-	201,077	-
Banco Santander, S.A. (b)	Lease	752	23	-	392
Banco Santander, S.A. (b)	Services	-	75	-	-
Pº Comer. Carlos III, S.A. (c)	Financing	29	-	2,590	-
Provitae Centros Asistenciales, S.L. (d)	Financing	-	-	1,131	-
Silicius Real Estate SOCIMI, S.A. (e)	Financing	-	-	-	4,050
		6,641	2,424	204,798	4,442

2021

	Nature of relationship	Thousands of euros
Related party		Revenue	Expense	Assets	Liabilities
Banco Santander, S.A. (a)	Financing	-	4,443	-	198,780
Banco Santander, S.A. (a)	Cash	-	-	487,939	-
Banco Santander, S.A. (a)	Notional derivatives	-	-	-	305,191 (*)
Banco Santander, S.A. (b)	Lease	636	-	-	131
Banco Santander, S.A. (b)	Services	-	98	-	-
Pº Comer. Carlos III, S.A. (c)	Financing	16	-	2,561	-
Provitae Centros Asistenciales, S.L. (d)	Financing	-	-	1,106	-
Silicius Real Estate SOCIMI, S.A. (e)	Financing	-	-	80,964	5,850
G36 Developments S.L. (f)	Financing	4	-	224	-
		656	4,541	572,794	509,952

(*) This amount does not represent the recognition of a liability as of 31.12.2021.

Transactions executed with significant shareholders

During 2022, only the shareholder Banco Santander, S.A. held the status of significant shareholder

pursuant to the regulations in force.

a)Financing transactions

At 31 December 2022, the Group had no loans taken out with shareholders except for a corporate

credit line of EUR 700 million, which was not drawn down at 31 December 2022, in which Banco

Santander, S.A. share was EUR 54.2 million. (see Notes 14).

At 31 December 2021, the Group had arranged loans and hedges with its shareholder Banco

Santander, S.A. that corresponded to Banco Santander, S.A.'s share of the loans granted for Group

84

financing transactions was EUR 198,780 thousand in loans and EUR 305,191 thousand in notional

derivatives.

At 31 December 2022, the Group had bank balances deposited with Banco Santander, S.A.

amounting to EUR 201,077 thousand (which included the accounts on behalf of the associates Paseo

Comercial Carlos III, S.A. and Edged Spain, S.L.U. for EUR 2 thousand and EUR 19 thousand,

respectively).

In 2022, the finance costs incurred in transactions with Santander, S.A. amounted to EUR 2,326

thousand, which included EUR 55 thousand in guarantee fees and EUR 385 thousand in current

account management costs.

The Group has been granted guarantees by the shareholder Banco Santander, S.A. amounting to

EUR 5,455 thousand (EUR 3,940 thousand granted to MERLIN Properties SOCIMI, S.A. and EUR

1,516 thousand granted to the associate Paseo Comercial Carlos III, S.A.).

The revenue of EUR 5,860 thousand relates to the early cancellation of the derivatives associated with

the financing of the corporate syndicated loan and the mortgage financing of Tree Inversiones

Inmobiliarias, SOCIMI, S.A.

b)Leases and services rendered

In 2022 the Group had 5 leases with Banco Santander Group in various office properties and shopping

centres. The duration of the lease contracts covers a period of up to 5 years, and in 2022 they

generated income of EUR 752 thousand (EUR 636 thousand in 2021) including income from leasing,

and parking spaces and transfers of cash machine space in shopping centres. The guarantees

deposited to secure these agreements amounted to EUR 392 thousand (EUR 131 thousand in 2021).

In addition, the Group has contracted General Meeting and shareholder registration organisational

services amounting to EUR 64 thousand, in addition to listing agent services on the Euronext Lisbon

stock exchange and dividend agent for EUR 11 thousand.

Transactions with companies accounted for using the equity method

c)Paseo Comercial Carlos III S.A.

At 31 December 2022, the Parent, together with the other shareholder of the associate and as a

condition of bank financing, had a loan of EUR 2,590 thousand in force, including EUR 51 thousand of

accrued interest (EUR 29 thousand in 2021), granted on 27 July 2020 to the associate Paseo

Comercial Carlos III, S.A. Which manages a shopping centre in Madrid.

d)Provitae Centros Asistenciales, S.L.

At 31 December 2022, the Parent had an existing loan amounting to EUR 1,131 thousand (EUR 962

thousand at 31 December 2021), which included EUR 144 thousand of accrued interest (EUR 144

thousand in 2021), granted on 10 January 2002 to the associate Provitae Centro Asistenciales, S.L.

with a land holding in Villajoyosa.

e)Silicius Real Estate SOCIMI, S.A.

At 31 December 2021, the Parent had a "financial asset at fair value through profit and loss"

amounting to EUR 80,964 thousand corresponding to the value of the shares associated with the

liquidity mechanism maturing in February 2022, agreed in the non-monetary contribution made by the

Parent on 27 February 2020. In the first half of 2021, the Parent sold 353,966 shares for EUR 5,418

thousand.

On 27 July 2022, the Group exercised the option to sell 14.28% of the shares of Silicius Real Estate

SOCIMI, S.A. for EUR 80,964 thousand, the full amount of which was paid in cash (see Note 10).

85

The Parent Company also had outstanding obligations to pay amounting to EUR 4,050 thousand,

recorded as "other current and non-current financial liabilities".

f)G36 Developments, S.L.

At 31 December 2022, the Parent did not have any outstanding loans with this company. During the

first quarter of 2022, the company has cancelled the outstanding part (EUR 212 thousand) of the loan

for an amount EUR 625 thousand, granted on 1 October 2018 to the associated company G36

Developments, S.L., holder of an asset that will be dedicated to the management of flexible office

spaces. In February 2022 G36 Developments, S.L. sold the asset it held.

In 2022, G36 Developments, S.L. returned the contributions made in the 2018 capital increase; i.e.,

the share premium amounting to EUR 1,823 thousand and a capital reduction of EUR 202 thousand,

which resulted in the value of the Group's share in this company reaching EUR 2 thousand.

Dividends and other profits distributed to related parties (thousands of euros)

	Thousands of euros
	2022	2021
Significant shareholders	136,701	51,209
Banco Santander, S.A.	136,701	51,209
Directors and managers	8,245	1,780
Directors	4,806	1,551
Executives	3,439	229
	144,946	52,989

.

20.    Information on Directors

The Parent's directors and the parties related thereto did not have any conflicts of interest that had to

be reported in accordance with article 229 of the revised text of the Spanish Capital Companies Act.

Directors' compensation and other benefits

At 31 December 2022 and 2021, salaries, per diem attendance fees and any other type of

compensation paid to members of the Parent's managing bodies totalled EUR 8,151 thousand and

EUR 6,523 thousand, as detailed below:

	Thousands of euros
	2022	2021
Fixed and variable remuneration	7,907	6,259
Statutory compensation	-	-
Termination benefits	-	-
Per diems	234	250
Life and health insurance	10	14
	8,151	6,523

In addition to the above amounts and in relation to the variable remuneration in favour of Executive

Directors corresponding to the bonus for previous years, in 2022 an amount of EUR 3,250 thousand

was paid on the deferred amounts of the variable targets for 2016 and 2019 in accordance with the

conditions in the above plans.

86

At the end of 2022, unpaid accrued amounts associated with the variable remuneration for 2021

amounting to EUR 1,350 thousand were maintained, of which EUR 675 thousand were recognised

under 'Non-current provisions' and EUR 675 thousand under 'Trade and other accounts payable' in the

accompanying balance sheet.

Unpaid accrued amounts are maintained, associated with the variable remuneration for 2022 for the

amount of EUR  4,186 thousand, of which EUR 1,243thousand are recognised under "Non-current

provisions" and EUR  2,943 thousands under "Trade and other accounts payable" in the

accompanying balance sheet.

Also, in accordance with the 2017-2019 Incentive Plan, described in this same Note, in 2022 the

Executive Directors received 538,460 net shares corresponding to the second 50% of the amount of

the incentive referenced to the EPRA NAV, with the 2017-2019 Incentive Plan settled.

In April 2022 the Executive Directors received a total of EUR 750 thousand under the 2021 Special

Incentive.

As established in the Special Incentive for the sale of the BBVA portfolio, defined below, the Executive

Directors have accrued an amount of EUR 1,700.

In regards to the "golden parachute" clauses for executive directors and other senior executives of the

Company or its Group in the event of dismissal or takeover, these clauses provide for compensation

that represented a total commitment of EUR  8,971 thousand as of 31 December 2022.

The breakdown, by board member, of the amounts disclosed above is as follows:

		Thousands of euros
		2022	2021
Director:
Remuneration of board members
Javier García Carranza Benjumea	Chairman - Proprietary director	-	-
Ismael Clemente Orrego	CEO	3,507	2,800
Miguel Ollero Barrera	Executive director	2,679	1,900
María Luisa Jordá Castro	Independent director	189	172
Ana García Fau	Independent director	207	172
George Donald Johnston	Independent director	172	134
Fernando Ortiz Vaamonde	Independent director	142	136
Juan María Aguirre Gonzalo	Independent director	182	176
Pilar Cavero Mestre	Independent director	152	159
Francisca Ortega Hernández Agero	Proprietary director	169	129
Emilio Novela Berlín	Independent director	187	168
María Ana Forner Beltrán	Proprietary director	177	161
Ignacio Gil-Casares Satrústegui	Proprietary director	144	146
John Gómez Hall	Independent director	-	6
		7,907	6,259

The Company has granted no advances, loans or guarantees to any of its directors.

The Parent's directors are covered by the "Corporate Third-Party Liability Insurance Policies for

Directors and Executives" taken out by the Parent to cover possible damages that may be claimed,

and that are evidenced as a result of a management error committed by its directors or executives,

and those of its subsidiaries, in discharging their duties. The premium amounted to an annual total of

EUR 400 thousand (EUR 493 thousand in 2021).

Remuneration and other benefits of senior executives

87

The remuneration of the Parent's senior executives, including the Head of Internal Audit, excluding

those who are also Board members (whose remuneration is disclosed above) in 2022 and 2021, is

summarised as follows:

2022

Thousands of euros
Number of persons	Fixed and variable remuneration	Other remuneration	Total
9	7,324	31	7,355

2021

Thousands of euros
Number of people	Fixed and variable remuneration	Other remuneration	Total
8	5,525	36	5,561

In addition to the above amounts and in relation to the variable remuneration for Senior Management

corresponding to the prior years' bonuses, an amount of EUR 4,373 thousand was paid related to the

variable objectives, and the deferred amounts of the variable objectives for 2016 and 2019 in

accordance with the above plans.

At the end of 2022, unpaid accrued amounts associated with the variable remuneration for 2021 were

maintained for EUR 1,988 thousand, of which EUR 994 thousand were recognised under 'Non-current

provisions' and EUR 994 thousand under 'Trade and other accounts payable' in the accompanying

balance sheet.

Unpaid accrued amounts are maintained, associated with the variable remuneration for 2022 for the

amount of EUR  5,229 thousand, of which EUR 1,707 thousand are recognised under "Non-current

provisions" and EUR 3,522 thousands under "Trade and other accounts payable" in the accompanying

balance sheet.

Also, in accordance with the 2017-2019 Incentive Plan, described in this same Note, in 2022 Senior

Management received 444,950 net shares corresponding to the second 50% of the amount of the

incentive referenced to the EPRA NAV, with the 2017-2019 Incentive Plan settled.

In 2021, two Senior Management staff left the company. In 2021 they received fixed and variable

remuneration of EUR 242 thousand, and other remuneration amounting to EUR 3 thousand. They

were also paid EUR 3,870 thousand corresponding to the deferred amounts of the variable targets for

2015, 2016, 2018 and 2019. There are no unpaid accrued amounts. In addition, in relation to the

remuneration plan associated with the 2017-2019 period, they received the payment of 591,766 net

shares arising from the entire amount corresponding to the incentive plan and linked to the increase in

the EPRA NAV in the period.

In April 2022 Senior Management received a total of EUR 540 thousand for the 2021 Special

Incentive.

As established in the Special Incentive for the sale of the BBVA portfolio, defined below, the Senior

Management have accrued an amount of EUR 1,709.

88

Special Incentive corresponding to TREE disposal

In application of the current Remuneration Policy, approved at the 2022 General Shareholders'

Meeting, the Board of Directors has decided to make use of the power to grant a special incentive

(hereinafter "Special Incentive") to the Executive Directors in the event of the success of extraordinary

corporate transactions that generate significant added value for the Company's shareholders and/or

generate an economic benefit or a significant value creation in the Company's assets.

In this regard, in fiscal year 2022, the sale of BBVA's branch portfolio through Tree Inversiones

Inmobiliarias SOCIMI, S.A. (100% subsidiary of MERLIN) was carried out for 1,987 million euros (sale

of TREE).  This transaction resulted in a premium of 17.1% over the last valuation and reduced the

Group's net debt by 1,636 million euros, while simultaneously distributing an extraordinary dividend of

351 million euros (0.75 euros per share).

The Special Incentive has been extended to Senior Management and the rest of the beneficiaries of

the 2022-24 Long-Term Incentive Plan for a total amount of 4,450 thousand euros. The incentive will

be paid in the first quarter of 2023.

2021 Special Incentive

On 27 April 2021, the Parent's Annual General Meeting of Shareholders approved the implementation

of an exceptional variable remuneration scheme payable in cash for 2021 (the "Special Incentive"( for

members of the Company's management and management team).

The activation of the right to receive the "Special incentive" would take place if, after the period from 1

January 2021 to 31 December 2021, the level of fulfilment of the targets linked to the right to receive

the "Special incentive" had been reached.

In this regard, at 31 December 2021, the Group recognised the expense in the amount of EUR 2,737

thousand, corresponding to the vested portion of the 2021 Incentive Plan.

This special incentive was paid to its beneficiaries in April 2022.

2017 – 2019 Incentive Plan

Also, at the General Meeting held on 26 April 2017, the shareholders approved a remuneration plan

for the management team and other important members of the Group's workforce, the measurement

period of which was from 1 January 2017 to 31 December 2019 (the "2017-2019 Incentive Plan").

According to the plan, the members of the management team could be entitled to receive: (i) a certain

monetary amount in accordance with the increase of the share price and (ii) Parent Company shares,

if certain objectives are fulfilled.

In this regard, as of 31 December 2022, the Company recognised the expense in the amount of EUR

1,210 thousand, corresponding to the vested portion of the 2017-2019 Incentive Plan, with a balancing

entry in reserves.

In 2022, a total of 1,262,398 net shares were paid corresponding to the second payment of the

incentive referenced to the EPRA NAV. With this payment, the 2017-2019 Incentive Plan was fully

settled and paid.

2022 – 2024 Incentive Plan

The General Shareholder Meeting held on 4 May 2022 approved a long-term remuneration plan

consisting of the delivery of a number of ordinary shares of the Company equal to 3,491,767 shares

(representing 0.74% of the share capital), aimed at the management team and other relevant

members of the Group's workforce (the 2022-2024 Incentive Plan).

89

The 2022-2024 Incentive Plan consists of a single cycle with a target measurement period of 3 years,

beginning on 1 January 2022 and ending on 31 December 2024. If the targets are met, the shares will

be delivered in 2025, once the corresponding accounts for 2024 have been prepared and audited. All

shares delivered under the 2022-2024 Incentive Plan to executive directors will be subject to a 2-year

vesting period. The maximum number of shares assigned to the Executive Directors is 1,088,082

shares.

The specific number of shares of the Company that, within the maximum established, will be delivered

to the Beneficiaries of the 2022-2024 Incentive Plan at the end of the Plan will be conditional on the

fulfilment of the following objectives related to the creation of value for shareholders and sustainability:

Metrics	Definition	Weighting
Absolute TSR Relative TSR	Absolute Total Shareholder Return (TSR) is the return on the share taking into account the cumulative change in the quoted value of the Company's share, including dividends and other similar concepts received by the shareholder in 2022-2024. The Relative TSR measures the evolution of the TSR of the Company's share in 2022-2024, in relation to the TSR experienced in the EPRA Nareit Developed Europe Index during the same period.	50%
EPRA NTA 31/12/24 Dividends (2022-2024)/share	EPRA NTA is calculated based on the Company's consolidated equity and by adjusting certain items following the recommendations of the EPRA. On the other hand, the dividends paid and other similar concepts received by the shareholder during the period of measurement of targets (financial years 2022, 2023 and 2024) are taken into account.	35%
Net carbon issues	Level of reduction of the Company's CO2 emissions at 31 December 2024, compared to 31 December 2021, calculated for the comparable asset portfolio over which the Company has operational control (scope of the Company's zero net path).	10%
Environment and Company	Progress on initiatives linked to improving the environment and society. In this sense, the economic and social impact of the Company's assets on the local communities located around said assets and the different interest groups will be assessed.	5%

As of 31 December 2022, the Company recognised the expense in the amount of EUR 2,804

thousand, corresponding to the vested portion of the 2022-2024 Incentive Plan, with a balancing entry

under reserves.

90

21.    Auditors' remuneration

The fees for financial audit services provided to the various companies composing the Merlin Group

and subsidiaries by the principal auditor, Deloitte, S.L., and entities related to the principal auditor and

other auditors is as follows:

	Thousands of euros
	2022	2021 (*)
Audit services	658	572
Other audit-related services:
Other attest services	141	129
Total audit and related services	799	701
Services required by applicable law
Tax advisory services	-	-
Other services	-	202
Total other services	-	202
Total	799	903

(*) No services associated with discontinued activity

The heading "Other audit-related services" includes the verification services performed by the auditor

in the bond issue process, and certain agreed procedures related to the performance of covenants.

"Other services" includes technical and urban advisory services, and other advisory services.

For its part, the audit services include, in addition to the statutory annual audit, services from revisions

of intermediate periods.

22.    Environmental information

Given the activity in which the Group engages, it has no environmental liabilities, expenses, assets,

provisions or contingencies that could have a material impact on its equity, financial position and

results of its operations.

Therefore, no specific environmental disclosures have been included in these notes to the

consolidated financial statements.

23.    Risk exposure

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and

cash flow interest rate risk. The Group's overall risk management programme is based on the

uncertainty of financial markets and aims to minimize the adverse effects of such risks on the financial

profitability of the Group.

Risk management is undertaken by the Group's Senior Management in accordance with the policies

approved by the Board. Senior Management identifies, evaluates and mitigates financial risks in close

collaboration with the Group's operating units. The Board issues the written global risk management

policies and the policies for specific areas, including those for covering market risk, interest rate risk

and liquidity risk and investing cash surpluses.

91

Market risk

Given the current status of the real-estate sector and to mitigate the effects thereof, the Group has

specific measures in place to minimize said impact on its financial position.

These measures are applied pursuant to the results of sensitivity analyses performed by the Group on

a regular basis. These analyses involve:

•Assessing the economic environment in which the Group operates: Designing different

economic scenarios and modifying the key variables potentially affecting the Group. Identifying

interdependent variables and the extent of their relationship; and

•Taking into account the time frame of the analyses: consideration is given to the periods over

which analyses are performed and any possible deviations thereof.

MERLIN Properties is exposed to market risk from possible vacancies or renegotiations of leases

when the leases expire. This risk could have a direct negative impact on the valuation of the

Company's assets.

However, market risk is mitigated by the customer acquisition and selection policies and the

mandatory lease compliance deadlines negotiated with them, and the guarantees that the Group has

associated with the leases. Therefore, at 31 December 2022, the average occupancy rate of the asset

portfolio was 95.1%, with a weighted average unexpired lease term of 3.2 years (weighted by GRI).

Credit risk

Credit risk is defined as the potential risk of loss in earnings to which the Group is exposed if a

customer or counterparty breaches its contractual obligations.

As a general rule, the Group places cash and cash equivalents with financial institutions with high

credit ratings.

The Group does not have significant concentrations of credit risk, having policies to limit the volume of

risk posed to customers and exposure to credit recovery risk is managed as part of normal activities

through, among other things, funds or guarantees deposited as collateral.

The Group has formal procedures to identify any impairment of trade receivables. Delays in payment

are detected through these procedures and individual analysis by business area and methods are

established to estimate impairment loss.

Details of the estimated maturities of the Group's financial assets in the consolidated statement of

financial position at 31 December 2022 are as follows.

92

2022

	Thousands of euros
	Less than 3 months	More than 3 and less than o 6 months	6 months to 1 year	Over 1 year (*)	Total
Loans to third parties	-	-	236	129,498	129,734
Equity instruments	-	-	-	9,191	9,191
Investments in associates	-	-	2,498	-	2,498
Guarantees and deposits	-	-	-	53,477	53,477
Trade and other receivables	22,428	19,936	7,476		49,840
Other current financial assets	226	-	-	-	226
Cash and cash equivalents	429,449	-	-	-	429,449
Total	452,103	19,936	10,210	192,166	674,415

(*) derivatives are not included

2021

	Thousands of euros
	Less than 3 months	More than 3 and less than o 6 months	6 months to 1 year	Over 1 year (*)	Total
Loans to third parties		-	236	120,475	120,711
Equity instruments	-	-	-	6,796	6,796
Financial assets at fair value through profit or loss	-	80,964	-	-	80,964
Investments in associates	-	-	1,118	-	1,118
Guarantees and deposits	-	-	-	65,440	65,440
Trade and other receivables	17,832	15,851	5,944	-	39,625
Other current financial assets	602	-	-	-	602
Cash and cash equivalents	866,721	-	-	-	866,721
Total	885,155	96,815	7,298	192,712	1,181,976

(*) derivatives are not included

Cash and cash equivalents

The Group has cash and cash equivalents of EUR 429,449 thousand, which represents its maximum

exposure to the risk posed by these assets.

Cash and cash equivalents are deposited with banks and financial institutions.

Liquidity risk

Liquidity risk is defined as the risk of the Group encountering difficulties meeting its obligations

regarding financial liabilities settled in cash or with other financial assets.

To manage liquidity risk and meet its various funding requirements, the Group uses an annual cash

budget and a monthly cash projection, the latter being detailed and updated daily. The driving factor of

the working capital deficiency is the maturity of short-term obligations. At 31 December 2022, the

Group's working capital deficiency amounted to EUR 411,292 thousand

The working capital deficiency has the following noteworthy mitigating factors, (i) the generation of

recurrent cash from the businesses on which the Group bases its activity; and (ii) the financing lines

93

available for an amount of EUR 1,410 thousand and (iii) the capacity to renegotiate and obtain new

financing facilities based on the Group's long-term business plans and the quality of its assets.

At the date of preparation of the consolidated financial statements, taking into account the foregoing,

the Group had covered all its funding requirements to fully meet its commitments to suppliers,

providers of financing, employees and the authorities based on the cash flow forecast for 2023.

Likewise, the type of sector in which the Company operates, the investments it makes, the financing it

obtains to make such investments, the EBITDA they generate and the occupancy rates of the

properties, enables the liquidity risk to be mitigated and excess cash to be produced.

Any cash surpluses are used to make short-term investments in highly liquid deposits with no risk. The

acquisition of share options or futures, or any other high-risk deposits as a method of investing cash

surpluses, is not among the possibilities considered by the Group for investing cash surpluses.

Details of the Group's exposure to liquidity risk at 31 December 2022 are provided in the table below.

The tables present the results of the analysis of gross financial liabilities, excluding the cost of bond

issuance, by remaining contractual maturity date:

2022

	Thousands of euros
	Less than 1 month	1 to 3 months	3 months to 1 year	Over 1 year	Total
Bank borrowings	421	-	1,309	194,257	195,987
Other non-current liabilities and guarantees	-	-	-	86,407	86,407
Trade and other payables (excluding payables to public authorities)	26,538	66,052	27,216	-	119,805
Total	26,959	66,052	28,525	280,664	402, 199

2021

	Thousands of euros
	Less than 1 month	1 to 3 months	3 months to 1 year	Over 1 year	Total
Bank borrowings	435	2,512	8,793	1,623,758	1,635,498
Other non-current liabilities and guarantees	-	-	-	93,035	93,035
Trade and other payables (excluding payables to public authorities)	23,405	43,976	24,003	-	91,384
Total	23,840	46,488	32,796	1,716,793	1,819,917

Cash flow interest rate risk and fair value risk

The Group manages its interest rate risk by borrowing at fixed and floating rates of interest. The

Group's policy is to ensure non-current net financing from third parties is at a fixed rate. To manage

this, the Group enters into interest rate swaps which are designated as hedges of the respective loans.

At 31 December 2022, the percentage of debt the interest rate of which is covered by the above

financial instruments was 99.6%. The impact of interest rate fluctuations is explained in Note 14.3.

Exchange rate risk

The Company's policy is to borrow in the same currency as that of the cash flows of each business.

Consequently, currently there is no foreign currency risk. However, noteworthy in this connection are

the exchange rate fluctuations arising in translating the financial statements of foreign companies

whose functional currency is not the euro. At 31 December 2022, the functional currency of all

subsidiaries and associates of the MERLIN Group was the euro.

94

Tax risk

As mentioned in Note 1, the Parent and part of its subsidiaries are subject to the special tax regime for

Real Estate Investment Trusts (REITs). The transitional period of the Parent ended in 2017 and,

therefore, compliance with all requirements established by the regime (see Notes 1 and 5.13) became

mandatory. Some of the more formal obligations that the Parent must meet involve the inclusion of the

term REIT in its company name, the inclusion of certain information in the notes to its separate

financial statements, the share price on the stock market, etc., and other obligations that require

estimates to be made and judgements to be applied by management that may become fairly complex,

especially considering that the REIT regime is relatively recent and was developed by the Directorate-

General of Taxes mainly in response to the queries posed by various companies. Group management,

based on the opinion of its tax advisers, assessed compliance with the requirements of the regime,

concluding that such requirements were met at 31 December 2022.

Accordingly, and also for the purpose of taking into consideration the financial effect of the regime, it

should be noted that, as in Article 6 of Law 11/2009, of 26 October 2009, amended by REITs Act (Ley

16/2012 de 27 de diciembre), and in the percentages in it, companies that have opted for the special

tax regime are required to distribute the profit generated during the year to their shareholders in the

form of dividends, once the related corporate obligations have been met. This distribution must be

approved within six months from each year-end, and the dividends paid in the month following the

date on which the pay-out is agreed (see Note 5.13).

If the Parent does not comply with the requirements in the regime or if the shareholders at the General

Meetings of these companies do not approve the dividend distribution proposed by the Board,

calculated in accordance with the requirements of this Act, it would not be complying therewith and,

accordingly, tax would have to be paid under the general regime, not the regime applicable to REITs.

Climate change management

Within the framework of the European Green Pact and the UN Sustainable Development Goals, the

Group is performing various actions on sustainability.

First, the Parent of the Group, in 2021, formed a Sustainability and Innovation Committee under the

Board that has the main competencies to advise the Board, among other aspects, on environmental

and sustainability issues; on the development of the Group's strategy on sustainability in its

relationships with stakeholders and in its publication and public communication; and to supervise the

communication and information to the market of any information that refers to sustainability issues and

non-financial information and to keep the ESG risk map updated (Environmental Social and

Governance).

In this regard, the Group included decision factors in relation to non-financial KPIs in its investment

and financing policies. In this line, the investment studies of real estate acquisitions and investments in

repositioning of the Group's assets take into account, among other factors, elements such as obtaining

energy efficiency certificates with the highest rating (see Note 7), air conditioning, lighting, solar

energy, irrigation of green areas, accessibility, etc.

When certifying assets, the Group selects the most appropriate framework and modality based on the

asset's phase, the characteristics of the building, its occupancy rate at the time of certification or the

tenants who occupy it.

We are continuing the process of certifying the portfolio under the standards of the leaders in this

market, BREEAM and LEED. In 2022 the Group certified or obtained the renewal of 33 assets. The

Group considers the process of certifying its assets as an anticipated response to the demands that

the market will place on property landlords in the medium term and which will enable it to maintain its

current competitive position.

95

Additionally, the Group obtained a 79% rating in the 2022 edition of GRESB, a platform that makes it

possible to harmonise and compare information related to sustainability criteria (environmental, social

and corporate governance - ESG) in real estate investments.

In addition, the Group has an Environmental Management System (EMS) certified according to ISO

14001, which is the umbrella under which it manages its portfolios and that incorporates new

properties into its scope every year.

From 2015, the Group performed plan for ISO 14001 (environmental management) and ISO 50001

(energy management) certifications to maintain and expand the number of real estate assets that have

at least ISO 14001 certification, and subsequently ISO 50001 certification (based on the

understanding that it is a natural step to obtain ISO 14001 certification before aspiring to ISO 50001).

This plan includes office buildings, shopping centres and logistics warehouses.  ISO 14001, in 2022,

88 buildings composing a surface area of 1,214,796 m2 were certified, 4 more buildings than in 2021.

Since 2017, the Group has also performed a process of implementing an Energy Management System

under the ISO 50001 standard, which began in 2017. Currently, 84 buildings are certified composing a

surface area of 1,153,701 m2, 3 more than in 2021. The assets included in this system aim to reduce

total energy consumption by 8% compared to 2021, based on the implementation of MAEs (energy

saving measures).

In 2022, the Group performed an analysis of the entire portfolio to determine the carbon footprint of

each of its assets, and the measures necessary to reduce the above carbon footprint.

The path taken by the Group in 2022 enables the Company to meet its emissions reduction target and

its "path to net zero" by 2030, thus anticipating the European strategy of decarbonization of the

economy and ensuring the present and future survival of the Company and its assets.

The Group's path to net zero is a roadmap that includes improving the performance not only of the

company itself and those assets over which it has operational control, but also of the main agents

responsible for the Group's emissions throughout its value chain, including suppliers and tenants.

The Group's financing policies are also aligned with the Group's sustainability objectives through the

Green Financing Program published in April 2022 and the conversion of 100% of its bonds in

circulation into green bonds.

Currently, 98% of the Group's debt with credit and bond institutions is linked to the Green Financing

Program or ESG criteria (see Note 14).

The Green Financing Program, in line with best market practices, includes the following eligibility

criteria:

1.Green assets with the best LEED/BREEAM certification levels or energy efficiency certificates

and/or minimum carbon emission levels

2.Investments in Energy Efficiency

3.Investments in renewable energy

4.Investments in pollution control and prevention mechanisms

5.Investments in transport mechanisms with low carbon emissions

Financing linked to ESG targets includes a cost adjustment mechanism linked, in the Group's opinion,

to own credit risk, based on management indicators calculated based on four sustainability criteria that

must be met at least three times annually and cumulatively over the 2019-2025 period. 

96

At year-end 2022, the Company complied with the 4 indicators established and the directors consider

that they will be met in 2023.

The indicators for 2019-2022 were:

1.Aggregate investment of at least EUR 10.2 million in energy efficiency improvements across

the portfolio

2.Obtaining a total of at least 31 LEED and BREEAM external energy certifications with a

minimum rating of LEED Silver and BREEAM Good.

3.Obtaining a total of at least 38 AIS/DIGA certifications for disability access for all tenants and

consumers

4.Aggregate electricity consumption of at least 150 GW from renewable energy sources

In addition, the Group in its commitment to climate responsibility incorporated qualitative factors

related to the Group's sustainability strategy into the measurement targets for short-term variable

compensation for its staff and management team (see Note 20).

The above initiatives, although they entail an increase in operation costs for the Group, are aimed at

anticipating regulatory developments and increasing the loyalty of its customer base.

In addition, in 2022 the Group joined SBTi1, aligning its targets to achieve carbon neutrality with the

Science Based Targets. In addition, it also undertook to report in the Statement of Non-Financial

Information (NFI) in accordance with the recommendations of TCFD2.

Finally, the Group has also made progress in publishing its Path to Net Zero. The Group's Path to Net

Zero is a road map that includes improving the performance not only of the Company itself and of

those assets over which it has operational control, but of the main stakeholder responsible for the

Group's issues throughout its entire value chain, including suppliers and tenants. This strategy has 5

axes of action:

1.Operational carbon reduction: 85% of operational carbon reduction from baseline (2018) to

target (2028).

2.Reduction of embodied carbon: Embodied carbon footprint calculated in all new developments

and repositions.

3.Offset of residual emissions: The inevitable footprint will be mostly offset by duly certified own

initiatives.

4.Reduction in tenant emissions: Green clauses in all new contracts and reduction in the rental

price associated with their own credit risk for net zero tenants.

5.Renewable energy: Acquisition of 100% renewable energy and on-site generation of energy

through solar power panels (Sun Project).

All of the above is part of the Group's net zero path or commitment to combating climate change.

24.    Events after the reporting period

No significant events have occurred between December 31, 2022 and the date of preparation of these

Consolidated Financial Statements.

97

1 SBTi: Science Based Target Initiative

2 Taskforce on Climate related Financial Disclosure

Appendix I - Group companies and associates 2022

Company	Line of business/Location	Ownership interest	Thousands of euros								Consolidation method	Auditor
			Share capital	Profit/(Loss)		Other	Total	Dividends	Carrying amount
				From operations	Net	Shareholders' Equity	Equity	Received	Cost	Impairment
Merlin Retail, S.L.U.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	17,963	13,998	13,330	236,491	267,785	42,922	251,408	—	Global Integration	Deloitte
Merlin Oficinas, S.L.U.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	29,674	22,934	22,377	718,601	770,651	16,130	771,345	—	Global Integration	Deloitte
Merlin Logística, S.L.U.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	28,166	29,978	33,842	274,082	336,091	31,544	292,304	—	Global Integration	Deloitte
Sevisur Logística	Urban development, construction and operation of logistics and common services buildings. Ctra. de la Esclusa, 15. 41011, Seville.	100%	17,220	4,438	4,249	9,910	31,379	3,455	37,629	—	Global Integration	Deloitte
Parques Logísticos de la Zona Franca, S.A.	Real estate acquisition and development for leasing, Avda. 3 del Parc Logístic, nº 26, Barcelona	100%	15,701	(1,253)	(1,172)	107,017	121,546	5,903	118,310	—	Global Integration	Deloitte
The Exhibitions Company , S.A.U.	Provision of all kinds of technical, commercial or economic services/ Paseo de la Castellana 257, Madrid	100%	180	(1,452)	(1,430)	3,474	2,224	—	4,287	(2,063)	Global Integration	N/A
Gescentesta, S.L.U.	Provision of Services / Paseo de la Castellana 257, Madrid	100%	3	177	121	933	1,057	—	3	—	Global Integration	N/A
Metroparque, S.A.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	56,194	8,477	8,808	33,086	98,087	8,186	231,557	—	Global Integration	Deloitte
La Vital Centro Comercial y de Ocio, S.L.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	14,846	3,152	3,218	18,980	37,044	2,245	56,788	—	Global Integration	Deloitte
Desarrollo Urbano de Patraix, S.A.	Land management / Avda. Barón de Carcer, 50, Valencia	100%	2,790	(3)	(83)	22,270	24,976	—	25,090	(114)	Global Integration	N/A
Sadorma 2003, S.L.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	73	(2)	231	18,785	19,089	—	25,485	(6,396)	Global Integration	N/A
Global Murex Iberia, S.L.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	14	—	21	(15,459)	(15,424)	—	—	—	Global Integration	N/A
Varitelia Distribuciones, S.L.U.	Real estate acquisition and development for leasing /  Paseo de la Castellana 257, Madrid	100%	15,443	3,344	1,150	6,110	22,703	333	172,979	(150,277)	Global Integration	Deloitte
Global Carihuela, Patrimonio Comercial S.L.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	3,303	2,123	1,578	4,358	9,239	—	34,102	(24,863)	Global Integration	Deloitte

98

Innovación Colaborativa, S.L.	Selection, contracting, fitting out, organization and management of coworking spaces / Paseo de la Castellana 257, Madrid	100%	15	(3,049)	(3,092)	2,005	(1,072)	—	15,868	(15,868)	Global Integration	N/A
Milos Asset Development,	Acquisition, ownership, administration, disposal and development of land located within the "Distrito Castellana Norte" project / Paseo de la	100%	3	—	(114)	250	139	—	3	—	Global Integration	N/A
Slack Tailwind Systems, S.L.U	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	3	(10)	(10)	—	(7)	—	3	(3)	Global Integration	Deloitte
Slow Rise Spain, S.L.U.	Real estate acquisition and development for leasing / Paseo de la Castellana 257, Madrid	100%	3	82	82	—	85	—	3	—	Global Integration	Deloitte
MPCVI – Compra e Venda Imobiliária, S.A.	Real estate acquisition and development for leasing / Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	1,050	1,095	208	5,969	7,227	277	6,418	—	Global Integration	Deloitte Portugal
MPEP – Properties Escritórios Portugal, S.A.	Real estate acquisition and development for leasing / Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	50	677	(241)	903	712	—	1,085	—	Global Integration	Deloitte Portugal
MP Monumental, S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	50	2,502	214	6,632	6,896	—	22,648	—	Global Integration	Deloitte Portugal
MP Torre A, S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	50	1,538	414	73	537	—	10,686	—	Global Integration	Deloitte Portugal
VFX Logística, S.A.	Real estate acquisition and development for leasing. Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	5,050	6,406	5,614	11,060	21,723	—	25,153	(2,417)	Global Integration	Deloitte Portugal
Promosete, Invest. Inmobil. SA.	Real estate acquisition and development for leasing.  Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	200	1,554	837	7,385	8,422	1,323	10,384	—	Global Integration	Deloitte Portugal
Praça Do Marquês serviços Auxiliares, SA	Real estate acquisition and development for leasing.  Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	15,893	3,178	2,086	61,169	79,148	2,008	56,361	—	Global Integration	Deloitte Portugal
Torre Dos Oceanus Investimentos Inmobiliarios,S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	50	1,933	827	3,319	4,196	593	15,912	—	Global Integration	Deloitte Portugal
Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	5	16,556	10,013	16,908	26,926	—	32,573	—	Global Integration	Deloitte Portugal
Forum Almada II, S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	10,000	13,028	9,153	66,132	85,284	—	325,660	—	Global Integration	Deloitte Portugal
Torre Arts  Investimentos Imobiliarios, S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	100	2,755	2,097	78,153	80,350	2,177	80,281	—	Global Integration	Deloitte Portugal

99

Torre Fernao Magalhaes  Investimentos Imobiliarios, S.A.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	100	869	673	25,370	26,143	995	26,055	—	Global Integration	Deloitte Portugal
Generous Profile , Unipessoal LDA.	Real estate acquisition and development for leasing /Avda. Dom João, 45, Lisbon	100%	2,000	(27)	(547)	54,799	56,252	—	56,808	(556)	Global Integration	Deloitte Portugal
Paseo Comercial Carlos III, S.A.	Real estate acquisition and development for leasing / Avda. San Martín Valdeiglesias, 20  28922 Madrid	50%	8,698	2,864	3,978	21,915	34,591	—	25,668	—	Equity method	Deloitte
Provitae Centros Asistenciales, S.L.	Real estate acquisition and development for leasing / C. Fuencarral, 123. Madrid	50%	6,314	944	944	(1,202)	6,056	—	5,061	(1,746)	Equity method	Deloitte
G36 Development, S.L.	Real estate acquisition and development for leasing / Paseo de la Castellana, 93 Madrid	50%	3	21	21	8	32	1,040	2	—	Equity method	N/A
Centro Intermodal de Logística S.A. (CILSA)	Development, management and implementation of logistics activities in the port system / Avenida Ports d’Europa 100, Barcelona	49%	18,920	25,289	17,079	123,701	159,700	2,556	95,688	—	Equity method	EY
Pazo de Congresos de Vigo, S.A.	Execution project, construction and operation of the Vigo Conference Center / Avda. García Barbón, I. Vigo	44%	n.d	n.d	n.d.	n.d.	n.d	—	3,600	(3,600)	Equity method	n.d
Parking del Palau, S.A.	Real estate acquisition and development for leasing / Paseo de la Alameda, s/n. Valencia	33%	1,698	42	40	459	2,197	—	2,137	(1,052)	Equity method	BDO
Araba Logística, S.A.	Real estate acquisition and development for leasing / Avda. Álava s/n Rivabellosa (Álava)	25%	1,750	911	391	2,925	5,066	—	2,257	(2,257)	Equity method	Mazars
Crea Madrid Nuevo Norte, S.A.	Performing all types of real estate activities / Paseo de la Castellana 216, Madrid	14%	206,509	(6,081)	(4,058)	(36,574)	165,877	—	174,445	(1,651)	Equity method	KPMG
Silicius Real Estate, SOCIMI, S.A.	Performing all types of real estate activities / Calle de Velázquez, 123, Madrid	18%	30,955	13,299	15,017	341,871	387,843	307	87,018	—	Equity method	PWC
Edged Spain, S.L.U	Provision of Data Center services / Paseo de la Castellana 257, Madrid	50%	3	96	88	(211)	(120)	—	2	(2)	Equity method	Deloitte

100

Appendix I - Group companies and associates 2021

Company	Line of business/Location	Ownership interest	Thousands of euros								Consolidation method	Auditor
			Share capital	Profit/(Loss)		Other	Total	Dividends	Carrying amount
				From operations	Net	Shareholders' Equity	Equity	Received	Cost	Impairment
Tree Inversiones Inmobiliarias, SOCIMI, S.A.U.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	9.323	66.293	53.908	91.189	87.001	51.559	657.984	—	Full consolidation	Deloitte
Merlin Retail, S.L.U.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	17.963	44.643	42.923	236.491	297.378	2.667	251.408	—	Full consolidation	Deloitte
Merlin Oficinas, S.L.U.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	29.674	16.334	16.13	718.601	764.405	15.155	771.345	—	Full consolidation	Deloitte
Merlin Logística, S.L.U.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	28.166	32.863	31.544	274.082	333.792	15.905	292.304	—	Full consolidation	Deloitte
Sevisur Logística	Urban development, construction and operation of buildings for logistics activities and common services. Ctra. de la Esclusa, 15. 41011, Seville	100%	17.22	3.834	3.839	9.526	30.584	3.174	37.629	—	Full consolidation	Deloitte
Parques Logísticos de la Zona Franca, S.A.	Acquisition and development of property assets for lease, Avda. 3 del Parc Logístic, nº 26, Barcelona	100%	15.701	4.957	5.23	107.017	127.948	4.939	118.31	—	Full consolidation	Deloitte
Exhibitions Company , S.A.U.	Provision of services of all kinds, technical, commercial or economic services/Paseo de la Castellana 257, Madrid	100%	180	(787)	(741)	4.215	3.654	—	4.287	(633)	Full consolidation	N/A
Gescentesta, S.L.U.	Provision of services/Paseo de la Castellana 257, Madrid	100%	3	197	151	782	936	—	3	—	Full consolidation	N/A
Metroparque, S.A.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	56.194	7.881	8.186	33.086	97.465	6.354	231.557	—	Full consolidation	Deloitte
La Vital Centro Comercial y de Ocio, S.L.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	14.846	2.446	2.495	18.731	36.071	1.397	56.788	—	Full consolidation	Deloitte
Desarrollo Urbano de Patraix, S.A.	Land management/Avda. Barón de Carcer, 50, Valencia	100%	2.79	(2)	(81)	22.351	25.06	—	25.09	(30)	Full consolidation	N/A
Sadorma 2003, S.L.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	73	(3)	254	18.531	18.857	—	25.485	(6.628)	Full consolidation	N/A
Global Murex Iberia, S.L.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	14	(1)	21	(15.48)	(15.445)	—	—	—	Full consolidation	N/A
Varitelia Distribuciones, S.L.U.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	15.443	2.586	333	6.11	21.886	—	172.979	(151.094)	Full consolidation	Deloitte

101

Global Carihuela, Patrimonio Comercial, S.A.	Acquisition and development of property assets for lease/Paseo de la Castellana 257, Madrid	100%	3.303	(4.214)	(4.757)	9.115	7.661	—	34.102	(26.441)	Full consolidation	N/A
MPCVI – Compra e Venda Imobiliária, S.A.	Acquisition and promotion of real estate for lease/ Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	1.05	1.092	292	5.955	7.296	261	6.418	—	Full consolidation	Deloitte Portugal
MPEP – Properties Escritórios Portugal, S.A.	Acquisition and promotion of real estate for lease/ Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	50	700	(123)	26	(47)	69	85	—	Full consolidation	Deloitte Portugal
MP Monumental, S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	50	1.525	(1.63)	7.162	5.582	—	21.548	—	Full consolidation	Deloitte Portugal
MP Torre A, S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	50	1.534	(367)	(60)	(377)	—	10.186	—	Full consolidation	Deloitte Portugal
VFX Logística, S.A.	Acquisition and development of property assets for lease Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	5.05	(5.997)	(6.5)	13.76	12.31	—	21.353	(9.043)	Full consolidation	Deloitte Portugal
Promosete, Invest. Inmobil, S.A.	Acquisition and development of property assets for lease  Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	200	2.173	1.323	7.372	8.895	444	10.386	—	Full consolidation	Deloitte Portugal
Praça Do Marquês serviços Auxiliares, S.A.	Acquisition and development of property assets for lease  Av. Fontes Pereira de Melo, Nº 51, Lisbon	100%	15.893	2.846	2.128	61.049	79.07	2.094	56.359	—	Full consolidation	Deloitte Portugal
Torre Dos Oceanus Investimentos Inmobiliarios,S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	50	1.643	593	3.319	3.962	521	15.912	—	Full consolidation	Deloitte Portugal
Forum Almada – Gestão Centro Comercial Sociedade Unipessoal, Lda.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	5	(1.284)	(7.137)	15.053	7.921	—	32.574	—	Full consolidation	Deloitte Portugal
Forum Almada II, S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	10	12.852	8.977	57.136	76.113	—	307.512	—	Full consolidation	Deloitte Portugal
Torre Arts - Investimentos Imobiliarios, S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	100	2.861	2.177	83.653	85.93	2.03	85.781	—	Full consolidation	Deloitte Portugal
Torre Fernao Magalhaes - Investimentos Imobiliarios, S.A.	Acquisition and development of property assets for lease/Avda. Fontes Pereira de Melo, 51, Lisbon	100%	100	1.302	995	26.87	27.965	557	27.555	—	Full consolidation	Deloitte Portugal
Innovación Colaborativa, S.L.	Selection, contracting, conditioning, organisation and management of collaborative shared work spaces/Paseo de la Castellana 257, Madrid	100%	15	(4.462)	(5.434)	6.539	2.02	—	15.868	(13.848)	Full consolidation	N/A
Milos Asset Development,	Acquisition, holding, administration, disposal and development of land located within the "Distrito Castellana Norte" project/Paseo de la Castellana 257, Madrid	100%	3	(3)	374	(124)	253	—	2	—	Full consolidation	N/A

102

Paseo Comercial Carlos III, S.A.	Acquisition and development of property assets for lease/Avda. San Martín Valdeiglesias, 20 - 28922 Madrid	50%	8.698	1.16	116	21.8	30.614	—	25.668	—	Equity method	Deloitte
Provitae Centros Asistenciales, S.L.	Acquisition and development of property assets for lease/C. Fuencarral, 123. Madrid	50%	6.314	(42)	(42)	(1.16)	5.112	—	5.061	(1.547)	Equity method	N/A
G36 Development, S.L.	Acquisition and development of property assets for lease/Paseo de la Castellana 93, Madrid	50%	4.053	(21)	(21)	—	4.032	—	2.027	—	Equity method	N/A
Centro Intermodal de Logística, S.A. (CILSA)	Development, management and performance of logistics activities in a port system/Avenida Ports d'Europa 100, Barcelona	49%	18.92	15.744	10.401	118.936	148.257	1.788	95.688	—	Equity method	EY
Pazo de Congresos de Vigo, S.A.	Project for the execution, construction and operation of the Vigo Convention Centre/Avda. García Barbón, I, Vigo	44%	N/A	N/A	N/A	N/A	N/A	—	3.6	(3.6)	Equity method	N/A
PK. Hoteles 22, S.L.	Acquisition and development of property assets for lease/C. Príncipe de Vergara, 15. Madrid	33 %	5.801	8.387	6.215	(5.298)	6.718	1.78	2.467	(283)	Equity method	CROWE, S.L.P.
Parking del Palau, S.A.	Acquisition and development of property assets for lease/Paseo de la Alameda, s/n. Valencia	33 %	1.698	(10)	(12)	458	2.144	—	2.137	(920)	Equity method	BDO
Araba Logística, S.A.	Acquisition and development of real estate for lease/Avda. Álava s/n Rivabellosa (Álava)	25 %	1.75	911	391	2.925	5.066	—	2.257	(2.257)	Equity method	Mazars
Distrito Castellana Norte, S.A.	Carrying out all types of real estate activity/Paseo de la Castellana 216, Madrid	14 %	196.06	(6.274)	(2.833)	(27.35)	165.877	—	172.934	(1.036)	Equity method	KPMG
Silicius Real Estate, S.L.	Carrying out all types of real estate activity/Calle de Velázquez, 123, Madrid	15 %	36.112	58.541	52.369	306.816	395.297	—	87.018	—	Equity method	PwC
Edged Spain, S.L.U	Services provided by data processing centres/Paseo de la Castellana 257, Madrid	50 %	3	(191)	(191)	(1)	(189)	—	2	(2)	Equity method	N/A

103

Management Report

Statement of Non-Financial Information

31 DECEMBER 2022

Table of contents

Table of contents .......................................................................................................................	2
Letter from the CEO ...................................................................................................................	6
1.Business model .............................................................................................................	9
1.1MERLIN Properties. Leading commercial real estate company in the Iberian Peninsula. ...................................................................................................................................	9
1.2Mission, vision, and values ...........................................................................................	11
1.3MERLIN’s structure .......................................................................................................	12
1.4Business activities .........................................................................................................	12
1.5Main milestones and objectives ...................................................................................	19
2.Sustainable growth strategy ........................................................................................	22
2.1The Market (sector) ......................................................................................................	22
2.2Outlook .........................................................................................................................	23
2.3Trends and opportunities .............................................................................................	24
2.4MERLIN’s Strategic Plan ................................................................................................	25
2.5MERLIN’s sustainability management ..........................................................................	26
2.6Materiality analysis .......................................................................................................	29
3.Responsible management ............................................................................................	32
3.1Governance structure ...................................................................................................	33
3.2Risk management ..........................................................................................................	40
3.3Ethics and compliance ..................................................................................................	50
4.Climate change management and operational efficiency ..........................................	55
4.1.Key environmental reporting criteria and concepts .....................................................	56
4.2.Environmental management and climate change ........................................................	58
4.3.Development and operation of sustainable assets ......................................................	60
4.4.Environmental performance of MERLIN Properties’ portfolio .....................................	62
4.5.Decarbonisation of MERLIN Properties’ portfolio ........................................................	69
4.5.1.Scope 1 and scope 2 greenhouse gas (GHG) emissions ................................................	70
4.5.2.Scope 3 greenhouse gas (GHG) emissions ....................................................................	75
4.6.Carbon footprint certification .......................................................................................	76
4.7.Validation of MERLIN’s commitments by independent third parties ...........................	77
4.8.Sustainability ratings .....................................................................................................	79

Statement of Non-Financial Information 2022

2

4.9.Protection of biodiversity .............................................................................................	80
5.Talent creation .............................................................................................................	82
5.1Staff loyalty ...................................................................................................................	83
5.1.1Composition of the workforce ......................................................................................	85
5.1.2Average contracts .........................................................................................................	87
5.1.3Number of dismissals by gender, age and professional classification ..........................	88
5.1.4Implementation of work disconnection policies ..........................................................	89
5.2Employee compensation ..............................................................................................	89
5.2.1Wage gap analysis .........................................................................................................	89
5.2.2Remuneration of non-executive directors ....................................................................	91
5.3Organisation of work ....................................................................................................	91
5.3.1Organisation of work ....................................................................................................	91
5.3.2Total hours of absenteeism ..........................................................................................	91
5.3.3Work-life balance measures .........................................................................................	92
5.4Safety, health and well-being of employees .................................................................	93
5.5Labour relations ............................................................................................................	95
5.5.1Organisation of social dialogue .....................................................................................	95
5.5.2Employees subject to collective bargaining agreements .............................................	95
5.5.3Balance of collective bargaining agreements ...............................................................	95
5.5.4Mechanisms to promote employee involvement in management ..............................	95
5.5.5Employees with disabilities ...........................................................................................	96
5.6Diversity and equal opportunities ................................................................................	97
6.Management of stakeholders ......................................................................................	100
6.1Stakeholder management model .................................................................................	100
6.1.1Shareholder return .......................................................................................................	102
6.1.2Treasury shares .............................................................................................................	102
6.1.3Stock market performance ...........................................................................................	103
6.1.4Dividends policy ............................................................................................................	103
6.2Supply chain ..................................................................................................................	104
6.3Maximising the well-being of users of the assets .........................................................	105
6.4Development and relationship with the environment .................................................	110
6.4.1Improving cities .............................................................................................................	111
6.4.2Social initiatives .............................................................................................................	113
6.4.3Measuring the distribution of contributions to the MERLIN community ....................	116
7.Capital management ....................................................................................................	119
7.1Tax information .............................................................................................................	120

Management Report – Statement of Non-Financial Information 2022

3

7.1.1Tax strategy ...................................................................................................................	120
7.1.2Profits earned on a country-by-country basis and income tax paid .............................	121
7.1.3Total tax contribution ...................................................................................................	122
7.2Green financing .............................................................................................................	128
7.2.1Financial strategy ..........................................................................................................	128
7.2.2Liquidity and capital resources .....................................................................................	128
7.2.3Green financing .............................................................................................................	130
8.About this Report .........................................................................................................	133
8.1Basis of preparation of this report ................................................................................	133
8.2Information on MERLIN Properties’ sustainability performance .................................	134
8.3Table of contents of Law 11/2018 ................................................................................	137
a.GRI Content Index .........................................................................................................	145
b.EPRA sBPR Content Index .............................................................................................	159
Appendix I. Environmental performance reporting in accordance with the EPRA Sustainability Best Practices Recommendations (sBPR) ..........................................................	161
Appendix II. Methodology for calculating scope 3 GHG emissions .........................................	180
Appendix III. Breakdown of the environmental performance reporting scope .....................	186
Appendix IV.  Climate risk reporting in accordance with TCFD methodology ........................	194
Executive summary ....................................................................................................................	194
Governance ................................................................................................................................	195
Strategy ......................................................................................................................................	196
Risk management .......................................................................................................................	197
Appendix V. Reconciliation of Alternative Performance Measures to the financial statements .................................................................................................................................	203
Appendix VI. Post-closing events ..............................................................................................	214
Appendix VII. Independent review report ...............................................................................	215

Management Report – Statement of Non-Financial Information 2022

4

The minimum content of the Consolidated Management Report, as required by Law 1/2010, of

July 2, 2010, on Capital Companies and by the Code of Commerce, is included in this Statement of

Non-Financial Information.

Annual Corporate Governance Report

The Annual Corporate Governance Report is available in its entirety on the website of the National Securities

Market Commission (www.cnmv.es) and on the Company's website (www.merlinproperties.com).

The Annual Corporate Governance Report has also been filed as Other Relevant Information (OIR) with the

CNMV.

Annual Report on Director’s Compensation

The Annual Report on Director’s Compensation is available in its entirety on the website of the CNMV

(www.cnmv.es) and on the Company's website (www.merlinproperties.com).

In addition, the Annual Report on Director’s Compensation has been reported as Other Relevant Information

(OIR) to the CNMV.

Management Report – Statement of Non-Financial Information 2022

5

Letter from the CEO

Dear MERLIN Properties shareholders and stakeholders,

This year has provided MERLIN Properties Socimi, S.A. (hereinafter, “MERLIN

Properties”, “MERLIN” o the “Company”) with the opportunity to

demonstrate its strength, returning to pre-covid levels in its key metrics.

Throughout 2022, MERLIN’s key financial and operating metrics have evolved

positively, achieving year-on-year growth in all of them.

MERLIN Properties achieved gross rents in 2022 of €453m, as a result of both

like-for-like rental growth (+7.3% vs. 2021) and occupancy growth of the

portfolio (+60 bps vs. 2021), totalling 95.1% as of December 31st, 2022. The cash flow generation

during the period has been solid, with FFO reaching €290m, implying a 6.4% increase on a like-for-like

basis. Finally, the disposal of the BBVA branch portfolio, formalized in June, has allowed the Company

to reduce the LTV to 32.7% as of December 31st.

I am pleased to present to you the Management Report - Non-Financial Information Statements 2022

(hereinafter, "NFI"), in which we provide all the relevant information for our stakeholders on

environmental, corporate governance and social issues for the year, as well as our main plans for the

future.

Environmental achievements

MERLIN remains focused on achieving the highest levels of sustainability and efficiency in its

portfolio. To this end, it integrates sustainability throughout the asset life cycle and supports this

commitment by obtaining certifications in this area.

In April 2022, MERLIN launched its "Pathway to Net Zero" strategy, a roadmap that includes

improving the environmental performance not only of the Company and those assets over which it

has operational control, but also of the main shareholders responsible for MERLIN's emissions

throughout its value chain, including suppliers and tenants. This strategy has 5 main pillars of action:

•Operational carbon reduction: 85% reduction in operational carbon from baseline (2018) to

2028.

•Reduction of embedded carbon in all new developments and refurbishments.

•Offsetting residual emissions: offsetting unavoidable footprint through duly certified own

initiatives.

•Scope 3 emissions reduction: engage tenants through green clauses in new leases and with

pioneering initiatives such as rent reduction for tenants who certify that their operation is

net zero.

•Renewable energy: 100% renewable energy supply and photovoltaic solar generation

through project “Sun”, which consists of installing photovoltaic panels on the rooftops of the

assets.

Also in 2022, MERLIN's decarbonization targets included in its "Pathway to Net Zero" have been

validated as aligned with Science-Based Targets (SBTi).

In terms of environmental performance data, 2022 has been a sound year. The energy consumption

of the asset portfolio on a like-for-like basis was 100,075 MWh, representing a 2% reduction

compared to 2021. We have also made significant progress on the portfolio's decarbonization

Statement of Non-Financial Information 2022

6

targets, with the corporation's carbon footprint being 2,580 tons of Co2, a 23% decrease compared

to 2021. We continue with our asset portfolio certification program: 94% of the portfolio is already

certified under LEED or BREEAM standards. We have also verified our environmental management

systems and energy management system, achieving ISOs 14,001 and 50,001 certifications for 37% of

the portfolio.

The aforementioned strong data have been endorsed in the sustainability ratings or scorings. In 2022,

the Group improved its score with respect to 2021 in all the sustainability indexes to which it applied.

Specifically, MERLIN has participated in six sustainability indexes, three of which consist of a

questionnaire, GRESB (real estate), CDP (climate change) and S&P Global (general), and the other

three are based on the Group's public information, Sustainalytics (ESG risks), Bloomberg (general)

and Vigeo Eiris (general). Two milestones are worth highlighting: the inclusion of MERLIN Properties

in one of the world's most prestigious sustainability ratings, the Dow Jones Sustainability Index, and

the exponential improvement in the Sustainalytics rating, which places MERLIN in the top 1% of the

world's best valued companies.

On June 1st, 2022, the Company obtained the conversion of all its bonds into green bonds in

accordance with the Green Financing Framework published on April 25th, 2022. The reclassification

of the bonds to green bonds does not entail changes in any of the bonds KPI’s such as their covenants

and conditions, interest or maturities.

Corporate governance achievements

MERLIN has a robust governance system, in line with its values of ethics, compliance and

transparency, supported through independent third-party validation. The main milestones achieved

in 2022 were as follows:

•Improved governance through the creation of a Planning and Coordination Committee,

with the aim of strengthening the Company's corporate governance.

•Unification of the Appointments and Remuneration Committees into a single

Appointments and Remuneration Committee.

•Approval of a Director Remuneration Policy (2022-2025), together with a long-term

incentive plan LTIP 2022-2024 including sustainability criteria.

•Implementation of an Internal Control System over Non-Financial Information (ICNFI)

and adaptation of the Internal Control Policy to this new control scheme over non-

financial information.

•Promotion of the improvement of the corporate governance system with the approval

of new policies (respect for human rights, biodiversity, human capital management, etc.)

and the review of other existing policies.

In terms of risk management, in 2022, MERLIN conducted a "zero-based" exercise to identify and

assess MERLIN's main corporate risks. In this regard, MERLIN's latest risk map, updated by the Audit

and Control Committee and approved by the Board of Directors in January 2023, has identified a total

of 27 key risks. Within MERLIN's Risk Management System, all risks have been assessed in terms of

impact and probability and in terms of temporality, as well as in terms of speed, persistence, and

adaptability.

Management Report – Statement of Non-Financial Information 2022

7

Social issues achievements

MERLIN creates value for society through the support of various initiatives and activities, having a

final impact on the development of the surrounding communities where it operates in different

dimensions. This contribution is approached from a dual perspective. On the one hand, at a

corporate level and on the other hand at an asset level.

In 2022, the Group donated a total of €223,575 in direct contributions and €192,374 through the

multiplier effect thanks to the collaboration of 32 employees and board members. Together, these

contributions have supported 73 foundations and directly benefited 6,646 people. On the other

hand, MERLIN contributes to local development through its assets, supporting different initiatives

and activities, which are organized in four areas: training, social action, promotion of culture and

local development, and awareness-raising.

MERLIN has measured its contribution to society through the LBG model after joining the

internationally recognized London Benchmarking Group (LBG) in Spain.

At the end of 2022, MERLIN's workforce consisted of 260 professionals. MERLIN manages its

relationship with its employees under the strictest labour standards, complying with the principles

set forth in the ILO Declaration on Fundamental Principles and Rights at Work. Currently, the Human

Capital Policy, the Equality Plan and the Human Resources Processes Manual and the Employee

Handbook establish the guiding principles of Human Capital management in the Company.

It is to this team that we owe the milestones achieved by the Company in 2022. It has been a year of

great effort and dedication to establish the Company's decarbonization roadmap, with ambitious yet

realistic targets, the fine-tuning of the foundations of the corporate governance structure and

progress in social matters, through the various initiatives that are implemented in our day-to-day

operations at a corporate, asset and local level.  We will continue to demand the same level of

professionalism and effort from ourselves in the years to come.

Kind regards,

Ismael Clemente Orrego

CHIEF EXECUTIVE OFFICER

MERLIN PROPERTIES SOCIMI, S.A.

Management Report – Statement of Non-Financial Information 2022

8

1.Business model

1.1 MERLIN Properties. Leading commercial real estate company in the Iberian

Peninsula.

MERLIN Properties is the leading REIT in Spain and Portugal, and among the 10 largest REITs in

Europe

MERLIN Properties SOCIMI, S.A. (hereinafter “MERLIN”, “MERLIN Properties” or “the Group”) is one

of the leading real estate groups listed on the Spanish Stock Exchange (IBEX-35) and mainly engages

in the acquisition and management of commercial real estate assets in the Iberian Peninsula.

MERLIN is a public company incorporated as a REIT. It mainly engages in the acquisition, active

management, operation and selective rotation of quality commercial real estate assets in the “Core”

and “Core Plus” investment segment, mainly in Spain and, to a lesser extent, in Portugal. The Group

focuses on offices, logistics, shopping centers and data center markets.

MERLIN Properties counts with a team of professionals who manage the portfolio of assets that it

owns with the aim of maximising the operational efficiency and profitability of each asset.

MERLIN Properties’ objective regarding returns is based on sustainable shareholder remuneration

consisting of annual dividend pay-outs and value creation1 by increasing the Group’s EPRA NTA.

Performance in 2022. Main figures

As part of its commitment to transparency and accountability to its stakeholders, MERLIN continues

to report on its sustainability performance in three areas: economic, environmental, and social. 

Following the impact of geopolitical tensions in recent months, this year has been an opportunity for

MERLIN to demonstrate its strength as a Group by returning to pre-covid levels. Throughout 2022,

MERLIN’s key financial and operating metrics have confirmed their recovery path, with year-on-year

growth in all of them. Examples of this include occupancy (+60 bps vs 2021), LfL rents (7.3% vs 2021)

and cash flow generation (€290m FFO, +6.4% vs 2021). 

Management Report -Statement of Non-Financial Information 2022

9

Note: MERLIN Properties, as a member of the EPRA (European Public Real Estate Association), follows best practice

standards in reporting that enables investors to more easily compare certain measures that are specific to the real estate

sector. The measures are published twice a year and are detailed in the Annex V. In accordance with the recommendations

issued by the European Securities and Markets Authority (ESMA), the alternative performance measures are described in

the Annex V.

1MERLIN defines value creation as the increase in shareholder return as a result of increasing the EPRA NTA and the

operating profit as a result of increasing the occupancy or rent of the assets in the portfolio.

Economic performance
€0.62 p.s (6.4% vs 2021) FFO	€15.67 p.s. (-2.7% vs 2021) EPRA NTA	32.7% (-651 bps vs 2021) LOAN TO VALUE (LTV)
Environmental performance
Dow Jones Sustainability Index INDEX MEMBER FOR THE SECOND CONSECUTIVE YEAR	161 ASSETS (+6.6% vs 2021) LEED or BREEAM CERTIFIED2	0.002 tCO2eq (-23.4% vs 2021) MARKET-BASED INTENSITY OF SCOPE 1 AND SCOPE 2 GREENHOUSE GAS EMISSIONS IN LIKE-FOR-LIKE ASSETS UNDER MANAGEMENT
360,268 GJ (-2.3% vs 2021) ENERGY CONSUMPTION IN LIKE-FOR-LIKE ASSETS UNDER MANAGEMENT	609,417 m3 (+17.9% vs 2021) WATER CONSUMPTION IN LIKE-FOR-LIKE ASSETS UNDER MANAGEMENT6	6,992 t (+19.6% vs 2021) WASTE GENERATED IN LIKE-FOR- LIKE ASSETS
Social performance
260 (+8.8% vs 2021) EMPLOYEES	€865 m (+63.4% vs 2021) VALUE DISTRIBUTED TO STAKEHOLDERS3	€3.7 M (+408% vs 2021) ECONOMIC IMPACT4

Management Report – Statement of Non-Financial Information 2022

10

2 The certified assets of Barcelona-Zal Port are not included

3 This item includes the payment of salaries, payments to suppliers, investments in communities and operating expenses.

Corresponds to indicator 201-1 included in the GRI Standards

4 In accordance with London Benchmarking Group methodology

MERLIN Properties’ portfolio

MERLIN has a diversified portfolio of more than 3.2 million sqm of gross leasable area in the office,

logistics warehouse and shopping centre markets.

GLOBAL PORTFOLIO
€11,317m (-1.5% vs 2021) GROSS ASSET VALUE (GAV)	3,182,582 sqm 92.4% SPAIN 7.6% PORTUGAL	95.1% (+60 bps vs 2021) OCCUPANCY
€453m (+7.9% vs 2021) GROSS RENTAL INCOME	€290m (+6.4% vs 2021) FFO	3.2 years AVERAGE LEASE PERIOD

1.2 Mission, vision, and values

MERLIN’s mission is to be the benchmark REIT in the Iberian Peninsula, thanks to our commitment to

long-term value creation and the generation of sustainable and growing dividend for shareholders in

an environment of transparency, ethics and responsibility in business and society.

Management Report – Statement of Non-Financial Information 2022

11

1.3 MERLIN’s structure

The strategy and operation are characterised by the following:

1.Focus on Core and Core Plus assets in Spain and Portugal

2.An investment grade capital structure

3.Distribution, via dividend or share premium, of 80% of AFFO generated in the period

4.Being one of the most cost-efficient REITs in Europe

5.Implementing best practices in Corporate Governance 

Its internal organisational structure can be summarised as follows:

•A Board of Directors (Board) composed of 13 directors and advised by the Audit and Control

Committee (ACC), the Appointments and Remuneration Committee (ARC) and the

Sustainability and Innovation Committee (SCI). The Company also has a Planning and

Coordination Committee (PCC).

•MERLIN’s Board of Directors, of which members are individually re-elected every two years,

is composed of a majority of independent directors and its activities are focused on defining,

supervising and monitoring the policies, strategies and general guidelines to be followed by

the Group. The Board is responsible for the long-term strategy and for monitoring its

implementation.

•General Management, composed of the Chief Executive Officer (CEO) and the Chief

Operating Officer (COO), who reports directly to the Board and are also Board members.

•An Investment Committee formed by the management team5.

1.4 Business activities

MERLIN Properties owns a portfolio of real estate assets valued at more than €11.3 billion,

comprising 107 office buildings, 55 logistics warehouses and 14 shopping centers. The portfolio has a

gross leasable area (GLA) of more than 3.2 million square metres that generates more than € 453

million in gross rental income.

Management Report – Statement of Non-Financial Information 2022

12

5 Management team is understood to be: https://www.merlinproperties.com/en/corporate-governance/management-

team/

OFFICES €6,388m GAV 107 ASSETS 1.2 m sqm GLA €243m GRI6 6	LOGISTICS €1,400m GAV 55 ASSETS 1.5 m sqm GLA €74m GRI	SHOPPING CENTERS €2,135m GAV 14 ASSETS 461 k sqm GLA €124m GRI
LOOM 12 SPACES7 and 2,639 desks 26k sqm of GLA 83.1% OCCUPANCY	ZAL PORT (48,5%)8 43 ASSETS 736 k sqm GLA €72m GRI 8	TRES AGUAS (50%)8 1 ASSET 68 k sqm GLA €8m GRI
DATA CENTERS 4 ASSETS 70 MW (Phase I&II)

Management Report – Statement of Non-Financial Information 2022

13

6 Gross Rental Income. Note 8.1. Operating leases - tenant

7 Out of the 12 spaces, 9 are owned by MERLIN, with a GLA of 21,731 sqm

8 100% of the asset

Offices

MERLIN once again consolidates its leadership position in the office market, reaching pre-covid levels

in key financial and operating metrics, as reflected in the growth in rental income of the like-for-like

portfolio (+6.0%), the release spread (5.8%) and the occupancy rate (92.5%), which beats the 91.5%

forecast given to the market at the beginning of the year. 

€6,388m GAV	107 ASSETS	1.2 m sqm GLA
€243 M GROSS RENTAL INCOME	92.5 % OCCUPANCY RATE	+6.0 % GRI LFL

2022 Milestones

Complete refurbishment of Plaza Ruíz Picasso

•The complete refurbishment of Plaza Ruiz Picasso of 36,899 sqm, stands out given

the inclusion in the construction process of measures for low CO2 emissions impacts,

both in terms of embodied and operational carbon. Based on the analyses carried

out, this pilot project will have a footprint of 375 kg of CO2/sqm of embodied

carbon9. The project also includes the refurbishment of the public spaces adjacent to

the asset. Work is progressing well and is scheduled for completion in the fourth

quarter of 2023. The asset is practically fully pre-let.

Refurbishment of the Churruca Business Park (Cunef Campus)

•Refurbishment of the Churruca Business Park, which is 100% leased to Cunef. The

incorporation to the new facilities has taken place since the 22-23 academic year.

This is a 17,166 sqm GLA campus, well connected, with comfortable and accessible

classrooms and spaces that combine the highest standards in technology and

sustainability and will include photovoltaic panels that will provide the campus

power for self-consumption.

Complete refurbishment of the Cerro de los Gamos Business Park

•Business Park consisting of 5 buildings with a GLA of 36,105 sqm. The works will be

carried out in three phases, with Phase I including the refurbishment of buildings 1

and 4 to be completed in 3Q23. Both buildings have been 100% pre-let. The

refurbishment will improve the technical, thermal and aesthetic performance of the

enclosures in accordance with the standards required by the LEED energy certificate.

Works also include a series of renovations that will completely change the structural

aspect, as well as a, complete renovation of the air conditioning and air quality

systems that will provide optimal standards of environmental comfort and for work

performance.

Management Report – Statement of Non-Financial Information 2022

14

9 Embodied carbon is the carbon included in the building materials, and the carbon generated by transporting these

materials and during construction work.

Strong growth of LOOM (flexible offices)

•Opening of 3 new locations at Castellana 93, in Madrid and Plaza Cataluña and

Ferretería in Barcelona. Furthermore, MERLIN has also expanded space in the Atica,

Torre Chamartín and Torre Glòries assets, given the strong demand for flexible office

space in the market.

Renazca preliminary project boost

•The RENAZCA Project aims to promote a complete refurbishment plan of the Azca

complex, located in the heart of the city, creating a place for the enjoyment of all

citizens and the subsequent revitalisation of the area, with the aim of making it a

destination in the city of Madrid and an example of best practices in sustainability.

Future objectives

Expansion and adaptation of new spaces

•MERLIN will continue expanding its LOOM network focused on hybrid work,

expanding its presence in key Spanish cities.

•Over the course of 2023, the LOOM Castellana 85 and Puerta de las Naciones spaces

are expected to open, both have an aggregate capacity of 430 desks.  

•Finish works in Plaza Ruiz Picasso and Churruca business park.

•Start of the refurbishment of the third building in the Cerro de los Gamos business

park.

•Continuation of the Renazca project.

Logistics

MERLIN is the undisputed leader in the logistics real estate market throughout the Iberian Peninsula,

thanks to the size, quality of its portfolio and the Group’s rapid response to its customers’ new

requirements. During 2022, a 7.9% release spread was obtained, with comparable rental income

growth of 8.6% and almost reaching full occupancy (97.0%).

€1,400m GAV	55 ASSETS	1.5m sqm GLA
€74m GROSS RENTAL INCOME	97.0% OCCUPANCY RATE	+8.6 % GRI LFL

Management Report – Statement of Non-Financial Information 2022

15

2022 Milestones       

 Significant progress of the Best II & III Plans

•Delivery of Cabanillas Park II A: a turnkey logistics warehouse with a 47,155 sqm GLA

for Logista in Cabanillas del Campo (Guadalajara), which marks the inauguration of

Cabanillas Park II.

•Delivery of Cabanillas Park I-J: 44,653 sqm GLA logistics warehouse for DSV. With the

delivery of this warehouse, MERLIN successfully completes the development of the

Cabanillas Park I logistics park.

Future objectives

Continuation of Best II and Best III Plans

•Continuation of the development of the A2-Cabanillas Park II logistics park, with the

warehouse B and commencement of works in the A2-San Fernando III warehouse. 

•Within the Best II and Best III Plans, the Company still counts with 507,000 sqm

landbank: 116,000 sqm in Cabanillas Park II, 180,000 sqm in Lisboa Park, 99,000 sqm

in A2-San Fernando III, 97,000 sqm in Valencia and 15,000 sqm in Sevilla ZAL.

Shopping Centers

MERLIN’s shopping centers continue to be a benchmark in the Spanish and Portuguese real estate

sector, strategically located in urban centers and dominant in areas with high GDP per capita, which

allows the Group to maintain the robustness demonstrated in previous years, recovering to pre-

pandemic levels (2019). During 2022, a 5.2% release spread was obtained, with comparable rental

income growth of 7.5% and occupancy increase (95.0%, +79 bps).

€2,135m GAV	14 ASSETS	460 k sqm GLA	11.8% OCCUPANCY COST RATIO
€124m GRI	95.0% OCCUPANCY RATE	+7.5 % GRI LFL

Management Report – Statement of Non-Financial Information 2022

16

2022 Milestones

Refurbishment of assets

•MERLIN is committed to the continuous refurbishment of its shopping centers. As part of the

Flagship refurbishment plan, which has already been completed, 6 shopping centers have

been completely refurbished to include the best standards in terms of sustainability,

technology, accessibility and aesthetics.

Completion of the Certification Program

•In 2022, MERLIN completed the Shopping Centre Certification Programme, with 100% of

shopping CENTERS certified, and obtaining BREAM certification levels above the national

average.

Award-winning shopping centers

•In 2022, MERLIN received the following awards from the Spanish Association of Shopping

Centers and Retails Parks (AECC) for the good practices carried out:

•Award for the Best Medium/Small Shopping Centre to X-Madrid.

•Award for the best sustainability campaign for its “zero waste” initiative in the Marineda

City shopping centre in A Coruña. This certificate, awarded by AENOR, certifies that

more than 90% of the waste generated at the shopping centre can be classified, thus

preventing it from being sent to a landfill.

•In the field of marketing and communication, MERLIN’s shopping centers have won

several awards, most notably those received in the Saler shopping centre for the best

large marketing and communication campaign “Escape Mall”, and the best small

marketing campaign for “La Falla virtual”.

•Top 3 nomination for Hapik as the best leisure centre at the Mapic Awards for X-Madrid.

Consolidation and expansion of prominent operators

•MERLIN continues to position itself as a benchmark owner for major operators. Noteworthy

of mention is City Wave, located in X-Madrid, which has received the award for Best

Independent Retailer, confirming the success of this shopping centre in its commitment to

offer visitors a differential experience.

Support for entrepreneurship and digitalisation

Management Report – Statement of Non-Financial Information 2022

17

•In 2022, a project was carried out with Lanzadera, the business accelerator, to support

entrepreneur sin the retail world.

•Amongst the winners of the Retailtech Hub are La Mas Mona and Kraft Walkers, which have

opened their own stores in two MERLIN shopping centers; and Gus and Wipass, two

technology startups that create solutions to improve customer experience.

Future objectives

Refurbishment of Callao 5

•Throughout 2023, works will begin on the total refurbishment of the asset located at

Callao 5, with the total remodelling of uses, facilities and formats. It is one of the

most special, iconic and representative properties in Madrid, with an unbeatable

location and great commercial value in the city. This new mixed-use real estate

complex is scheduled to be completed in December 2025.

Development of new initiatives to support entrepreneurship and digitalization.

•MERLIN will continue to support entrepreneurship and the development of

digitalization.

Net leases

The sale of the BBVA portfolio in 2022 is noteworthy of mention, which was valued at € 1,773 million

(including the derivative) and generated € 83.6 million in gross annual rental income. It was sold to

BBVA on 15 June at a premium of 17.1% over valuation. Thanks to the sale, the Company was able to

reduce its debt level considerably and can focus on developing its two growth pillars: logistics and

data centers.

Data centers

At the end of 2021, MERLIN launched a new business line, data centers (Mega Plan), an attractive

asset class with 4 strategic locations in the Iberian Peninsula to develop state-of-the-art data centers.

2022 Milestones

        Phase I and Phase II: Launch of the Data Centre Programme

•Obtain 3 licences for data centers in Madrid-Getafe, Barcelona-PLZF and Bilbao-Arasur,

where the installed capacity of each module will be 20 MW, 16 MW and 22 MW,

respectively.

•Progress on the construction of the 3 locations, with the structure, roofing and closure

completed in Bilbao and Madrid and the foundations completed in Barcelona.

•Pre-let signed in Bilbao with the possibility of extension to Madrid and Barcelona.

Management Report – Statement of Non-Financial Information 2022

18

Future objectives

        Continuation of the Mega Plan

•Finishing of the works in Madrid-Getafe, Barcelona-PLZF and Bilbao-Arasur (first

building) in the first quarter of 2023.

•Installation of the first 9 MW, 3MW in each location.

   Energy efficiency systems

•High energy efficiency of the facilities with a PUE (Power Usage Effectiveness) below the

global average and a total energy consumption from renewable sources.

•Innovation as regards the cooling system with zero water consumption.

•Install photovoltaic panels on all assets.

1.5  Main milestones and objectives

MERLIN Properties has demonstrated and strengthened its leadership position in the Iberian

Peninsula, posting excellent results.

In 2022 MERLIN posted excellent results in its key financial and operating metrics. As a result,

MERLIN closed 2022 with total revenues of €460.7m (including gross rents of €452.8m), like-for-like

rental income of 7.3% (vs. 2021), EBITDA10 of €334.7m and operating profit (FFO) OF €290.5m (€0.62

per share). At year-end, the gross value of the REIT’s assets therefore stood at € 11,317 million.

MERLIN continues strengthening its position in the Spanish and Portuguese market with a diversified

portfolio and is committed to the integration of differential solutions that provide added value to the

users of its assets, with sustainability and innovation as two of its main pillars.

Compliance with Value Creation Plans

During 2022, MERLIN has made significant progress in the value creation plans for its different asset

classes. Within the framework of the Landmark Plan (offices), only Plaza Ruiz Picasso has yet to be

completed, with delivery scheduled for the end of 2023, while progress on the Best II and III Plans

(logistics) continue on track. The Flagship plan (shopping centers) has been completed.

Management Report – Statement of Non-Financial Information 2022

19

10 EBITDA excluding LTIP and non-overheads

	2019	2020	2021	2022	2023 and subsequent years
Landmark Plan (in progress)	Torre Chamartín (Fase II) Torre Glòries (Fase II)	Marqués de Pombal Diagonal 605	Castellana 85 Monumental		Plaza Ruiz Picasso
Plan Flagship	Larios Arturo Soria X-Madrid Tres Aguas		Saler Porto Pi
Best II Plan (in progress)	A4-Pinto II B A2-Cabanillas III A4-Seseña	A2-Cabanillas Park I F A2-San Fernando II	A2-Cabanillas Park I G, H A2-Azuqueca II	A2-Cabanillas Park I J A2-Cabanillas Park II A	A2-Cabanillas Park II B, C, D A2-Azuqueca III
Best III Plan          (in progress)	Valencia- Ribarroja Sevilla ZAL WIP (2019/2021)	Zaragoza-Plaza II	Lisboa Park A		Lisboa Park Madrid - San Fernando III Valencia - Bétera
Mega Plan (in progress)					Barcelona-PLZF Madrid-Getafe Bilbao-Arasur Lisbon-VFX

Sale of the BBVA portfolio

With the sale of the BBVA portfolio, MERLIN has completely divested from its Net leases division,

which also included the Caprabo assets sold in Q4 2021. The BBVA portfolio was valued at €1,773

million (including the derivative) and generated €83.6 million in gross annual rental income. It was

sold to BBVA on June 15th, 2022, for a total amount of €1,987 million, at a premium of 17.1% over

valuation.

On June 15th, as a result of the share sale of Tree Inversiones Inmobiliarias to BBVA, the Group

repaid in advance the mortgage financing associated with the bank branches for a total amount of

€670 million and €850 million of the syndicated loan, thus reducing the leverage ratio from 39.2% in

2021 to 32.7%, a reduction of 651 bps.

Management Report – Statement of Non-Financial Information 2022

20

Re-qualification of green bonds

MERLIN has converted all of its senior bond issuances (more than €4 billion) into green bonds,

integrating the financial strategy into its sustainability strategy by launching a green financing

program. To this end, MERLIN has allocated the principal amount of all outstanding bonds into

eligible green assets in accordance with the Green Financing Framework.

This new green financing program is a further step in MERLIN’s strategy to include sustainability as a

core pillar, as outlined in the “Pathway to Net Zero” plan.

Bond refinancing

MERLIN has subscribed, in the Q422, a green corporate financing agreement with leading national

and international banks, which it allows it to add €660 million to its available liquidity, ensuring the

repayment of all debt maturities until 2026. 

Data centers

In 2022, MERLIN moved forward with its entry into a booming market driven by product scarcity, the

arrival of submarine cables and the exponential increase in data traffic. The assets located in Madrid-

Getafe, Barcelona-PLZF and Bilbao-Arasur are currently under construction. Once Phases I and II are

completed, these assets will have a total installed capacity of 70 MW.

As regards with the efficiency of the data centers, a cooling system will be used in which water

consumption is eliminated, with a closed system based on glycol as the coolant.

Furthermore, the average PUE (Power Usage Effectiveness) of the facility is only 1.15, well below the

global average for data centers (1.59) and the European average (1.46). All the energy consumed by

the facilities will come from renewable sources through long-term purchase contracts with

renewable energy producers and guarantees of origin with the suppliers.

As part of Project SUN, the photovoltaic solar project launched by MERLIN in 2019, given the

structure and location of the data centers, photovoltaic panels will be installed on the rooftops of

the assets to optimise energy consumption.

As a future objective, MERLIN expects to obtain the licence for the Lisbon-VFX asset in order to be

able to start construction of this asset.

Management Report – Statement of Non-Financial Information 2022

21

2. Sustainable growth strategy

2.1 The market (sector)11

The markets in which MERLIN operates are benefiting from the gradual economic recovery following

the devastating effect of the pandemic in 2020.

This economic environment has led to significant increases in trading volumes, which results in

higher occupancy in the three asset classes in which we operate.

Moreover, the investment volume overall for all asset classes in Spain has increased exponentially,

reaching €15,400 million in 2022 compared to €11,700 million of direct investment in Spain in 2021.

Situation of the rental market by geographical area:

Madrid

Madrid is both the largest metropolitan area and the main real estate market on the Iberian

Peninsula. In general, the rental market has benefited from the economic recovery. The

absorption of office space has reached around 543,000 sqm, up 30% versus 2021, prime

rents have increased by +4% to reach 36.50 €/sqm/month, and availability has increased

slightly to 9.75%. As regards with the logistics market, it has been a record year in terms of

take-up with 1,328,500 sqm contracted, up 32% compared to the previous year. Lastly,

shopping centers have practically recovered in terms of sales with footfall still below pre-

covid levels.

Barcelona

In the office market, take-up has amounted to 328,000 sqm and prime rents have remained

at 27.50 €/sqm/month. It should also be noted that more than 180,000 sqm were delivered

during the period, causing the vacancy rate to rise to 10.1%. On the other hand, the logistics

market is suffering from a lack of both available land and quality product for e-commerce

operators. With regards to shopping centers, the performance in both sales and footfall is

still slightly below the one in Madrid.

Lisbon

The performance of the office rental market has been very positive, with 272,000 sqm

absorbed (+68%) and a vacancy rate that stands at 7%. Prime rents remained stable during

the year, reaching 25 €/sqm/month. In relation to logistics, rents have increased and stand

at €5/sqm/month, on the Alverca/Azambuja axis. In addition, take-up in the period has been

250,000 sqm. Lastly, shopping centers have recovered relatively well with sales and footfall

at pre-covid levels.

Management Report – Statement of Non-Financial Information 2022

22

11 The sources consulted, among others, include the following: “The Office Property Telescope - Spain 2022” - EY; “The

reality of the office market - Summary of 2022 and trends for 2023” - Savills; “Marketbeat Madrid - Industrial Q4 2022” -

Cushman Wakefield; “The reality of the office market - Summary of 2022 and trends for 2023” - Savills; “CBRE Retail Index

Dec 2022” and “Portuguese Real Estate Market” - Cushman Wakefield

Situation of the rental market by business segment:

Offices

The Spanish office market recorded an increase in activity in 2022 compared to 2021

although Madrid performed better than Barcelona (30% vs +0.2%). In addition, the vacancy

rate rose in both markets to 9.75% in Madrid and 10.1% in Barcelona, although the vacancy

rate in the more central submarkets remains low at 5% and 4%, respectively. Prime rents

have risen slightly in both markets, although there have been slight declines in more

peripheral locations. Similar performance has been observed in Portugal.

Logistics

The upward trend in the logistics sector continues to be favoured by consumer habits

acquired during the pandemic that are part of the new reality and that are expected to

continue to consolidate in the coming quarters. Record year for logistics take-up in Madrid

and, to a lesser extent, in Barcelona.

The volume reached by turnkey projects and pre-lets is of particular note given the lack of

available logistics platforms that meet current demand requirements. This shortage of

quality product has had an impact on the rents of logistics assets.

Shopping centers

The gradual recovery in the activity of shopping centers after the pandemic has been

reflected in the high levels of sales and footfall in 2022. Although it is true that footfall is still

below pre-covid levels due to the fact that there have been few box office releases in

cinemas. 

Data centers

Booming market driven by product scarcity, the arrival of submarine cables and the

exponential increase in data traffic. In addition, the strategic geographical position (port of

entry for submarine cables connecting to other continents, installed capacity and renewable

energy development) of the Iberian Peninsula makes it an attractive location for the

development of data centers.

2.2 Outlook

In the absence of externalities, the three main asset classes (offices, logistics and shopping centers)

are expected to maintain occupancy levels, while rents will continue to benefit from rising inflation

as leases are indexed to CPI.

The Group expects 2023 to be a year of transition following the sale of the BBVA portfolio. In this

regard, the Group has provided the market with an estimate of its operating profit for 2023 of €0.58

per share. A complementary dividend, additional to the dividend on account of €0.20 per share

distributed in December 2022, will be proposed to the Board of Directors in the following meetings,

subject to approval by the AGM and to be paid in May 2023.

Management Report – Statement of Non-Financial Information 2022

23

2.3 Trends and opportunities

The Group’s operating performance improved during the year, beating the FFO forecast given to the

market at the beginning of the year. 

MERLIN Properties has closed the year with a gross rental income of €452.8 million, an EBITDA of

€334.7 million and an FFO of € 290.5 million or € 0.62 per share.

The net asset value amounted to € 7,363 million (€ 15.67 per share), which represents a decrease of

2.7% compared to the previous year, while total shareholder return reached 4.7% boosted by the

€1.20 per share dividend paid during the period. The portfolio’s resilience can be seen in its strong

fundamentals, with growth in LfL gross rental income (+7.3%) and an occupancy rate of 95.1% (+60

bps compared to 2021).

Offices

Significant increase in LfL gross rental income (+6.0%), thanks to the increase in occupancy

(+245 bps), rising inflation and positive release spreads in renewals. Occupancy stood at

92.5%, beating the guidance provided to the market (91.5%) and with a release spread of

5.8%. The main contracts signed in 2022 include 13,890 sqm in Adequa with EDP, 4,221 sqm

in Poble Nou 22@ with Generalitat de Catalunya, and 3,838 sqm in Maria de Portugal T2

with Honeywell. In terms of renewals, worth underlining American Express (8,318 sqm in

Partenon 12-14), Servizurich (4,201 sqm in Poble Nou 22@) and Liferay (1,805 sqm in

Castellana 280).

With regard to the Landmark Plan, only Plaza Ruiz Picasso 11 building has yet to be

completed, which will become the smartest building in Madrid provided with the highest

ESG standards and is virtually fully pre-let. Worth highlighting IBM’s 12,129 sqm lease.

Logistics

Solid release spread of 7.9% and LfL rental income growth of 8.6%. The occupancy rate stood

at 97.0%.

The main contracts signed during the year include Logista with 47,211 sqm in Cabanillas Park

II A, DSV with 25,221 sqm in A2-Cabanillas Park I H, Leroy Merlin with 16,100 sqm in A4-

Getafe (CLA) and Media Markt with 11,099 sqm in A4 Pinto-I.

Shopping centers

Footfall (+19.5%) and sales (+27.7%) continue to improve compared to last year and are

almost at 2019 levels. LfL gross rental income have increased by 7.5%, occupancy continues

to rise and stands at 95.0% (+79 bps vs 2021) and the release spread stands at 5.2%. The

main contracts signed and renewed during the year include Zara (extension) with 3,229 sqm

in Saler, Zara (extension) with 1,600 sqm in Artea, Outlet Sport with 1,056 sqm in X-Madrid.

Investment and divestment activity

Investment activity in the year most notably included the acquisition of two prime office

buildings for €131.5 million. These assets are Liberdade 195, a 16,510 sqm building on

Management Report – Statement of Non-Financial Information 2022

24

Lisbon’s most exclusive avenue, and a 3,665 sqm building adjacent to our Plaza Ruiz Picasso

11 development in Azca, Madrid.

As regards with divestments, the sale of the BBVA portfolio in 2022 is noteworthy of

mention, which was sold for €1,987 million and generated € 83.6 million in gross annual

rental income. It was sold to BBVA on June 15th at a premium of 17.1% over valuation. In

addition, the Group sold various assets in 2022 for a total of €112.6 million at a premium of

8.7% over GAV, including four office buildings (33,783 sqm).

2.4 MERLIN’s Strategic Plan

MERLIN’s strategy aims to generate sustainable shareholder returns through the acquisition, focused

management and selective rotation of real estate assets mainly in Spain and, to a lesser extent,

Portugal.

In this regard, MERLIN, with the objective of remunerating shareholders with a dividend policy of

80% of the AFFO generated in the year, has set a target mix of the different business segments,

investing only in Core and Core Plus assets in Spain and Portugal, while maintaining cost efficiency

and best corporate governance practices.

In keeping with industry best practices, the Group is therefore active in four key areas:

•Internal portfolio management: MERLIN is committed to internalising the management of

its properties by a first-class team with extensive experience in the real estate sector. In

doing so, the Company is able to maximise the operational efficiency and profitability of

each asset in all stages of the life cycle.

•Profitability through asset refurbishment: MERLIN strives to realise the full potential of

each asset through refurbishment, maximising the value of the portfolio and generating

higher returns for shareholders.

•Entering in a new asset class: data centers

•Sustainability, a key aspect of the assets: MERLIN continues to aspire to the highest levels

of sustainability and efficiency in its portfolio. It does so by integrating sustainability into the

entire life cycle of the asset and supporting this commitment by obtaining sustainability

certifications.

Management Report – Statement of Non-Financial Information 2022

25

2.5 MERLIN’s sustainability management

MERLIN responsibly manages its activity, ensuring the achievement of sustainable objectives over

time and the creation of shared value for its stakeholders. This is done while ensuring strict

compliance with the law and with the international benchmarks to which the Group adheres.

In this context, MERLIN’s commitment can be none other than the achievement of sustainable

profitability that guarantees the success of its business project and takes into account the

expectations of its stakeholders. In addition, this growth must be achieved without undermining the

organisation’s environmental performance, minimising any impacts on the environment and

committing to the integration of sustainability in the development and refurbishment of assets.

MERLIN’s sustainability roadmap

Sustainability policy

MERLIN Properties considers sustainability to be a lever for the creation of value in the environment

in which the Group operates, mainly through its assets. The principles governing MERLIN’s

sustainability roadmap are as follows:

This Sustainability Policy was approved by the Board of Directors of MERLIN Properties, entering into

force on the date of its approval and remains fully valid until such is amended.

The Board of Directors, through its delegated Committees and, in particular, through its

Sustainability and Innovation Committee, monitors the correct implementation and fulfilment of all

guiding principles and commitments set out.

Management Report – Statement of Non-Financial Information 2022

26

Guiding principles

•Responsible governance and ethical behaviour: MERLIN is committed to the highest

standards, guarantees and transparency in the Group’s management and decision-

making, and to the success of the business when carrying out its activities,

safeguarding ethics and integrity in its operations.

•Transparency with stakeholders: MERLIN considers it a priority to provide complete,

accurate and truthful information on the Group’s performance and activities, and to

maintain sufficient relationship channels with its stakeholders, actively

communicating with them and responding to their main demands and expectations.

•Independent external validation of commitments: MERLIN seeks to endorse its

commitments by obtaining external validation, which guarantees the effective

integration of sustainability in its internal management and assets, and this gives

credibility to the practical implementation of the commitments made in the Group’s

decision-making and activities.

Pathway to Net Zero

Following the 2.0°C pact made at COP2112, MERLIN announced its commitment to become a net zero

carbon company by 2030, in line with the with science-based targets (SBTi), reporting risks under the

TCFD recommendations13 and committed to the SDGs set by the UN.

Strategy:

1.Reduce operational carbon.

Milestones: In 2022, MERLIN has launched its Road to Net Zero strategy, a roadmap that

includes improving the performance not only of the Group itself and those assets over which

it has operational control, but of the main agents responsible for MERLIN's emissions along

its entire value chain, including suppliers and tenant.

Objectives: 85% reduction in operational carbon from baseline (2018) to 2028.

2.Reduce embodied carbon in all new developments and refurbishments.

Milestones: In 2022, MERLIN developed a procedure for measuring the embodied carbon

footprint for developments and refurbishments. Specifically, in the case of CAPEX awards

for amounts over €3 million, the proposal must take into account the calculation of the

embodied carbon footprint of the project awarded. This procedure means that an additional

sustainability criterion is added when selecting suppliers.

Management Report – Statement of Non-Financial Information 2022

27

12 Climate Change Conference in Paris

13 Task Force on Climate-related Financial Disclosures

Additionally, in 2022, the assessment of the embodied carbon of the refurbishment of Plaza

Ruiz Picasso 11 was also carried out, which stands out given the inclusion in the construction

process of low CO2 emissions measures, both in terms of embodied and operational carbon.

Based on the analyses carried out, this pilot project will have a footprint of 375 kg CO2/sqm

in the embodied carbon phase, fulfilling one of the premises established in its Pathway to

Net Zero.

Objectives: To increase the sample in the calculation of embodied carbon in our portfolio to

be able to set limits for each asset class.

3. Offset residual emissions: offsetting the unavoidable footprint through duly certified own

initiatives focused on environmentally based solutions with a positive impact on local and/or

underdeveloped communities.

Milestones: The Company has estimated the forest mass needed to be able to offset its

footprint in 2028 (around 150 hectares). In the process of searching for a land plot that

meets the necessary requirements to be able to carry out the project.

4.Reduce scope 3 emissions: engage tenants through green clauses in new leases and

pioneering initiatives such as rent reduction for tenants if they certify that their operations

are net zero.

Milestones: The Company has made significant progress in establishing a dialogue with our

main tenants, which represent around 30% of the total surface area of the portfolio, to

engage them in our net zero journey and to share data. On January 1st 2023, the new green

clause came into force for all contracts, whereby all tenants who wish to benefit from a rent

reduction will be required to share their consumption data through a technological platform.

This green clause, which will be linked to the tenant’s credit risk, will incorporate a series of

milestones which, if met, tenants will be able to benefit from a reduction in rent of up to 50

basis points.

5.Renewable energy: 100% renewable energy supply and photovoltaic power generation

through the Project SUN, which consists of installing photovoltaic panels on the rooftops of

the assets.

Milestones: Significant efforts have been made this year in executing the project, having

carried out 19 projects representing an additional 10.9 MW in the year, which implies a total

installed capacity of 11.9 MW. The new installations include 10 office assets, 4 logistics

assets and 5 shopping centers. Following the completion of Phase I of the Project SUN, the

peak installed capacity is expected to be 39.8 MW. Likewise, 100% of MERLIN’s assets under

operational control consume renewable electricity with a guarantee of origin certificate. 

Converting debt into green debt

MERLIN counts with a 100% Green Financing Program under which all of its outstanding bonds are

reclassified as green bonds, and has assumed a commitment to issue green bonds or other ESG

bonds in the future. A Green Financing Framework has therefore been developed based on best

practices with strict eligibility criteria including the following:

•High levels of asset certification: LEED Gold or higher and BREEAM Excellent or higher.

•Low carbon intensity emissions for buildings under operational control.

Management Report – Statement of Non-Financial Information 2022

28

•Investments to promote renewable energies and/or improve energy efficiency.

The Framework has received positive feedback from Sustainalytics, which considers it to be in line

with the four main components of the ICMA Green Bond Principles 2021 and LMA Green Lending

Principles 202114.

2.6 Materiality analysis

MERLIN updated its materiality analysis on sustainability matters at the end of 2021, carried out on

a biannual basis, in which various key issues in sustainability were assessed, either because of their

influence on the valuations and perceptions of the stakeholders or because of their direct impact on

the medium and long-term success of the Group’s strategy.

For MERLIN, determining materiality (“double materiality”) is a key aspect in establishing the ESG

roadmap. Materiality refers to everything that has a direct or indirect impact on creating, preserving

or eroding economic, environmental and social value within MERLIN.

The analysis of material aspects for MERLIN was carried out in accordance with the EFRAG15

guidelines on double materiality:

•Stakeholder relevance (impact materiality): Material aspects when the company is related to

actual or potential significant impacts on stakeholders or the environment over the short,

medium or long term. This includes impacts directly caused by MERLIN or those that may

occur throughout its value chain.

•Internal relevance (financial materiality): This differs from the materiality used in financial

reporting and its objective is to identify those material aspects that could have financial

effects for the company, i.e. that may generate risks or opportunities that influence future

cash flows and, therefore, the value of the company in the short, medium or long term.

The methodology used to identify and assess the main impacts of MERLIN Properties is summarised

in the following activities:

•Real estate companies. Comparative analysis of the relevance of the material aspects for the

main players in the sector in which MERLIN Properties operates included in their

Sustainability Reports (or others).

•Internal interviews and corporate documentation. The main ESG aspects for MERLIN

Properties were reviewed and discussed during interviews with the different areas involved.

Internal documentation and the previous materiality analysis were also reviewed.

•International sustainability standards. Analysis of the main relevant aspects defined by

international standards on sustainability. For this materiality analysis, GRIs (including the

Real Estate sector supplement) and the Sustainable Development Goals were taken into

consideration.

•Press analysis of news concerning MERLIN Properties in 2022.

•Expectations of stakeholders in ESG matters. The input of prescribers (DJSI, GRESB, EPRA,

SASB) and demands of other stakeholders were taken into account mainly through the

launch of a survey, which was answered by 46 representatives of 5 stakeholders: main

shareholder, analysts (2), banks (5), main tenants (14) and main suppliers (24).

Management Report – Statement of Non-Financial Information 2022

29

14 ICMA: International Capital Market Association; LMA: Loan Market Association

15 EFRAG: European Financial Reporting Advisory Group

As a result of these actions, the following double materiality matrix was prepared:

		Coverage of material aspect
Category	Material aspect	Inside the organisation	Outside the organisation
Environmental performance	Climate change management	x	x
	Environmental performance of the assets	x	x
	Sustainable certifications	x	x
	Biodiversity	x	x
	Sustainable mobility	x	x

Management Report – Statement of Non-Financial Information 2022

30

Social performance	Talent attraction and retention	x
	Diversity and equal opportunities	x
	Development of local communities	x	x
	Health and safety of employees and contractors	x	x
	Quality spaces and services for users	x	x
	Sustainability in the supply chain	x	x
Good governance	Responsible governance	x
	Ethics and compliance	x	x
	Transparency with stakeholders	x	x
Economic performance	Economic performance and dividend sustainability	x	x
	Innovation in assets and digitisation	x	x

Management Report – Statement of Non-Financial Information 2022

31

3. Responsible management

MERLIN has a robust governance system in line with its commitment to ethics, compliance and

transparency, which is backed by independent third-party validation.

2022 MILESTONES

FUTURE OBJECTIVES

•Improved governance through the creation of a Planning and Coordination Committee, with the aim of strengthening the Company’s corporate governance by increasing the efficiency of the Board’s functioning. •Unification of the Appointments Committee and the Remuneration Committee into a single Appointments and Remuneration Committee. •Promoting training on sustainability matters and reporting requirements for the Board of Directors. •Approval of a Directors Remuneration Policy (2022-2025), that includes sustainability criteria both in the short and long term. •Implementation of a System of Internal Control over Non-Financial Reporting (ICNFR) and adaptation of the Internal Control Policy to this new scheme of control over non-financial information. •Promoting the improvement of the corporate governance system with the approval of new policies (respect for human rights, biodiversity, human capital management, etc.) and the review of other existing policies.

•Continue with the ongoing improvement of the Governance System in line with international best practices as a comprehensive system that generates security and value, enabling the improvement of the Group’s strategic and operational management. •Develop and implement the improvement opportunities identified in the assessment of the Board and its Committees conducted by an external consultant in 2023. •Continue to monitor sustainability reporting, expanding improvements to existing reports and their incorporation into the rest of the Group’s regulated information. •Maintain UNE 19601 Criminal Compliance and ISO 37001 Anti- Corruption and Bribery certifications, with a global scope for all the Group’s subsidiaries. •Continuously improve the Risk Management System with a particular focus on climate-related risks and exposure of assets to extraordinary events. •Closely monitor the Action Plans established for risk mitigation in 2022 to verify their progress, implementation and mitigation of identified risks.

Management Report – Statement of Non-Financial Information 2022

32

KEY INDICATORS FOR THE YEAR
	2022	CHANGES 2021-2022
Independent directors16	7/13	—
Women on the Board of Directors	5/13	—
Non-executive directors with industry experience	6/11	—
Directors present on 4 or more Boards of other listed companies	0/7	—
Scope of ethics and compliance training (employees trained)	91%	-4 percentage points

MERLIN has developed a Governance System that sets out the principles that should the Company,

all Group companies, and their professionals.

3.1 Governance structure

Management Report – Statement of Non-Financial Information 2022

33

16 Pursuant to section 529 duodecies of the Spanish Corporate Enterprises Act (Ley de Sociedades de Capital), an

independent director is considered to be a director who, appointed based on their personal and professional qualifications,

may perform their duties without being conditioned by their relationships with the Company or its Group, its significant

shareholders or management.

The Board Regulations, the Regulations of its Committees, the General Meeting Regulations, and the

main policies of MERLIN’s Governance System, along with a summary of the remaining policies, are

published on the corporate website https://www.merlinproperties.com/en/corporate-governance/

corporate-governance-normative/.

MERLIN uses the CNMV’s “Good Governance Code for Listed Companies” as a reference, along with

the good governance recommendations generally recognised and accepted by the markets. In 2022,

the Board of Directors, in addition to the amendments to the Articles of Association, the Board

Regulations and the Regulations of its Committees, which were approved by the shareholders at the

General Meeting held on 4th May 2022, has approved the following updates to the Governance

System:

Internal Control Policy	The Board of Directors approved the changes to the current policy at the proposal of the Audit and Control Committee, with the main changes being: •The ICNFR Model on non-financial information is defined. •The Board’s responsibility for preparing the statement of non- financial information is established. •The responsibilities of the ARC and the SIC as regards non-financial reporting and coordination with the ACC are set out.
Risk Management and Control Policy	The Board of Directors approved the changes to the current policy at the proposal of the Audit and Control Committee, with the main changes being: •It establishes that the ARC and SIC are involved in identifying and monitoring non-financial risks. •Coordination between the ARC, SIC and ACC for identifying and monitoring risks is established.
Procurement Policy	The Board of Directors approved the changes to the current policy at the proposal of the Audit and Control Committee, with the main changes being: •Environmental, social and governance risks are included. •Suppliers must be assessed on ESG matters as part of procurement processes.
Financing and Financial Risk Policy	The Board of Directors approved the changes to the current policy at the proposal of the Audit and Control Committee, with the main changes being: •It establishes the objective of having corporate debt linked to ESG criteria. •Best market practices (ICMA and EU Taxonomy) are benchmarked. •A commitment is made to publish an annual allocation report and an impact report.

Management Report – Statement of Non-Financial Information 2022

34

Human Capital Management Policy	The Board of Directors approved the initial version of this policy at the proposal of the Appointments and Remuneration Committee, the main content of which is as follows: •The basic principles for selection, hiring, remuneration, training and assessment are established. •Aspects such as health and safety, digital disconnection, equal opportunities are included.
Senior Management Selection Policy	The Board of Directors approved the initial version of this policy at the proposal of the Appointments and Remuneration Committee, the main content of which is as follows: •Senior management is defined in section 1.2. of the Board Regulations. •The selection process is defined as proposed by executive directors / ARC report / Board approval. •Succession plans and grounds for termination.
Management Team Remuneration Policy	The Board of Directors approved the initial version of this policy at the proposal of the Appointments and Remuneration Committee, the main content of which is as follows: •Alignment with the Directors Remuneration Policy. •Remuneration (fixed, STIP and LTIP): assessment by the ARC and approval by the Board. •The ARC may rely on support from other committees or external parties for objectives and assessment. •Malus, clawback and non-competition clauses and notice periods.
Policy on Respect for Human Rights	The Board of Directors approved the initial version of this policy at the proposal of the Sustainability and Innovation Committee, the main content of which is as follows: •It reflects the Group’s commitment to respect human rights (SDGs). •It establishes commitments to employees, suppliers, customers and the communities in which it operates. •It establishes mechanisms for reporting and deliberation in the Group’s various governance policies.
Biodiversity Policy	The Board of Directors approved the initial version of this policy at the proposal of the Sustainability and Innovation Committee, the main content of which is as follows: •It establishes a framework for integrating the protection and promotion of biodiversity into the Group’s strategy. •It integrates biodiversity into the Company’s internal strategic planning and decision-making processes, and into the analysis, management and reporting of long-term risks.

Management Report – Statement of Non-Financial Information 2022

35

Sustainability Policy The Board of Directors approved the initial version of this policy at the proposal of the Sustainability and Innovation Committee, the main content of which is as follows: •It sets out the principles governing MERLIN’s sustainability roadmap: ◦Active climate change management. ◦Maximising the well-being of users of the assets. ◦Generating positive impacts in cities. •It sets out the guiding principles that underpin the policy: ◦Responsible governance and ethical behaviour. ◦Transparency with stakeholders. ◦Independent validation of commitments.

Its internal organisational structure can be summarised as follows:

•A Board of Directors composed of 13 directors. MERLIN’s Board of Directors is composed of

a majority of independent directors and its activities are focused on defining, supervising

and monitoring the policies, strategies and general guidelines to be followed by the Group.

The Board is responsible for long-term strategy and for monitoring its implementation.

•A Planning and Coordination Committee composed of 4 directors, including the Chairman

and the Chief Executive Officer, assigned the functions of preparation, coordination,

proposal and preliminary review of the agenda and proposed resolutions to be submitted to

the Board, without executive functions and without supervisory or control functions.

•A Lead Director, who will chair the Board in the absence of the Chairman, coordinates the

external directors and is informed and aware of the concerns of investors and shareholders.

The lead directors also plays an important role in managing the Whistle-blower Channel.

•An Audit and Control Committee (ACC) composed of 6 directors, an Appointments and

Remuneration Committee (ARC) with 6 directors, and a Sustainability and Innovation

Committee (SIC) with 4 directors; all of these committees are made up of a majority of

independent directors, are informative and advisory bodies, without executive functions,

with advisory, reporting and proposal-making powers within their scope of action.

•A Chief Executive Officer (CEO) who reports directly to the Board and is a Board member,

responsible for carrying out the Company’s strategy and operations.

•A Chief Executive Officer (COO) who reports directly to the Board and is a Board member,

responsible for managing and carrying out the Company’s operations.

•An Investment Committee formed by the management team.

Management Report – Statement of Non-Financial Information 2022

36

Composition and operation of the Board of Directors

The Board, in exercising its functions of submitting proposals to the General Meeting and co-option

to fill vacancies, will ensure that, in the composition of the Board, external or non-executive

directors represent a majority over executive directors and that these are the minimum necessary.

Likewise, the Board ensures that member selection procedures favour diversity of gender,

experience, and knowledge and are not affected by any implicit bias that may entail any kind of

discrimination, and in particular, that they facilitate the selection of women directors.

In accordance with section 15.5 of the Board Regulations, the Board of Directors and the

Appointments and Remuneration Committee, within the scope of their respective powers, will

ensure that persons of renowned solvency, competence and experience are elected as candidates,

and will exercise the utmost care when inviting persons to fill the position of independent director

provided for in section 5 of the Board Regulations.

Management Report – Statement of Non-Financial Information 2022

37

Management Report – Statement of Non-Financial Information 2022

38

Skills matrix of the Board of Directors:

Selection, evaluation and remuneration of Board members

•The criteria for selecting Board members are established in the Director Selection Policy

(approved by the Board of Directors, at the initiative of the Appointments and Remuneration

Committee), ensuring that proposals for the appointment of directors, which are made

individually, are based on objective criteria and focused on the candidate’s professional

qualities, favouring diversity of gender, experience, age and knowledge. Selection criteria do

not take into account aspects such as race, ethnicity, religion or nationality.

•The Commission will choose candidates to fill these positions who are honourable, suitable,

reputable, competent, experienced, qualified and committed to the task and must also

guarantee the appropriate balance of the Board of Directors as a whole.

•In accordance with the recommendations of the Good Governance Code for Listed

Companies, the Company contracts an external consultant every three years, and in

Management Report – Statement of Non-Financial Information 2022

39

accordance with that indicated in the recommendations for good corporate governance of

listed companies, to evaluate the functioning and composition of the Board of Directors and

its committees.

In 2017 and 2020 the Company received advice from an independent external consultant

(Egon Zehnder and KPMG, respectively).

Subsequently, in 2018, 2019, 2021 and 2022 it was not considered necessary to engage an

external consultant to re-assess the functioning of the Board and its committees, whereby

the Company carried out a self-assessment process by means of a personal and individual

questionnaire sent to all the directors, in which they were asked for their opinion in relation

to the composition, competencies and functioning of the Board of Directors and its

committees, and in relation to the Company’s Chair and the Chief Executive Officer. In 2022,

the Council employed a technological tool that allowed all individual evaluations to be

anonymous.

•The remuneration of the Group’s Board members and management team is based on the

principles of transparency, consistency, competitiveness, profitability and sustainability and

the ability to attract the best professionals, as stated in its Directors Remuneration Policy.

•The remuneration of the various Board members is determined in accordance with these

principles and taking into account factors such as the economic environment, the Company’s

earnings, the Group’s strategy, legal requirements, good corporate governance

recommendations and best market practices, including metrics linked to sustainability.

•Each year, the Appointments and Remuneration Committee establishes the quantitative,

qualitative, financial and non-financial objectives that will determine the remuneration for

the year. Non-financial targets include the reduction of CO2 emissions per square meter and

MERLIN’s position on the GRESB, CDP and S&P CSA ratings.

3.2 Risk management

MERLIN has a Risk Management System based on the principles, key elements and methodology

established in the COSO Framework (“Committee of Sponsoring Organisations of the Treadway

Commission”), which aims to minimise the volatility of results (profitability) and, therefore, maximise

the Group’s economic value, incorporating risk and uncertainty into the decision-making process to

provide reasonable assurance of achieving the strategic objectives established, providing

shareholders, other stakeholders and the market in general with an adequate level of guarantees to

ensure that the value generated is protected.

Based on a comprehensive view of risk management, MERLIN has adopted a methodological

approach based on the Enterprise Risk Management Framework - Integrating with Strategy and

Performance (COSO ERM 2017), which emphasises the importance of enterprise risk management in

strategic planning and incorporates it throughout the organisation, since risk influences strategy and

performance in all areas, departments and functions.

Management Report – Statement of Non-Financial Information 2022

40

The Risk Management and Control Policy (https://www.merlinproperties.com/en/corporate-

governance/corporate-governance-normative/ ) was initially approved by the Board of Directors in

February 2016, and updated in April 2022 at the proposal of the Audit and Control Committee.

As stated in the policy, MERLIN identifies and controls the risks arising from its activities and

manages the risks faced by the Group and its subsidiaries.

This policy establishes the general guiding principles, rooted in the perception that risk management

is an ongoing process based on the identification and assessment of the Group’s potential risks

according to its strategic and business objectives, the determination of action plans and controls for

critical risks, the supervision of the effectiveness of the controls designed and the evolution of

residual risk to be reported to the Group’s governing bodies.

MERLIN’s risk management is a process driven by the Board of Directors and senior management,

and each and every member of the organisation is responsible for it within their own purview.

Risk management, which is supervised by the Audit and Control Committee, allows Management to

effectively manage uncertainty and its associated risks, thereby improving the ability to generate

value.

With the support of the Internal Audit Department, the Committee uses risk management

methodologies to monitor the identification and assessment of the risks affecting each area’s

objectives.

Through the implementation of the plan, the Committee assesses and concludes on the adequacy

and effectiveness of the controls implemented by the Group, issuing recommendations as needed.

MERLIN’s risk management model

Management Report – Statement of Non-Financial Information 2022

41

In 2022, MERLIN carried out a ‘zero basis’ exercise to identify and assess MERLIN’s main corporate

risks:

•Compare the main competitors in the sector and review corporate risks and sustainability

documentation.

•Hold working meetings with MERLIN’s key staff to identify risks or update/adjust/calibrate

existing ones to bring them into line with the reality of the business, MERLIN’s plan and the

current environment and market situation.

•Group and classify the 106 risks identified based on the reporting categories (business,

resources, ESG) of the Risk Management System, identifying a new category related to

strategy.

•Review MERLIN’s 2022 materiality matrix and analyse the consistency of the 106 risks

identified with the matrix and the key aspects in relation to GRI reporting and the SDGs.

•Assess the risks identified (COO/Audit/MRL) based on the impact and probability criteria

established and the other attributes identified:

◦Impact: strategic, financial, stakeholder and reputational

◦Probability: timing and occurrence

◦Attributes: speed, persistence and adaptability.

•Update the Risk Map and digitalise it.

In 2022, MERLIN’s Risk Map was regularly updated to reflect every six months the perception of the

Company’s main executives and governing bodies of the risks faced by MERLIN.

MERLIN’s latest Risk Map, updated by the Audit and Control Committee and approved by the

Board of Directors in January 2023, includes a total of 27 key risks, as shown below:

Management Report – Statement of Non-Financial Information 2022

42

MERLIN’s Risk Management System assesses all risks in terms of impact and probability, obtaining a

residual risk indicator for the current year, identifies those KPIs and KRIs (forward-looking indicators)

to be reported, and assigns those responsible for reporting, and those responsible for implementing

or developing the mitigating measures identified for each of the risks.

In addition, all risks were assessed in terms of time frame (short term —12 months—, medium term

—12 to 36 months—, and long term —more than 36 months—), and in terms of speed, persistence

and adaptability.

•Short-term risks most notably include those related to increases in construction costs, raw

materials and energy supplies and their impact on the envisaged Capex works and on the

operating margin of the tenants.

•On the other hand, longer-term risks most notably include those related to changes in

consumer behaviour (remote working, e-commerce, etc.), failure to attract and retain talent,

risks related to climate change (lack of third-party traction for footprint reduction,

inefficiency in energy efficiency investments, natural disasters), and those risks related to

regulatory non-compliance (GDPR, occupational risk prevention, etc.).

Management Report – Statement of Non-Financial Information 2022

43

The various key risks identified are therefore classified into several key pillars to achieve the Group’s

objectives, such as:

•Strategic and governance risks: these affect the strategic objectives, leadership, and

benchmarking (being the benchmark REIT) and the values of transparency, ethics and

responsibility, and they affect the design and implementation of the Group’s strategy:

definition of the business model, adaptation to a change in the real estate cycle, delay in

strategic divestments, inadequate development of the governance system, succession plans

for key personnel, etc.,

•Business risks: these affect the strategic objectives of long-term value creation and the

generation of a sustainable and growing dividend, and are achieved mainly through the

Group’s various assets, grouped into the different business segments (offices, shopping

centers, logistics and data centers): loss of value of properties, delays and Capex cost

overruns, costs passed on to tenants, reduced tenant margin, etc.

•Resource risks: these affect the strategic objectives of generating a sustainable and growing

dividend and the values of transparency, ethics, and responsibility, and are achieved mainly

through the Group’s various internal and external resources (human, technological and

financial): macroeconomic conditions in Spain and Portugal, failure to attract and retain

talent, reliance on personnel and remuneration, cybersecurity breaches, technological

innovation, etc.

•Social and Sustainability risks: these affect the Group’s long-term sustainability and its

interaction with stakeholders, and are achieved mainly through the various actions carried

out and policies implemented by the Group to ensure the sustainability of its assets (physical

impact due to increased costs as a result of extraordinary events, transition costs due to

changes in customer expectations and preferences, sustainability of the supply chain, etc.);

for its various stakeholders (customers, suppliers, society, investors, shareholders, and

regulatory bodies): protecting the health of the users of the assets.

Management Report – Statement of Non-Financial Information 2022

44

Emerging risks

MERLIN has also identified two emerging risks. Emerging risks are considered to be those

that are relatively new, growing in importance, outside of the company and that will have an

impact on the business in 3-5 years, although the consequences of the risk may start to be

seen now.

•Risk of a change in the economic cycle: the rising inflation experienced in 2022 and

the interest rate hikes by central banks are accelerating the risk of an economic

recession. In this scenario, which is likely to begin in 2023 — but its duration is

currently difficult to predict —, it is logical that real estate asset valuations will be

negatively impacted by rising yields.

The Group has therefore anticipated possible downgrades in valuations by managing

its debt and signing a green corporate financing agreement with leading national and

international banks, which allows it to add € 660 million to its available liquidity,  and

thus ensuring the repayment of all debt maturities until 2026. The financing

agreement was closed at an average cost of MS + 126 bps and extends the average

maturity of its debt from 5.2 to 6.1 years, structuring its liabilities so as to be able to

meet the requirements of the new cycle.

•Risk of increased impact from climate change: One of the major breakthroughs of

COP26 was the recognition that we are falling short of the target set under the Paris

Agreement of not exceeding a +2°C rise in temperature (compared to pre-industrial

levels). It would be preferable to keep to an average of +1.5°C so that weather

conditions would not become unpredictable and extreme. By the time COP27 was

held in 2022, a 1.1º temperature rise had been reached in 2022. In other words,

there is only room for four tenths of a percentage point before the end of the

century to meet the most demanding target. The problem is that, according to the

latest Emissions Gap Report issued by the UN Environment Agency, if we only meet

the minimum requirements, we are looking at a 2.6° temperature rise. COP27

therefore assumes, to a certain extent, that we will no longer be able to avoid the

worst of certain extreme weather conditions that will result from exceeding 1.5°C.

But rather the objective now is to try to stay within the 2ºC threshold.

Aware of the importance of climate risk and its effect on its assets and their users, in

2022 the MERLIN Group began a detailed analysis of physical and transition risks in

accordance with the Task Force on Climate-related Financial Disclosures (TCFD)

methodology. This analysis identified the various physical risks to which each of the

assets in the portfolio would be exposed based on simulations of different IPCC17

scenarios and identified the various transition risks that are expected to have a

greater financial impact and an impact on the Group’s operations. See the TCFD

analysis in Appendix IV.

Management Report – Statement of Non-Financial Information 2022

45

17 Intergovernmental Panel on Climate Change

Identification of other risks and action plans

MERLIN set up its response plans through policies, procedures and controls that are adjusted

based on the different risks that affect or may affect the Company. The Group has therefore

defined and identified a series of different types of controls, designated the person responsible for

each control, and assesses on a regular basis the risk and its residual component after carrying out

and documenting the control. In addition, specific improvement plans have been established for

operational, strategic, compliance and reporting risks that are considered to be significant.

The Audit and Control Committee is committed to the risk management and control process,

approving policies, procedures, and control structures it considers necessary.

The Company’s General Management, the Finance Department and the Company’s other business

divisions analyse at their regular meetings the situation and evolution of the main risks affecting

the Group, taking corrective measures when considered necessary.

The following is a summary of the main mitigation measures implemented to manage the other risks

considered to be significant:

Identified risks	Action plans
Business risk management
•Business model definition •Occupancy rate of the assets / Sale of assets under development or being refurbished / Contract renewals •Fluctuating rent levels (real estate cycle; competition from new developments)	•Exclusively strategic Board meetings in which the business model and risks are reviewed and the various strategic alternatives are analysed based on the economic situation and the real estate cycle. •Monitoring external factors of the real economy with an impact on the value of the assets, i.e. factors that affect demand (rent renegotiations, unexpected tenant departures, potential future supply, etc.), and factors that affect the return and valuation of assets (interest rates, real estate market yields).

Management Report – Statement of Non-Financial Information 2022

46

Identified risks	Action plans
•Concentration of rents and solvency in top 10 tenants •Effect of inflation (CPI) on tenants •Delays and cost overruns in CAPEX investments (higher material costs, delayed deadlines, licences, etc.) •Decrease in operating margin of tenants and operators (increase in internal costs and raw materials) •Ability to achieve the desired asset mix (location, turnover and asset obsolescence) •Changes in user behaviour (less use of offices; remote working and hybrid models) •Excessive holdings of non-core assets; delay in divestments to raise funds	•Independent asset valuation every six months, rotation plan for appraisers, review of appraisals by the external auditor, and internal verification of the appraisal: monitoring of the discount rates applied in the appraisal and of the investment alternatives. •Ongoing monitoring of business indicators (occupancy, rent, vacancies, like-for-like, release spread, etc.) of the contracts for each tenant / operator, the concentration of gross rents for the largest tenants, the credit risk of the main tenants and the design of contingency plans for the potential departure of each major tenant. •Implementation of an internal marketing team that provides service to all business segments in the processes of attracting, marketing and renewing asset contracts. •Five-year Investment Plan that will allow the quality of a certain number of properties to be refurbished, which will contribute to an increase in gross rents and maximise the profitability of the current portfolio. •Non-core divestment programme approved by the Board of Directors and monitored monthly.
Climate change management and operational efficiency
•(Objectives) Failure to comply with GHG emission reduction commitments or errors in their measurement (scope 1 - 2). •(Objectives) Lack of traction/commitment by third parties in reducing the Group’s carbon footprint for its assets (scope 3). •(Preference) Change in customer expectations and requirements regarding sustainability, innovation and the environment	•Sustainable certification of assets: monitoring the objective of having almost all of its assets LEED and BREEAM certified, and maintaining accessibility certifications at centers. •Independent external validation of GHG emissions (scope 1 and scope 2), as certified by AENOR. •Energy efficiency: monitoring numerous initiatives linked to efficiency (MAEs), including the Photovoltaic Project. •Sustainability index reporting: monitoring and review of the information reported to the various sustainability indexes (GRESB, CDP, and DowJones Sustainability Index), analysing the scores obtained and establishing action plans for continuous improvement.

Management Report – Statement of Non-Financial Information 2022

47

Identified risks	Action plans
•(Costs) Increase in repair and maintenance costs (due to storms, snowfall, floods, heat waves) •Inadequate management of inputs (electricity, gas and water) and waste from an asset •(Investments) Inefficiency in energy efficiency investments / obsolescence of assets and replacement by assets with lower emissions •Increasing cost of raw materials/supplies due to sustainability requirements •Suppliers with low quality and ESG (supplier scoring) standards •Lack of environmental due diligence in the acquisition of assets.	•Study, design and upcoming implementation of a green clause in leases, where lessees who share energy information and reduce their carbon footprint will benefit from rent discounts. •Meters installation in all assets (and in lessee spaces), which allows us to obtain information on energy consumption in real time. •Sustainability Committee, which meets every two weeks, with members from various departments, to continuously monitor all actions related to the Group’s sustainability. •Identification of sustainable Capex initiatives to improve the energy efficiency of the assets, making them a priority and subject to special monitoring. •Changes to the Procurement Procedure, requiring an ESG questionnaire from suppliers with contracts for more than € 150 thousand and the calculation of their embodied carbon footprint for those with contracts for more than € 3 million.
Talent creation
•Failure to attract new talent (loss of attractiveness) •Failure to retain existing talent (motivation, ambition, remuneration, career plan) •Inadequate staff structure, composition and sizing (business vs support) •Lack or non-existence of adequate training plans	•Approval of a new Long-term Remuneration Policy that introduces certain changes to adapt it to the new developments in the Ley de Sociedades de Capital and bring it into line with the interests of stakeholders, in particular those of its shareholders. •Short-term Remuneration Incentive Plan: with a weighting of non-financial targets at a maximum of 30% •Variable remuneration in line with the achievement of targets linked to the Company’s short- and long-term strategic plans and the interests of shareholders, without being guaranteed, but sufficiently flexible to not pay, or partially pay, this component if the targets set are not achieved.

Management Report – Statement of Non-Financial Information 2022

48

Identified risks	Action plans
•Failure to comply with occupational risk prevention regulations with employees •Lack of communication and traceability of the strategy in long-term objectives •Inadequate (or non-existent) management of succession plans for key personnel (senior management and other staff) •Failure to comply with inclusion, diversity and equality plans	•Succession plans for key personnel reviewed by the Appointments and Remuneration Committee. •Employee evaluation based on objective criteria to ensure appropriate remuneration of each employee’s professional value, experience, dedication and responsibility. •Registered Equality Plan and Sexual Harassment Action Protocol disseminated throughout the company. •Outsourced occupational risk prevention plan, with particular emphasis on early detection of COVID-19 infections.
Management of stakeholders
•Inadequate management of the impact of CSR activity (Corporate/centers) •Inadequate management of the (physical and social) impact of our assets on local communities •Failure to comply with local taxation (property taxes, tax on economic activities, duties, no- parking zones, environmental taxes) and its impact on local communities •Failure to comply with occupational risk prevention regulations with third parties •Protecting the health (well-being) of the users of the assets	•Measurement the ongoing social impact using the London Benchmark Group (LBG) methodology, which allows us to quantify the impact of all actions with social implications. •Implementation of general controls (Strategy and Tax Policy), tax department regulations and a protocol for reviewing compliance with Spanish Law 16/2012. •Appointment of a Safety and Health Coordinator for all projects and a Business Coordinator for all works when required, and monthly monitoring of the accident rate. •Implementation of services (MERLIN HUB, urban gardens, etc.), and investments in HVAC to improve mobility and experience and to protect the health of our users.
•Inadequate management of data protection and privacy of the users of the assets

Management Report – Statement of Non-Financial Information 2022

49

Identified risks	Action plans
Capital management
•Increase in the Company’s financing costs (rating, rate hikes, etc.) •Volume of short-term debt •Compliance with financial covenants •Management of strategic investments/ divestments •Access to sustainable financing (non- compliance with required KPIs) •Macroeconomic conditions in Spain and Portugal	•Strict financial policy, by continuously monitoring the debt markets (mortgage, corporate banking, bonds), monitoring the leverage ratio, maturities and average cost of debt, maintaining lines of credit open and reports from the external auditor on compliance with covenants. •Investment procedures and control structures: documentation on the operation of the financial models, implementation of modification and integrity controls in all models. •Reconversion of all corporate debt to green financing (corporate bonds and debt), subject to compliance with certain Sustainable ESG KPIs. •Monitoring of the political and regulatory environment: regular reporting of new sector regulations, analysis of drafts of new regulations anticipating impacts and ongoing contact with specialised advisors.

3.3 Ethics and compliance

MERLIN is firmly committed to ethics, transparency and the creation of value for its stakeholders in

carrying out its activities.

MERLIN’s Code of Conduct, which was updated in 2021, is the document that reflects MERLIN’s

commitment to the principles of business ethics and transparency in all areas of activity, establishing

a set of principles and guidelines for conduct aimed at ensuring the ethical and responsible

behaviour of all Group professionals in the performance of their activities.

Management Report – Statement of Non-Financial Information 2022

50

All professionals receive annual training on the Code of Conduct and regular internal

communications. All new hires must also sign the Code of Conduct. In addition, MERLIN’s contracts

with suppliers and lessees include clauses referencing both MERLIN’s compliance policies and its

Code of Conduct.

As stated in the Code, MERLIN has a Whistleblower Channel (canal.etico@merlinprop.com), which is

a confidential channel for reporting any violations of the law and the Code of Conduct, and any

potential financial, accounting or other irregularities. This channel is available to all professionals, is

available to the public and can be accessed by any third party who wishes to do so on the corporate

website.

In 2022, zero complaints were received (4 complaints in 2021). Those filed in the previous year were

investigated following the established procedure, duly processed and reported to the Board of

Directors, and the conclusion reached was that there was no need to take action against any MERLIN

professional18.

Ethical and honest behaviour is inextricably linked to strict compliance with the regulations in force.

Since its inception as a Group, MERLIN has had the bodies, policies and procedures in place to

guarantee this integrity at all levels. The Group has an integrated, efficient internal control model,

aligned with best practices, which ensures compliance with the requirements associated with the

regulations given the highest priority, and currently has the following tools for this purpose:

•Crime Prevention Model (CPM), which covers all activities and companies with

operations that are controlled by MERLIN.

•Anti-money laundering mechanisms: MERLIN has mechanisms in place to comply with

the requirements established in anti-money laundering regulations, including a

Prevention Manual (updated in 2021), annual external audits, an Internal Control Body

(ICB), a Customer Acceptance Policy and a Technical Unit for the prevention of money

laundering. All these mechanisms have been adapted to cover the Company’s activities

in Portugal.

•System of Internal Control over Financial Reporting (ICFR): MERLIN has an effective

and reliable financial control model, based on identifying key risks and selecting

relevant processes for financial reporting, the methodology and procedures of which

are documented in the ICFR Manual.

•System of Internal Control over Non-Financial Reporting (ICNFR): MERLIN has an

effective and reliable model for controlling non-financial information, based on

identifying key risks and selecting relevant processes for financial reporting, the

methodology and procedures of which are documented in the different ICNFR indicator

manuals.

•Personal data protection mechanisms: The Group has mechanisms in place to ensure

that personal data is processed correctly, including a DPO (Data Protection Officer) and

the Personal Data Protection Policy.

Management Report – Statement of Non-Financial Information 2022

51

18 The nature of the complaints received in 2021 was as follows: two concerning employees’ interactions with Group

suppliers; one concerning the incorrect use of corporate mail; and one concerning the conduct of certain Group suppliers;

none of them concern corruption and/or bribery.

•Also worthy of note in 2022 is the continuation of the global training for the entire

workforce as part of Regulatory Compliance Training aimed at all of the Group’s

professionals, with a high level of participation (over 91%) by staff, executives and

Board members. This year, compliance training was included as part of the onboarding

process for new employees and global training focused on issues related to the Code of

Conduct, sustainability, and the new 2022 policies (in particular the Policy on Respect

for Human Rights and the Personal Data Protection Policy).

Anti-fraud and anti-corruption measures

In accordance with its Articles of Association, MERLIN aims to ensure that its conduct and that of the

people related to it comply with and adhere to current law, its corporate governance system and

with generally accepted principles of ethical and social responsibility. MERLIN has a Criminal

Compliance Management System that is based on MERLIN’s firm commitment to the values and

principles framed within the rejection of and zero tolerance for any unlawful act.

These principles are set out in the Code of Conduct approved by the Board of Directors in 2015 and

updated in 2021, and are projected onto the organisation’s employees, executives and governing

bodies, with a strong message of rejection of and zero tolerance for any unlawful conduct or

behaviour that violates the Group’s policies, values and principles.

The Criminal Compliance Policy helps to reinforce the Company’s commitment to good corporate

governance in accordance with its values and principles, and on the other hand, to diligently exercise

due control within the organisation over the Group’s managing bodies, executives and employees to

minimise as much as possible the potential risk of bad practices or non-compliance with regulations

in the performance of its activities.

Furthermore, the Anti-Corruption, Fraud and Bribery Policy (updated in 2021) is based on the

principle of zero tolerance for unlawful or criminal acts and, therefore, does not allow any of its

employees, regardless of their hierarchical or functional level, to become involved or participate in

any transaction or business within its business activity that involves a criminal or fraudulent act or

goes against the principles set out in its Code of Ethics; and the Public Authority Relations Policy,

which aims to establish the basic principles governing the Group, and the rules of conduct for

MERLIN Group employees in their interactions with public authorities to establish preventive actions

and proactive steps in the fight against corruption and bribery in all areas of its business activity.

As regards MERLIN’s Compliance System:

–The certification of MERLIN’s Compliance Management System was renewed in 2022 under

the UNE 19601 standard for all Group companies, including those in Portugal.

This standard (UNE 19601) is the national standard for best practices in management systems for

preventing and detecting crime and is the benchmark standard for criminal compliance systems.

–Likewise, the certification of MERLIN’s Anti-Corruption and Bribery System was renewed in

2022 under ISO 37,001, the international standard in best practices against corruption and

bribery.

Management Report – Statement of Non-Financial Information 2022

52

Both certifications accredit that MERLIN’s Crime Prevention and Detection Model meets the

standard’s requirements and is also effective in its commitment to ongoing improvement to

incorporate the highest standards of compliance.

Among other aspects, MERLIN’s Crime Prevention and Detection Model includes a map of risks or

criminal offences to which the Group is exposed due to its activity and identifies, documents and

executes more than 90 controls linked to such offences, demonstrating that the organisation has put

in place the mechanisms and controls within its reach in the area of criminal compliance.

Respect for human rights

In 2022, the Board of Directors approved the Policy on Respect for Human Rights, in the interest of

expressly placing on record the commitment of the Company and the Group to human rights

recognised in Spanish and international law, and establishing the principles to be applied by the

Group for human rights due diligence, in accordance with the Guiding Principles on Business and

Human Rights, the OECD Guidelines for Multinational Enterprises, the principles underlying the

United Nations Global Compact, the Tripartite Declaration of Principles concerning Multinational

Enterprises and Social Policy, the conventions of the International Labour Organisation, the

Sustainable Development Goals (SDGs) adopted by the United Nations, the Company’s Code of

Conduct, and any documents and texts that may replace or supplement the above.

MERLIN and its Group are committed to guiding their actions based on the following principles:

•Reject discriminatory practices or practices that undermine the dignity of individuals on the

basis of their age, gender, marital status, nationality, religion, disability, race or ethnicity, or

any other personal circumstance.

•Reject child labour and forced or compulsory labour.

•Respect freedom of association and collective bargaining

•Protect the health of workers and provide decent employment.

•Respect the rights of local communities and other stakeholders.

•Respect the environment and protect natural resources.

•Integrity, zero tolerance for corruption.

•Implement monitoring and control procedures to identify, with due diligence, potential

situations of risk of human rights violations, and establish mechanisms to prevent and

mitigate these risks.

To achieve these objectives and commitments, MERLIN assumes and promotes the following basic

guiding principles that should govern its actions and those of the Group in all areas:

a)Promote a culture of respect for human rights and actions aimed at raising the

awareness of the Group’s professionals, suppliers, contractors and third parties with

which professional relationships are maintained;

b)Identify the potential impacts that the operations and activities carried out by the

Group, either directly or through a third party, may have on human rights;

Management Report – Statement of Non-Financial Information 2022

53

c)Assess the effectiveness of the due diligence system through monitoring indicators,

with a special focus on those activities where there may be a higher risk of human

rights violations. This assessment will be supported by the Group’s internal control

systems;

d)Complaint and grievance mechanisms, with sufficient guarantees and adequate

resolution procedures, to address potential cases of human rights violations. MERLIN

has set up an ethics mailbox at the address canal.etico@merlinprop.com, which can

be used to report any indication of irregularities in the actions or conduct of

employees, executives or collaborators of the Group companies that could imply a

breach of the Code of Conduct or that could be considered an act of discrimination,

corruption, extortion, bribery or any other type of offence.

e)React by diligently adopting the appropriate measures if a violation of human rights

is detected in the Group’s operations or in those of its customers or suppliers, and

inform the competent authorities so that they can take the appropriate actions

when this violation may constitute an administrative, criminal or any other type of

offence.

In particular, and with regard to its Supply Chain, MERLIN will encourage suppliers with which the

Group companies interact to also show strict respect for the human rights as recognised in

international law and the national laws of each of the countries in which they operate.

MERLIN considers its suppliers to be a key partner for compliance with this Policy and, therefore,

they assume a shared responsibility with the Group. The Company will therefore promote respect

for human rights throughout its supply chain and, in particular, will insist that the commitments

contained in this Policy be extended to its suppliers and their employees, always respecting their

management autonomy and following the practices and procedures contained in the Group’s

procurement regulations.

In accordance with its Procurement Policy, MERLIN carries out ESG assessments of key suppliers of

the Group companies, which include an analysis of fundamental rights and procedures to help those

suppliers with which it has contractual relationships to undertake, within the scope of their

competencies, to protect human rights.

MERLIN will ensure that its business partners are aware of and respect the principles and

commitments made in this policy.

In 2022, MERLIN requested information from 110 suppliers representing 72% of CAPEX as of 31st

December 2022, requesting information and details on environmental, social and regulatory

compliance matters, including aspects regarding human rights compliance (policies, demands, etc.)

for each third party assessed.

Lastly, no complaints of human rights violations were recorded in 2022.

Management Report – Statement of Non-Financial Information 2022

54

4. Climate change management and operational efficiency

The Group’s environmental sustainability is a key aspect to ensure compliance with its objectives

at all levels and to enhance its value creation, with active management of climate change and

efficiency in the use of resources as key pillars. 

2022 MILESTONES	FUTURE OBJECTIVES
•Launch of the pathway to net zero carbon emissions. •Definition of decarbonisation targets and approval of these targets by the SBT. •Quantification of climate change risks and their integration into the Group’s risk management in accordance with TCFD.    •Implementation of the green clause for leases. •Creation of the Biodiversity Policy. •Adherence to the SDGs.	•Creation of the Group’s own carbon sinks to offset residual emissions. •Gradual replacement of production equipment that uses fossil fuels. •Expansion of asset management systems to optimise energy consumption as much as possible. •Setting footprint limits in the construction phases (embodied carbon).
KEY INDICATORS FOR THE YEAR

	Like for Like Data		Absolute Data
	2022 Data	2021-2022 Evolution	2022 Data	2021-2022 Evolution
Energy consumption (GJ)	360,268	-2%	436,344	0%
Energy consumption (MwH)	100,074	-2%	121,206	0%
Greenhouse gas emissions (tCO2eq) Market-based	2,580	-23%	2,729	-21%
Greenhouse gas emissions (tCO2eq) Location-based	14,167	11%	17,210	9%
Water withdrawal (m3)	609,417	18%	680,084	27%
Waste (ton)	6,992	20%	7,512	21%
% of self-produced energy	n/a	n/a	1%	n/a
% of portfolio (in terms of GAV) certified with LEED, BREEAM	n/a	n/a	93.6%	2.5%
% of the portfolio certified on ISO 14001 y 50001	67%	4.8%	37%	0.7%

Management Report – Statement of Non-Financial Information 2022

55

4.1 Key environmental reporting criteria and concepts

a)Methodology

MERLIN includes information on environmental performance of its asset portfolio in accordance with

the methodology established by EPRA Sustainability Best Practice Recommendations (3rd edition,

2017) and based on the GRI (Global Reporting Initiative) Indexes.

b)Reporting scope

Asset categories

MERLIN reports environmental performance information for the office, logistics and shopping centre

portfolios19.

Type of surface area control

For more accurate performance management of its assets in terms of energy consumption

efficiency, water withdrawal and carbon footprint, MERLIN separates the data for these indicators by

type of property:

•Assets over which the Group exercises operational control. These are generally "multi-

tenant" assets where the Group continuously assesses their environmental impact.

•Assets over which the Group does not exercise operational control. For these "single-tenant"

assets, although MERLIN is the holder of some of the utility contracts, the consumption

management tasks fall to the lessee of the asset.

•MERLIN’s corporate headquarters and LOOM spaces leased by the Group.

In particular, MERLIN reports the information for the environmental indicator of waste management

in terms of those assets where it is responsible for waste management, since in some cases this

management is carried out by the owners’ associations.

Reported data

The Group has established the following reporting criteria taking into account the criteria set out

above and the condition of the asset:

Management Report – Statement of Non-Financial Information 2022

56

19 The Company’s policy excludes from the perimeter all assets that are under development or refurbishment. Data center

assets are currently excluded from the environmental indicators as they are in the construction phase.

	Energy	Water	Waste	Certificate s
Land20	x	x	x	x
WIP21	x	x	x	ü
Assets in operation full year22	ü	ü	ü	ü
Assets in operation part of the year2323	ü	ü	ü	ü /x

Environmental performance data are reported both in absolute terms and in relative terms, known

as intensity, i.e. absolute consumption or emissions divided by the surface area for which the

consumption or emissions are reported.

With these considerations in mind, the environmental indicators are calculated taking into account

the percentage of GLA (Gross Leasable Area):

•To measure the intensity of assets that are in operation for part of the year, the asset’s

GLA is weighted by the time it has been in operation. This is a change from the data

reported by MERLIN in previous years, which included the full GLA.

•Furthermore, in the case of assets that form part of an owners’ association, the share of

equity is applied to the energy and water consumption data. In these cases, the surface

area taken into account in the calculations represents MERLIN’s share of equity in the

asset.

•Lastly, the total GLA of the assets is considered in the calculation of energy and water

intensity, except in those cases where MERLIN only has control over the management of

consumption in the common areas, in which case only the surface area of these

common areas is considered.

	Energy % GLA	Water % GLA	Waste % GLA	Certifications % GLA
Offices	73%	76%	62%	95%
Logistics	43%	24%	2%	82%
Shopping Centres	100%	100%	88%	100%

Management Report – Statement of Non-Financial Information 2022

57

20 Plots of land acquired by the Group on which construction has not yet begun

21 WIP: Assets under construction or refurbishment/renovation

22 Assets in operation for the full fiscal year

23 Assets that are in operation for part of the fiscal year, if the asset is in operation at the end of the fiscal year, the

information on certifications is reported

Absolute scope and like-for-like scope

Based on the EPRA sBPR Guidelines, MERLIN reports on a series of environmental indicators or KPIs

(integrated in the EPRA Sustainability Performance Measures). These KPIs cover information on

energy consumption, GHG or Greenhouse Gases emissions, water withdrawal and waste

generation24.

There are two different types of KPIs: total or absolute KPIs and like-for-like KPIs. Absolute KPIs are

calculated in terms of the total asset portfolio, while like-for-like KPIs are calculated considering only

assets that have been in continuous operation for the last three years.

Environmental performance data is reported including the degree of coverage of each KPI. Coverage

is defined as the proportion of assets for which there is information available to calculate the

respective KPI with regard to total assets, calculated both in terms of the number of assets and

surface area of the assets.

In 2022, MERLIN updated the criteria for calculating its GHG emissions, based on operational control

and its share of equity in the assets as established in the GHG Protocol25, using the market-based

method, based on which the data on emission factors arising from electricity consumption must be

obtained from the suppliers from which the electricity has been purchased. The Group previously

calculated the emission factor based on the electricity mix for Spain and Portugal (location-based

method).

Regarding the type of emissions, they are reported in Scope 1, 2 and 3, as described below:

1)Scope 1, which includes direct GHG emissions:

•Associated with fuel consumption in fixed installations of assets with operational

control.

•Associated with fugitive emissions of refrigerant greenhouse gases.

2)Scope 2, which includes indirect GHG emissions:

•Associated with electricity consumption in installations.

•Associated with thermal energy consumption in installations.

3)Scope 3, which are direct emissions from fuel consumption at fixed installations of assets not

under operational control and indirect emissions as a result of the company’s activities at

sources that are neither owned nor controlled by the company (see Appendix II of this

report).

In view of the above, the data for the last two years have therefore been recalculated, for easier

year-on-year comparability.

4.2 Environmental management and climate change systems

As it is responsible for the management of its portfolios, MERLIN has implemented an Integrated

Management System (IMS) that includes the Environmental Management System and the Energy

Management System. The IMS is certified under the reference standards UNE-EN ISO 14001:2015 for

the Environmental Management System and UNE-EN ISO 50001:2018 for the Energy Management

System.

Management Report – Statement of Non-Financial Information 2022

58

24 The full definition of these KPIs can be found in more detail in Appendix I. “EPRA sBPR Table of Contents” of this NFIS.

25 GHG Protocol (Green House Gas Protocol) establishes global standardized frameworks for measuring and managing

greenhouse gas (GHG) emissions from public and private sector operations, value chains and mitigation actions.

The Environmental Management System implemented allows the environmental performance of its

activity to be controlled, thus ensuring that it has a system in place to identify and comply with all

applicable legal requirements of an environmental nature, and to identify and manage the

associated environmental risks, demonstrating its commitment to the ongoing improvement of its

environmental performance.

The Energy Management System allows the Company to improve energy efficiency, reduce

consumption, improve operations and activities, and reduce emissions, demonstrating its

commitment to the ongoing improvement of its energy performance and efficiency.

Thus, in 2015 the Company began an ambitious plan for ISO 14001 (environmental management)

and ISO 50001 (energy management) certifications to maintain and expand the number of real

estate assets that have at least ISO 14001 certification, and subsequently ISO 50001 certification

(based on the understanding that it is a natural step to obtain ISO 14001 certification before aspiring

to ISO 50001).

This plan includes office buildings, shopping centres and logistics warehouses. In 2022, 89 buildings

comprising a surface area of 1,211,745 sqm were certified under ISO 14001, 6 more buildings than in

2021.

The Group also continued the process of implementing an Energy Management System under the

ISO 50001 standard, which began in 2017. Currently, 84 buildings are certified comprising a surface

area of 1,151,751, 5 more than in 2021.

The target for the assets included in the Energy Management System certified under ISO 50001 is to

reduce energy consumption by 8% compared to the figure recorded in 2021 (96.71 kWh/sqm

occupied), based on the implementation of ESMs (energy saving measures).

The Group adheres to the precautionary principle through the Environmental Management System,

which identifies the most significant environmental impacts of its activities and establishes the

mechanisms necessary to identify, assess and control these impacts.

The Group allocates 8.11 FTEs (3.12% workforce) to environmental risk prevention, considering the

dedication of the governing bodies, senior management, and prevention and management teams.

With regard to cover for potential environmental risks, the Group has third-party liability insurance

that expressly covers any third-party liability arising from contamination or pollution of the

atmosphere, soil or water, provided that these harmful actions occurred as a result of an accidental,

sudden, unforeseeable, unexpected and unintentional cause.

This insurance also covers the costs of removal, cleaning or disposal of contaminating substances for

which MERLIN is legally liable due to contamination of third-party sites or facilities.

In 2022, following an analysis, the Group did not consider it necessary to make provisions for

potential environmental risks.

Management Report – Statement of Non-Financial Information 2022

59

4.3 Development and operation of sustainable assets

Integrating sustainability into each of the different phases of the asset’s life cycle has always been a

priority for MERLIN and it has remained constant through the different phases life-cycles:

Acquisition of new land or buildings

In the due diligence process for investments in land and buildings, MERLIN considers environmental

and social sustainability aspects such as the property’s construction characteristics, the asset’s

energy efficiency, alignment with the Group’s strategy regarding sustainable mobility, or the status

of legal compliance and sanctions. Furthermore, as a starting point, the Group’s strategy is to

prioritise the location of assets in urban environments as this in and of itself ensures that no

ecologically critical or endangered areas will be affected.

MERLIN is therefore committed to ensuring that:

•100% of office and shopping centre assets are located within 10 minutes/1km of public

transport.

•0% of assets are located in protected or ecologically critical areas.

•100% of acquisitions take environmental and social criteria into account.

MERLIN has made progress fulfilling these commitments. For example, 100% of the Company’s

offices and shopping centres are accessible by public transport and all assets are located in urban

areas that do not impact protected or ecologically critical areas. MERLIN also continues to work on

integrating environmental and social criteria in its acquisitions in line with LEED and BREEAM

certifications.

Developments and refurbishments

Sustainability is a factor that enters into the design phase of MERLIN’s new developments and

refurbishments, which raises the value generated by the project from the initial stages. The

Company also sets sustainability requirements for contractors, guides the projects for the

certification of its assets based on sustainable construction schemes, and reduces and mitigates the

negative impacts associated with the construction. In this phase, the Group replaces or installs

resource-efficient equipment, systems and devices.

MERLIN has developed a new policy that establishes the obligation to calculate the embodied carbon

footprint for projects over € 3 million and give an ESG performance rating to suppliers with projects

to be carried out for over € 150 thousand.

MERLIN also seeks synergies between its assets to minimise and reuse the waste generated during

refurbishment. Examples of this include the building materials, false ceilings and light fixtures that

were reused in other assets following the refurbishment of Arturo Soria 343 or the recycling of

technical floor plates from Cerro de los Gamos. In 2022, materials from the Plaza Ruiz Picasso

building were used for the construction of the Cerro de los Gamos Business Park, Atica 1, Churruca

and Campo de las Naciones business park.

The Group’s roadmap calls for more circularity among contractors in the development and

refurbishment processes and, therefore, the Group plans to include these criteria in the evaluation

of the bids submitted in tender processes.

With regard to biodiversity in developments and refurbishments, MERLIN studies the ecological

value of the environment and proposes measures to preserve it, with priority given to native plant

species in landscaped areas around our assets, avoiding exotic species. Likewise, although implicit in

Management Report – Statement of Non-Financial Information 2022

60

its expansion strategy, the Group avoids deforestation in its developments and refurbishments by

acquiring land in urban settings or with previous uses.

MERLIN is therefore committed to ensuring that:

•100% of developed/refurbished assets have sustainable construction certification.

•100% of critical suppliers will be evaluated on ESG aspects in 2023.

MERLIN has made progress in living up to these commitments by obtaining LEED or BREEAM

certification for all developments and refurbishments.

Management of properties in operation

When operating its assets, MERLIN is committed to monitoring and actively managing consumption,

taking steps to optimise consumption, working with tenants and operators, reducing negative

impacts on the asset’s sustainability, evaluating suppliers based on sustainability criteria and

certifying assets using recognised systems to measure sustainability performance.

Given that it is during the operating phase when MERLIN has the greatest capacity to act, the Group

focuses its efforts on maximising the integration of sustainability during this phase. The following

sustainability initiatives are currently being implemented in the portfolio in operation:

•Monitor the environmental performance of each asset throughout the chain of command

and establish specific action plans on a quarterly basis.

•Approve an investment plan for the installation of equipment (lighting, temperature, etc.)

that improves asset performance.

•Include green clauses to encourage energy efficiency in the tenant’s operations.

•In line with its sustainability roadmap, MERLIN continues to install photovoltaic panels on

assets in its strategic portfolios (offices, shopping centres and logistics assets) as part of the

Project SUN, through which it aims to position itself as an essential player in the energy

transition as the largest developer of self-generated energy in its sector. Significant efforts

have been made this year in implementing the project, having carried out 19 projects

representing 10.9 MW additional MW in the year and implying a total capacity installed of

11.9 MW. The new facilities include 10 office assets, 5 logistics assets and 4 shopping

centres. Following the completion of Phase I of the Sun Project, the peak installed capacity is

expected to be 39.8 MW.

•Likewise, 100% of MERLIN’s assets under operational control consume renewable electricity

with a guarantee of origin certificate. 

•In an effort to improve the circularity of its assets, MERLIN implements different initiatives

to optimise the use of materials, reduce waste generation and manage the generated waste

more efficiently. All assets (offices and shopping centres) therefore have waste sorting

systems.

MERLIN’s main objective in the operation of its assets is having 100% of assets with photovoltaic

panels installed 26.

Management Report – Statement of Non-Financial Information 2022

61

26 This commitment applies to those assets where installation is feasible based on the technical and/or structural

characteristics of the assets.

4.4 Environmental performance of MERLIN Properties’ portfolio

In line with market best practices in sustainability and to ensure that the results obtained are

comparable to those reported by other companies in the sector, MERLIN reports on the

environmental performance of its portfolio in accordance with the EPRA Sustainability Best Practice

Recommendations (3rd edition, 2017)27.

For more information on the environmental performance of MERLIN’s portfolio, and the

methodology used, please refer to “Appendix I. Environmental performance reporting in accordance

with the EPRA Sustainability Best Practices Recommendations (sBPR)”.

Key environmental performance indicators of MERLIN’s portfolio28

		2020		2021		2022
		Absolute	LfL	Absolute	LfL	Absolute	LfL
	Energy	365,134 GJ 0.210 GJ / sqm 101,426 Mwh 0.058 Mwh / sqm	336,735 GJ 0.261 GJ / sqm 93,537 Mwh 0.072 Mwh / sqm	436,963 GJ 0.223 GJ / sqm 121,378 Mwh 0.062 Mwh / m2	368,763 GJ 0.283 GJ / sqm 102,434 Mwh 0.079 Mwh / sqm	436,344 GJ 0.219 GJ / sqm 121,206 Mwh 0.061 Mwh / sqm	360,268 GJ 0.277 GJ / sqm 100,074 Mwh 0.077 MWh / sqm
	Water	480,580 m3 0.350 m3 / sqm	467,187 m3 0.361 m3 / sqm	535,055 m3 0.377 m3 / sqm	516,756 m3 0.392 m3 / sqm	680,084 m3 0.477 m3 / sqm	609,417 m3 0.463 m3 / sqm
	Waste	4,951 tons	4,949 tons	6,195 tons	5,847 tons	7,512 tons	6,992 tons

With respect to the energy consumption of the Like for Like29 assets, there has been a 2.3%

decrease compared to 2021, mainly due to the implementation of energy saving measures and the

control of the facilities, since it was expected that there would be an increase in this consumption

compared to 2021 due to the disappearance in 2022 of the health restrictions due to the COVID-19

pandemic and the increase in occupancy in offices, logistics activity and the influx in shopping

centres.

In relation to energy intensity, in the Like for Like portfolio it was 2.8% lower compared to 2021,

and in the absolute portfolio, 1.4% lower compared to 2021.

In relation to performance data, in Like for Like terms, the volume of water withdrawal in 2022 in

the assets in which MERLIN exercises operational control was 609,417 m3 divided between

consumption in office assets (42%), logistics warehouses (7%) and shopping centres (51%).

Compared to 2021, there has been an increase of 17.9% mainly due to the increase in inflow in the

27 The third and most recent edition of the EPRA (European Public Real Estate Association) sBPR Guidelines from 2017 take

the GRI (Global Reporting Initiative) Standards as a starting point. These standards are the most important sustainability

reporting standard in the world. However, they are intended for a wide range of companies and as such they are generic

and broad in nature. As a result, in some cases they do not address the specific characteristics of the real estate sector.

Accordingly, the EPRA sBPR Guidelines provide very specific reporting criteria that sum up the requirements in the GRI

Standards. Following the recommendations of the EPRA sBPR Guidelines, Appendix I includes a series of tables that provide

a full breakdown of the portfolio’s environmental performance data.

28 The environmental indicators reported in the infographic only include information on assets over which MERLIN

exercises operational control.

29 The assets included are those that have been in continuous operation for the last three years.

office and shopping centre portfolio (+19.5%) as a result of the improvement in the COVID-19

pandemic situation and the high temperatures recorded in the summer period.

Energy consumption

MERLIN collects information on energy consumption of its assets under operational control, assets

not under operational control, MERLIN’s headquarters in Madrid and the LOOM spaces in Huertas

and Salamanca. The breakdown of energy consumption below includes consumption of electricity,

fuel (natural gas and diesel) and district heating & cooling.

•Energy consumption at assets over which MERLIN exercises operational control

ENERGY CONSUMPTION OF MERLIN’S ASSETS UNDER OPERATIONAL CONTROL30

In relation to the assets over which MERLIN has the capacity to control and evaluate their energy

consumption levels, the Company has information in absolute terms for 56% of the portfolio in

terms of surface area.

Management Report – Statement of Non-Financial Information 2022

63

30 The total surface area of the assets has been considered in the calculation of energy intensity, except in those cases

where MERLIN only has control over the management of consumption in the common areas, in which case only the surface

area of these common areas is considered.

Management Report – Statement of Non-Financial Information 2022

64

Management Report – Statement of Non-Financial Information 2022

65

MERLIN has maintained its commitment to renewable energy through the production and self-

consumption of photovoltaic energy at its assets and by increasing the number of assets that are

supplied with renewable energy with a guarantee of origin. Green electricity consumption

represents 99.2% of total electricity consumed by assets under operational control in 202231.

Additionally, MERLIN acquires renewable energy certificates (RECs) within the framework of its LEED

and BREEAM certificates. Thanks to this green energy purchase mechanism, the Group acquired a

total of 12,627 GJ in 2022, worth approximately $ 19,727.

Water withdrawal

With regards to water withdrawal of the assets under management, MERLIN has the information of

54% of the portfolio, in terms of surface area.

WATER WITHDRAWAL FROM MERLIN’S ASSETS UNDER OPERATIONAL CONTROL32

Management Report – Statement of Non-Financial Information 2022

66

31 The remaining electricity consumption (2,936 GJ, 0.8% of total electricity consumption) corresponds to the electricity

that comes from conventional electricity suppliers.

32 The total surface area of the assets has been considered in the calculation of energy intensity, except in those cases

where MERLIN only has control over the management of consumption in the common areas, in which case only the surface

area of these common areas is considered.

Waste management

Within the framework of the ISO 14,001 Environmental Management System, MERLIN takes a

systematic approach to waste management, separating waste at source according to its

characteristics (including separation of hazardous and non-hazardous waste). Given the type of

activity carried out by the Group, the hazardous waste generated by the assets is negligible in terms

of weight compared to non-hazardous waste.

MERLIN has information on the final destination of 60% of the waste generated by the assets under

operational control in its portfolio. In addition, practically all managed waste undergoes some sort of

recovery process. The quantities of waste that undergo different types of treatment on a portfolio-

by-portfolio basis are given below.

Management Report – Statement of Non-Financial Information 2022

67

The like for like increase is mainly due to the recovery to pre-covid levels of the footfall in the

shopping centres (+19.5%).

In the coming years, the Group will remain focused on continuously improving the identification and

management of waste, maximising the amount of waste that can be recovered and/or recycled and

minimising the volume of waste not classified or sent to the landfill. The Marineda shopping centre,

which continues to hold the “Zero Waste” certification awarded by AENOR is notable in this regard.

Due to its activity, MERLIN no longer considers food waste to be a material aspect. However, the

Group promotes initiatives such as Too Good to Go at its shopping centres, which helps to reduce

food waste at its assets.

Management Report – Statement of Non-Financial Information 2022

68

4.5 Decarbonisation of MERLIN Properties’ portfolio

MERLIN’s progress over the last few years has enabled the Company to define its emissions

reduction strategy or “Pathway to Net Zero” for 2030, thus getting a head start on the European

strategy for decarbonisation of the economy and ensuring the present and future survival of the

Company and its assets.

MERLIN’s Pathway to Net Zero is a roadmap that outlines the way to improve not only the

performance of the Company and its assets under operational control, but also the behaviour of the

key agents responsible for MERLIN’s emissions along its value chain, including suppliers and tenants.

In 2022, MERLIN updated the criteria used for the calculation of emissions, using the market-based

method33 as established in the GHG Protocol guidelines.

	2020                                Absolute	2021                                Absolute	2022                                Absolute
Market-based                    Scopes 1 y 2	3,069	3,469	2,729
Scope 1	2,541	2,676	2,670
Scope 2                          Market-based	528	793	59
Intensity tCO2eq/sqm	0.002	0.002	0.002
Scope 3	n/d	n/d	n/d

Management Report – Statement of Non-Financial Information 2022

69

33 Market-based method calculates emissions based on the electricity that organizations have chosen to purchase. The

difference is that the market-based method takes into account the use of renewable energy outside the consumption

location as a generator of 0 carbon emissions, while the location-based method assigns the average local grid emission

factor to renewable use outside the consumption location.

MERLIN continues to report its emissions under the location-based method34.

	2020                                Absolute	2021                                Absolute	2022                                Absolute
Location-based                    Scopes 1 y 2	12,773	15,824	17,210
Scope 1	2,541	2,676	2,670
Scope 2                          Location-based	10,232	13,148	14,540
Intensity tCO2eq/m2	0.009	0.010	0.011
Scope 3	n/d	111,627	133,674

4.5.1. Scope 1 and scope 2 greenhouse gas (GHG) emissions

The information provided below describes the calculation of the greenhouse gas (GHG) emissions

associated with electricity and fuel consumption (natural gas and diesel), district heating & cooling

and the refrigerant gas recharges for the cooling systems recorded at assets under operational

control, assets not under operational control, MERLIN’s headquarters in Madrid and the LOOM

spaces in Huertas and Salamanca.

For more information on the environmental performance of MERLIN’s portfolio, and the

methodology used, please refer to “Appendix I. Environmental performance reporting in

accordance with the EPRA Sustainability Best Practices Recommendations (sBPR)”.

GHG emissions at assets over which MERLIN exercises operational control (market-based)

First, taking a market-based calculation approach and considering the like-for-like portfolio, the sum

of scope 1 and scope 2 GHG emissions was 2,580 tCO2eq, 23.4% less than in 2021.

Looking at the portfolio in absolute terms, the sum of scope 1 and scope 2 market-based GHG

emissions was 2,729 tCO2eq, 21.3% more than in 2021. Broken down by scope, 2,670 tCO2eq

correspond to scope 1 emissions35 and the remaining 59 tCO2eq to scope 2 emissions36.

Management Report – Statement of Non-Financial Information 2022

70

34 The location-based method does not take into account instruments or contracts, and assigns the average emission factor

of the local network to all external use, regardless of its origin.

In both methods, Scope 1 emissions have been calculated considering the factors recommended by the Spanish Ministry of

Ecological Transition and Demographic Challenge (MITERD). Likewise, Scope 2 location-based emissions corresponding to

electricity consumption have been calculated considering the emission factor of the electricity mix for the countries of

Spain and Portugal. The electricity mix emission factor is a ratio that represents the intensity of CO2 emissions with respect

to the generation of electricity consumed. It is therefore an indicator of the relevance of low-carbon energy sources in the

country's electricity production as a whole. The scope 2 location-based emissions corresponding to District Heating

consumption have been obtained from the emission factor provided by Districlima, and the emissions corresponding to

District Cooling consumption have been obtained considering the specific electricity consumption necessary for the chilled

water service and the emission factor of the Spanish electricity mix.

35 Includes fuel consumption and refrigerant gas recharges.

36 Includes electricity consumption and district heating & cooling.

KPIs - SCOPE 1 AND SCOPE 2 GREENHOUSE GAS (GHG) EMISSIONS AT MERLIN’S ASSETS UNDER

OPERATIONAL CONTROL37

Management Report – Statement of Non-Financial Information 2022

71

37 The scope 1 and scope 2 GHG emissions reported below are for assets over which MERLIN exercises operational control.

The total surface area of the assets has been considered in the calculation of energy intensity, except in those cases where

MERLIN only has control over the management of consumption in the common areas, in which case only the surface area

of these common areas is considered.

Management Report – Statement of Non-Financial Information 2022

72

GHG emissions at assets over which MERLIN exercises operational control (location-based)

Taking a location-based calculation approach and considering the like-for-like portfolio, the sum of

scope 1 and scope 2 GHG emissions was 14,167 tCO2eq, 8.6% more than in 2021. Looking at the

portfolio in absolute terms, the sum of scope 1 and scope 2 location-based GHG emissions was

17,210 tCO2eq, 8.8% more than in 2021. Broken down by scope, 2,670 tCO2eq correspond to scope 1

emissions38 and the remaining 14,540 tCO2eq to scope 2 emissions39.

KPIs - SCOPE 140 AND SCOPE 2 GREENHOUSE GAS (GHG) EMISSIONS AT MERLIN’S ASSETS UNDER

OPERATIONAL CONTROL41

Management Report – Statement of Non-Financial Information 2022

73

38 Includes fuel consumption and refrigerant gas recharges.

39 Includes electricity consumption and district heating & cooling.

40 Given that, in both methods, Scope 1 emissions have been calculated considering the factors recommended by the

Spanish Ministry of Ecological Transition and Demographic Challenge (MITERD), this section does not include Scope 1 data,

already reported under the market-based approach.

41 The scope 1 and scope 2 GHG emissions reported below are for assets over which MERLIN exercises operational control.

The total surface area of the assets has been considered in the calculation of energy intensity, except in those cases where

MERLIN only has control over the management of consumption in the common areas, in which case only the surface area

of these common areas is considered.

Management Report – Statement of Non-Financial Information 2022

74

4.5.2 Scope 3 greenhouse gas (GHG) emissions

In line with its “Pathway to Net Zero” strategy, in 2022 the Company extended the calculation of its

indirect scope 3 GHG emissions, those resulting from the Company’s activities at sources that are

neither owned nor controlled by the Company. MERLIN therefore calculated its GHG emissions in the

most relevant categories defined in the GHG Protocol based on the Group’s lines of business, as

shown below.

As a result of the updated criteria for calculating scope 1 and scope 2 emissions, MERLIN has

established the following considerations for including indirect GHG emissions in its value chain for

the calculation of scope 3 emissions: 

•Emissions associated with assets where MERLIN is a landlord: emissions from fuel

consumption at fixed installations in offices used to air condition lessees’ private areas or at

shopping centres where it is used to air condition leased premises. The use of this fuel, the

control of its use, and the bills issued are paid by the lessees.  

•Emissions associated with assets in which the complete measurement of the energy

consumed in the building is available in the invoice in the name of a Group company, where

it is considered that 88% of such consumption corresponds to the tenants' own consumption

for the development of their activity.

•Emissions from the utilities of single-tenant assets held in MERLIN’s name.

Management Report – Statement of Non-Financial Information 2022

75

		Emissions (tCO2eq)
Type of emission	GHG protocol category		2021	2022
Emissions related to the supply chain	1. Goods and services purchased		6,207	7,372
	2. Capital goods		43,315	41,228
	4. Upstream transport and distribution		937	1,005
Upstream emissions from fuels	3. Fuel and energy-related activities		2,253	2,734
Emissions associated with employee commuting	7. Employee commuting		6,673	8,741
Emissions associated with assets where MERLIN is a landlord	8. Upstream leases		92	118
Emissions associated with assets where MERLIN is a tenant	13. Downstream leases		52,150	72,475
TOTAL			111,627	133,674

Additional information on the method for calculating scope 3 GHG emissions can be found in

“Appendix II. Methodology for calculating scope 3 GHG emissions”.

4.6 Carbon footprint certification

In accordance with the requirements established in UNE EN ISO 14064-3:2012 standard on

greenhouse gases, MERLIN has the calculation of its scope 1 and scope 2 carbon footprint verified by

an independent third party. Using the GHG Protocol framework, the Group reports all GHG emissions

and removals attributable to the operations over which it exercises control and, where applicable, its

equity share in the respective facilities.

Management Report – Statement of Non-Financial Information 2022

76

Based on the gross carbon footprint, MERLIN removes its emissions through carbon offset projects,

by planting vegetable gardens and vertical gardens in some of its assets and through reforestation

projects.

Lastly, MERLIN offsets its emissions by obtaining offsets or removal credits from carbon emission

reduction projects through voluntary certificate programmes, obtaining offset purchase certificates.

4.7 Validation of MERLIN’s commitments by independent third parties

As stated in the Sustainability Policy, one of the most important steps MERLIN takes to support the

robustness and practical implementation of the assumed commitments is to have them validated by

independent third parties. This is particularly relevant in the operation of the assets, as they are the

ones that require a great deal of effort on the Group’s part and also where it has more options for

having its results independently validated.

This is why MERLIN has its portfolio certified under LEED, BREAM, ISO, AEO, AIS and WELL.

LEED/BREEAM certifications

MERLIN takes on the responsibility of leading the development and operation of sustainable assets

with the highest standards of quality and excellence. One component of that leadership is seeking to

certify practically all of its main portfolios (offices, logistics assets and shopping centres) under the

market’s benchmark sustainable construction standards: LEED and BREEAM.

In new construction and refurbishment projects, MERLIN prioritises LEED certification in the Building

Design and Construction category. For assets in operation, MERLIN aims to obtain the highest

possible rating within the BREEAM in Use and LEED Building Operations & Maintenance standards,

which requires a commitment from both MERLIN and the tenants.

As part of the certification plan introduced by the Group in 2016, at the 2022 year-end, 93.6% of

MERLIN’s strategic portfolio in terms of GAV was certified under one of the two international

benchmark standards for sustainable construction: LEED and BREEAM. MERLIN is thus positioned as

a REIT of reference in this area, having nearly achieved the goal of certifying 99% of offices, 100% of

shopping centres and 97% of logistics assets in terms of GAV.  

MERLIN obtained or renewed a total of 34 LEED or BREEAM certifications in 2022. With the addition

of these certifications, the current status of the portfolio in terms of sustainable construction

certifications is as follows:

Management Report – Statement of Non-Financial Information 2022

77

ISO certifications

MERLIN’s commitment to minimising the environmental impacts stemming from the existence and

operation of its assets is backed by its Environmental Management System certified under ISO

14001. At the end of 2022, a total of 89 assets (including 78 office assets, 8 shopping centres and 3

logistics assets), representing a surface area of 1,211,745 sqm, or 36.7% of the strategic portfolio’s

total surface area, were covered under the System. MERLIN continues to make progress in the

integration of new assets under its Environmental Management System, with the aim of certifying all

multi-tenant office assets and as many shopping centres as possible in the coming years.

In addition, the Group seeks to reinforce its commitment to improving the energy efficiency of its

assets and introducing measures to optimise consumption by obtaining ISO 50001 certification of its

assets. Over the last year, 7 new buildings were certified under this standard, bringing the total to 84

assets (including 75 office assets, 8 shopping centres and 1 logistics asset) covering a surface area of

1,151,751 sqm, which represents 34.8% of the total surface area of the portfolios indicated.

Below is a breakdown by surface area in relation to those assets eligible to be certified under ISO

14001 and ISO 50001.

Energy rating of MERLIN’s assets

Pursuant to Royal Decree 235/2013, MERLIN continues to make progress in obtaining energy ratings

for all of the assets in its portfolio. At the end of 2022, 97% of MERLIN’s strategic portfolio (offices,

shopping centres and logistics assets) had an energy rating.

MERLIN also uses these certifications to gauge the energy performance of air conditioning, lighting

and domestic hot water systems, which allows the Group to prioritise and optimise the

implementation of energy efficiency measures.

Management Report – Statement of Non-Financial Information 2022

78

Energy rating of MERLIN’s assets (% of surface area) 

Other certifications

In 2022, MERLIN continued the process of certifying its assets under recognised industry standards.

33 new office assets obtained AEO certification, which certifies the technical quality of office

buildings by assessing technical parameters such as architectural features, facilities, equipment and

property maintenance.

Furthermore, as reflected in the Sustainability Policy, one of the Group’s priorities is the well-being

of the users of its assets. MERLIN therefore seeks to further support its commitment by obtaining

external certifications that allow the Company to advance and improve its performance in this area.

The Company has been certifying its assets under the AIS certification system for years, which

certifies the degree of accessibility of the assets. Under this system, MERLIN has continued to

expand its AIS-certified portfolio, which reached a total of 69 assets in 2022. 

At the same time, the Group continues to analyse the feasibility of obtaining WELL certification for

its assets, aimed at taking measures focused on the health and well-being of the asset’s occupants,

and has begun the preliminary work on four of its assets to obtain the highest WELL rating. In 2022,

the Castellana 85, Madrid, asset was awarded a WELL Platinum rating.

In addition, the Group has obtained WiredScore certification for 14 of its assets in 2022. This

certification measures aspects such as flexibility, infrastructure quality and data transmission speed.

In 2022, MERLIN invested a total of € 1.2 million to obtain, maintain and extend these certifications,

as part of the Group’s commitment to effectively incorporate sustainability into the management of

its assets.

4.8 Sustainability ratings

MERLIN regularly participates in various sustainability benchmark indices, which reflect the Group’s

efforts and the effectiveness of the steps taken in both internal management and asset

management. 

The Group’s score increased in 2022 compared to 2021 on all of the relevant sustainability indices.

Specifically, MERLIN participates in six sustainability indexes; three of them — GRESB (real estate),

Management Report – Statement of Non-Financial Information 2022

79

CDP (climate change) and S&P Global (general) — consist of a questionnaire, while the other three —

Sustainalytics (ESG risks), Bloomberg (general) and Vigeo Eiris (general) — are based on the Group’s

public reporting.

MERLIN has reinforced its position on GRESB, an international benchmark that measures the

environmental, social and governance performance of companies in the real estate sector, having

participated for the fourth year in a row. The Group achieved a score of 79 points out of 100, which

places it above the global average and ahead of its peers (companies ranked as comparable to

MERLIN).

For the third year in a row, MERLIN also participated in the CDP questionnaire, which assesses the

degree of a company’s commitment to climate change. MERLIN improved its rating to an “A-”, which

means that the Group is transparent and manages climate change issues adequately. This rating is

higher than the global, European and peer group average assigned by CDP (financial services). 

In line with the commitment made last year, MERLIN once again actively participated in the S&P CSA

questionnaire, obtaining a score 70%, a substantial improvement on the 58% obtained in 2021. This

improvement allows the Company to once again be included in the Dow Jones Sustainability

European Index for the second year in a row.

With regard to sustainability reporting, MERLIN received the Gold Award from EPRA for the fifth year

in a row. This award recognises the degree to which its Sustainability Report (formerly CSR) is aligned

with EPRA Sustainability Best Practices Recommendations.

Since 2020, MERLIN has adapted its Sustainability Report (formerly CSR) to Bloomberg’s ESG

Disclosure Score, reporting additional information that is more in line with the indicators defined by

Bloomberg for this index. MERLIN has considerably improved its ESG risk rating in Sustainalytics,

positioning itself as a leader both globally and in the real estate and REIT sector, obtaining a total

rating of 7.2 points and thus being included among the top 1% of the best rated companies

worldwide.

4.9 Protection of biodiversity

As part of its objective in the field of sustainability, MERLIN’s Board of Directors approved the

Biodiversity Policy in 2022 with the aim of establishing a reference framework to integrate the

protection and promotion of biodiversity into the Group’s strategy, and to define the guiding

principles for developing a sustainable and positive business model with nature, so that its activities

protect and promote the development and growth of natural heritage, including, in particular, the

protection of animals.

The degradation of ecosystems and the unprecedented decline of biological diversity, unanimously

identified by the scientific community as a direct consequence of the impact of human activities,

entail serious environmental, economic and social risks, urging action to reverse biodiversity loss.

Management Report – Statement of Non-Financial Information 2022

80

The Group is committed to assuming a leadership position in the conservation and promotion of

biodiversity in its sector of activity and to integrating the United Nations 2050 vision "Living in

harmony with nature" into its management, where biodiversity is valued, conserved, restored and

used sustainably, maintaining ecosystem services, supporting a healthy planet and delivering

benefits essential for all people.

Guiding principles

•Integrate biodiversity into the Group’s internal strategic planning and decision-making

processes, and into the analysis, management and reporting of long-term risks.

•Identify, quantify and evaluate, on an ongoing basis and throughout the life cycle of the

assets, the impacts and dependencies of the activities on natural capital, including the

diversity and protection of wild animals, and protected and vulnerable species, respecting

them in all lines of action.

•Protect species and habitats, both those under threat and those of high biodiversity value,

through the adoption of preventive, minimising and enhancing measures.

•Manage and offset in quantity and quality the negative impacts produced on the

environment, giving priority to nature-based solutions, facilitating the connectivity of

populations and encouraging the development of specially protected areas or private

conservation.

•Promote knowledge of and training in biodiversity for the Group’s employees and suppliers.

As a result of MERLIN’s commitment to the environment, the Group contributes through its daily

activities to improving the environment around us. MERLIN analyses and minimises its potential

negative impacts on biodiversity throughout the life cycle of its assets, especially in developments

and refurbishments, proposing measures to preserve the environment and prioritising native plant

species in the landscaped areas of the various assets, while avoiding exotic species. Likewise,

although implicit in its expansion strategy, the Group avoids deforestation in its developments and

refurbishments by acquiring land in urban settings or with previous uses.

Furthermore, MERLIN Properties is not materially dependent on ecosystem and/or abiotic services,

either in its own operations or in its supply chain, or in the development/rehabilitation of buildings

or the management of existing buildings. Point 6.2 provides an explanation of the relationship with

its suppliers and the type of employment generated in the communities, and point 4.3 gives a

description of the development and operation of sustainable assets.

The actions carried out by the Group in this area are as follows:

–In Spain, MERLIN collaborates with the REFORESTA Association, contributing to the

conservation and recovery of forests, to reverse deforestation and mitigate the effects of

climate change. In 2022, the Group continued its financial support for reforestation

initiatives by making donations.

–MERLIN manages several urban gardens, where the Group has begun to promote actions to

preserve biodiversity.

–With regard to biodiversity in developments and refurbishments, MERLIN studies the

ecological value of the environment and proposes measures for its conservation. Priority is

given to native plant species in the landscaped areas around their assets and exotic species

are avoided.

Management Report – Statement of Non-Financial Information 2022

81

5. Talent creation42

2022 MILESTONES

FUTURE OBJECTIVES

•Registration of the Equality Plan. Communication of the Equality Plan to employees. •Development of a specific Human Capital Policy and a Protocol Against Sexual Harassment. •Improvements with regard to selection through the implementation of a new digital tool and the formalisation of the internal vacancies process. •Expansion of work-life balance measures. •Encouragement of employee relationships through sport with the participation of employees in inter-company sports leagues. •37% increase in training hours compared to the previous year. •Reduction of the wage gap compared to 2021

•Create an Employee Portal on the corporate website linked to the new digital selection tool. •Promote women’s empowerment in business through training and inclusion in associations for this purpose. •Improve the flexible remuneration portal so that employees can access new benefits or discounts. •Encourage employees to volunteer. •Resume employee visits to the Company’s assets to enhance ownership. •Decrease staff turnover in those jobs with a higher turnover rate. •Introduce new functionalities to the payroll software that allow for more automated analysis of employee data.

Management Report – Statement of Non-Financial Information 2022

82

42 See MERLIN’s Human Capital Management risks and action plans in Section 3.2. Risk Management

KEY INDICATORS FOR THE YEAR
	2022	CHANGES 2021-2022
Number of employees	260	(239 - 260)
% of women employees	0.45	(45% - 45%)
% of employees with a permanent contract	0.98	(98% - 98%)

5.1 Staff loyalty

In its relationship with employees MERLIN adheres to the strictest labour standards, complying with

the principles set out in the ILO Declaration on Fundamental Principles and Rights at Work. The

Human Capital Policy, the Equality Plan and the Human Resources Processes Handbook and

Employee Handbook currently set out the guiding principles for human capital management at the

Company.

The risks inherent in the Company’s social and personnel issues are discussed with in chapter 3.2. of

the report.

A strong and unique workforce

At the end of 2022, MERLIN’s workforce consisted of 260 professionals divided into three categories,

as follows:

•Directors: 28 employees (27 men and 1 woman). Team composed by the Chief Executive

Officer, Chief Operating and Corporate Officer and by the senior management team and area

managers, who ensure that each area of the Company functions as efficiently as possible.

•Middle management: 82 professionals (55 men and 27 women). A team of professionals

closely linked to business and projects of great responsibility.

•Other professionals: 150 employees (61 men and 89 women). Professionals in general

support services with a high level of knowledge and experience to carry out their activities. 

All of them form a team of highly qualified professionals committed to the Company and its

corporate philosophy and values.

Management Report – Statement of Non-Financial Information 2022

83

Current profile of MERLIN Properties’ employees43

•I represent 45% of the workforce.

•I represent 42% of new hires in 2022.

•I am between 30 and 50 years old

(50% of women).

•I have a permanent contract (100% of

women).

•I received 27 hours of training in

202244.

•I work in Spain (94% of women).

•I represent 27% of income-generating

positions.

•I represent 26% of STEM positions.

•I represent 55% of the workforce.

•I represent 58% of new hires in 2022.

•I am between 30 and 50 years old

(59% of men).

•I have a permanent contract (97% of

men).

•I received 26 hours of training in

2022.

•I work in Spain (94% of men).

•I represent 73% of income-generating

positions.

•I represent 74% of STEM positions.

MERLIN’s distinctive aspects in relation to its employees

MERLIN’s team, which is so critical to the Group’s success, is composed of a group of highly qualified

professionals with extensive experience in the sector.

MERLIN goes to great lengths to keep its employees motivated and committed and has a high talent

retention rate.

22 average years of experience of the management team Excellence MERLIN’s staff is made up of a team of top professionals with extensive knowledge of the real estate sector and vast experience, especially the management team.

Management Report – Statement of Non-Financial Information 2022

84

43 Data as of 31 December 2022, except for average training hours per employee.

44 The average number of training hours based on the average headcount in 2022. The average number of training hours in

2022 in total terms (including men and women) was 6,654 hours.

44 €M GAV/employee	Productivity MERLIN has a very competitive GAV per employee ratio, in line with its philosophy of productivity and efficiency.
8% Voluntary turnover rate	Talent retention  MERLIN strives to offer professionals long-term development opportunities, ensuring their well-being as members of the Company and making all employees feel comfortable and identified with the Group’s philosophy and objectives.
44% of employees have chosen to receive Group shares as salary in kind	Commitment  MERLIN’s professionals are highly committed to the Company. Worth noting here is the percentage of employees who have chosen to receive part of their remuneration in Group shares.
95% of employees have received training	Independence MERLIN has a proactive and responsible team of professionals who are equipped with the necessary skills and independence to guarantee good decision-making.

5.1.1 Composition of the workforce45

MERLIN’s staff are the Group’s main asset. At 2022 year end, the MERLIN Group’s workforce was

composed of a total of 260 employees, divided into 3 categories in keeping with MERLIN’s strategy

of maintaining a horizontal structure.

	2021			2022
	Men	Women	Total	Men	Women	Total
Directors	26	1	27	27	1	28
Middle management	51	26	77	55	27	82
Other professionals	52	83	135	61	89	150
Total	129	110	239	143	117	260

Management Report – Statement of Non-Financial Information 2022

85

45 Data as of 31 December 2022.

			2021		2022
Country	Category	Age range	Men	Women	Men	Women
Spain	Directors	<30 years old	-	-	-	-
		30-50 years old	12	1	13	1
		>50 years old	13	-	13	-
	Total		25	1	26	1
	Middle management	<30 years old	4	3	7	2
		30-50 years old	24	12	22	14
		>50 years old	19	10	20	10
	Total		47	25	49	26
	Other professionals	<30 years old	8	19	11	14
		30-50 years old	27	45	18	17
		>50 years old	16	16	30	52
	Total		51	80	59	83
	TOTAL		123	106	134	110
Portugal	Directors	<30 years old	-	-	-	-
		30-50 years old	1	-	1	-
		>50 years old	-	-	-	-
	Total		1	-	1	-
	Middle management	<30 years old	-	1	-	1
		30-50 years old	3	-	5	-
		>50 years old	1	-	1	-
	Total		4	1	6	1
	Other professionals	<30 years old	-	1	-	2
		30-50 years old	1	2	1	2
		>50 years old	-	-	1	2
	Total		1	3	2	6
	TOTAL		6	4	9	7
TOTAL SPAIN AND PORTUGAL			129	110	143	117

MERLIN has a team of professionals with permanent contracts and an average age of 43.

From the moment they join the Company, MERLIN offers its employees stable contracts to ensure

their loyalty and improve its ability to attract talent to the organisation. At 2022 year end, 98% of the

Group’s employees had a permanent contract.

Management Report – Statement of Non-Financial Information 2022

86

Type of contract	Time	2021	2022
Permanent	Full-time	224	247
	Part-time	10	9
Total permanent		234	256
Temporary	Full-time	5	4
	Part-time	-	-
Total temporary		5	4
Overall total		239	260

5.1.2 Average contracts

Annual average number of permanent, temporary and part-time contracts by gender, age and

professional classification is as follows:

			2021		2022
Contract	Category	Age range	Men	Women	Men	Women
Full-time permanent	Directors	<30 years old	-	-	-	-
		30-50 years old	12	1	14	1
		>50 years old	14	-	13	-
	Total		26	1	27	1
	Middle management	<30 years old	3	4	6	3
		30-50 years old	26	11	28	14
		>50 years old	18	10	21	10
	Total		47	25	55	27
	Other professionals	<30 years old	5	12	6	15
		30-50 years old	26	42	28	48
		>50 years old	15	14	18	17
	Total		46	69	52	80
	TOTAL		119	95	134	108
Part-time permanent	Other professionals	<30 years old	-	-	-	-
		30-50 years old	1	4	1	4
		>50 years old	1	2	1	1
	Total		1	5	2	5
	Other professionals	<30 years old	-	-	-	-
		30-50 years old	-	-	1	-
		>50 years old	-	-	-	-
	Total		-	-	1	-
	TOTAL		1	-	1	-
	TOTAL		121	100	137	113

Management Report – Statement of Non-Financial Information 2022

87

5.1.3 Number of dismissals by gender, age and professional classification

There were 4 dismissals in 2021 and none in 2022.

Dismissals		2021		2022
Category	Age range	Men	Women	Men	Women
Other professionals	<30	-	1	-	-
	30-50	1	2	-	-
TOTAL		1	3	-	-

The number of voluntary departures has remained more or less stable.

Voluntary departures		2021		2022
Category	Age range	Men	Women	Men	Women
Directors	>50 years old	1	-	-	-
Middle management	<30	1	-	-	-
	30-50	2	1	1	1
Other professionals	<30	2	2	5	7
	30-50	3	7	2	6
TOTAL		9	10	8	14

Changes in turnover.

The voluntary turnover rate has increased and the total turnover rate has decreased. 

The total turnover rate was calculated taking into consideration all employees who leave the

organisation either voluntarily, due to dismissal, retirement or death in service. If an employee has

had different employment relationships and has left more than once, this is not counted as one but

as the total number of departures.

Total number of departures/ Number of employees at the end of year = Turnover rate.

	2021	2022
Voluntary turnover rate	8%	8%
Total turnover rate for departures	12%	11%

Breakdown by type of departures:

	2021		2022
Type of departure	Men	Women	Men	Women
Voluntary employee departure	10	10	8	14
Employee dismissal	1	3	-	-
End of temporary contract	3	-	6	1
Employee retirement	1	-	-	-
Total	15	13	14	15

Management Report – Statement of Non-Financial Information 2022

88

5.1.4 Implementation of work disconnection policies

MERLIN instructs all employees not to send emails outside working hours as far as possible.

MERLIN’s Employee Handbook that all professionals receive when they join the Company and that

can be accessed through the Employee Portal at any time during their employment relationship, has

a chapter dedicated to digital disconnection in 2022. In this chapter MERLIN emphasises the

importance of having rest periods for the physical and mental well-being of all employees and co-

workers, and creates a set of guidelines and criteria to help employees ensure good email habits.

5.2 Employee compensation

Diffential remuneration scheme

Remuneration is a key tool for attracting and retaining the best talent. The Company’s remuneration

scheme is differential; prioritizing performance over any other variable when establishing

remuneration and, therefore, employee growth is monitored on an ongoing basis.

100% of the employees benefit from a variable remuneration (bonus), regardless of their

professional category. This enables the company to reward the performance and attract and retain

the best professionals across all levels. 

23% of the employees benefit as well from a long-term incentive plan further reinforcing, key talent

retention to guarantee the company´s success.

Employee benefits

In addition to MERLIN’s remuneration system, the Group offers all its employees employment

benefits and alternative remuneration formulas.

In 2022, all MERLIN Group employees enjoyed the same conditions and social benefits in kind, which

include health insurance (covering the employee, its spouse and children), life and accident

insurance, and all employees in Spain have access to a flexible remuneration plan that includes

restaurant vouchers, transport vouchers, childcare vouchers, training plans and the option of

purchasing shares of the Parent company.

5.2.1 Wage gap analysis

The total compensation earned per employee by the average number of employees has been taken

into account to calculate the average remuneration and the wage gap. The 2022 remuneration

includes an extraordinary bonus, granted by the Board of Directors, on a general basis to all

employees not included in the group benefiting from the long-term incentive, consisting of a special

remuneration of a maximum of 2 monthly payments.

Total compensation earned includes all compensation accrued in a financial year, which would

include:

•Fixed salary. (Includes all remuneration received by the employee during the year including

salary increases, components of collective bargaining agreement, bonuses, sickness or

accident benefits, temporary disability compensation and all remuneration agreed as fixed

salary in general with employees).

•Variable remuneration (including annual bonuses and extraordinary bonuses).

Management Report – Statement of Non-Financial Information 2022

89

•Remuneration in kind (health insurance, life insurance, shares and flexible remuneration)

•Compensation and severance payments.

•Average remuneration and changes in salaries broken down by gender, age and professional

classification or equal value

Average remuneration by gender (€k)	2021	2022
Men	195	190
Women	59	60

Average remuneration by age (€k)	2021	2022
Under 30 years old	62	55
30 to 50 years old	102	108
Over 50 years old	212	201

Average remuneration by category (€k)	€ 2021	€ 2022
Directors	614	647
Middle management	110	106
Other professionals	41	43
Overall total	133	131

•Gender wage gap46

Gender wage gap	2021	2022
Directors	N/A	N/A
Middle management	15%	7%
Other professionals	13%	13%

The gap in 2021 and 2022 was 69% and 68%, respectively, considering for their calculation average

salary remunerations composed of base salary and variable salary and including Executive Directors. 

The salary gap for the Directors category is not reported as there is only one woman in this category.

The underlying cause of the salary gap in certain categories is due to the lower presence of women

in the workforce, a common situation in the real estate sector, which is accentuated in management

and technical positions. To try to mitigate this reality, MERLIN is working in the areas presented and

registered in the Equality Plan.

Management Report – Statement of Non-Financial Information 2022

90

46 Definition Wage gap=Average pay for men-Average pay for women / Average pay for men x 100

5.2.2 Remuneration of non-executive directors

Average remuneration of non-executive directors, including attendance fees and any other

compensation broken down by gender (no variable remuneration or termination benefits).

Average remuneration of non-executive directors by gender (€)	2021	2022
Men	152	166
Women	167	179

5.3 Organisation of work

5.3.1 Organisation of work

MERLIN uses the collective bargaining agreement to determine the length of the annual working

time, which is 1,765 hours for full-time employees. The Company’s working hours are from 9am to

2pm and from 4pm to 7pm from Monday to Friday. Employees have 23 working days of holiday

leave and the Company adds extra days onto public holidays to comply with the total number of

hours established in the collective agreement.

At MERLIN, all employees who meet the conditions set out in the Workers’ Statute (Estatuto de los

Trabajadores) are eligible for reduced working hours. There are currently 7 employees with reduced

working hours, 2 of whom are men.

5.3.2 Total hours of absenteeism

A total of 41 employees took sick leave at MERLIN in 2022, one employee more than in 2021.

The number of occupational accidents has decreased mainly because the sick leave taken due to

COVID was classified as an occupational accident and the number of infections from one year to the

next has decreased considerably.

The sick leave taken due to illness has remained more or less the same.

There was an increase in parental leave taken for the birth of a child, which increased from 8 cases in

2021 to 13 in 2022.

Management Report – Statement of Non-Financial Information 2022

91

2021	Working days			Number of cases
Type of absenteeism	Men	Women	Total days	Men	Women	Total cases
Occupational accident	68	47	115	4	6	10
Non-occupational accident	44	-	44	1	-	1
Common illness	273	208	481	10	11	21
Parental leave	372	122	494	5	3	8
Overall total	757	377	1,134	20	20	40

2022	Working days			Number of cases
Type of absenteeism	Men	Women	Total days	Men	Women	Total cases
Occupational accident	8	6	14	1	1	2
Non-occupational accident	-	42	42	-	2	2
Common illness	420	239	659	13	11	24
Parental leave	687	429	1,116	8	5	13
Overall total	1,115	716	1,831	22	19	41

Absenteeism rates:

Absenteeism rate	Men	Women	Total
2021	2.5%	1.5%	2.1%
2022	3.3%	2.6%	3.0%

The absenteeism rate is expressed as the ratio of days on which employees are absent on medical or

parental leave to scheduled working days.

5.3.3 Work-life balance measures

The measures taken by the Group that are designed to facilitate work-life balance and promote the

sharing of responsibility by both parents most notably include the following:

•Holidays: In addition to the holidays established in the collective bargaining agreement,

MERLIN gives extra days off that coincide with public holidays during the school calendar,

thus helping with work-life balance. In addition, MERLIN provides flexibility so that

employees can take their holiday leave without having to take it at a specific time of year.

•Flexible working hours: MERLIN gives its employees flexibility regarding when they arrive at

work and when they leave to help with work-life balance. Remote working is not established

as standard practice but MERLIN has the necessary resources to enable its employees to

work remotely if necessary.

Management Report – Statement of Non-Financial Information 2022

92

•Reduced working hours: In the Welcome Handbook, MERLIN encourages both parents,

regardless of gender, to apply for reduced working hours to care for a child under 12 years of

age.

•Compensation: MERLIN compensates 100% of the salary of all employees who apply for

parental, sick or accident leave, irrespective of gender. All MERLIN employees have access to

childcare vouchers through the Flexible Remuneration Plan.

•Events: Once a year MERLIN organises an activity for employees’ children. This activity takes

place on a working day that is also a public holiday for schools to help employees with work-

life balance.

•Organisation of work: MERLIN ensures that work meetings are always held during the

working hours of all employees who are required to attend the meeting. If training is

provided when an employee is on sick leave or parental leave, this training will be repeated

so that the employee is not at a disadvantage as a result of having been absent.

5.4 Safety, health and well-being of employees

MERLIN seeks to ensure the well-being of its employees by creating healthy work environments that

maximise their well-being through design, the heating, ventilation and air conditioning equipment

used, light output, and ergonomics, among others, meeting employees’ needs in terms of their

thermal, visual and acoustic comfort, and indoor air quality.

MERLIN has an external Occupational Risk Prevention Service that inspects the offices where

employees work on an annual basis to assess the risks and the adequacy of the facilities in terms of

safety and occupational risk prevention. All offices have been assessed this year and all

recommendations of the Occupational Risk Prevention Service have been implemented to improve

the health and safety of employees at work. MERLIN offers its employees an annual medical check-

up, the possibility of getting the flu vaccine and the possibility of getting a Covid-19 antigen test as

part of its social benefits.

Included within the welcome package, all employees receive mandatory training regarding

occupational risk prevention, providing information regarding the most relevant risk related to their

position and mitigation measures.

In addition, emergency drills are conducted every year and the headquarters are evacuated.

Employees who are part of the Emergency Brigade are in charge of helping other employees to

comply with the Occupational Risk Prevention Plan and to evacuate the building in a timely manner.

The drill at the Paseo de la Castellana 257 offices was carried out in November 2022, without

incident.

As part of their remuneration in kind, MERLIN provides its employees with high-cover health

insurance that is 80% reimbursed. This health insurance is both for employees and their direct family

(spouse and children). All employees, without differentiation between professional categories, have

the same health insurance with the same coverage. MERLIN organises a training session once a year

to raise awareness of company health insurance so that employees and their families can get the

most out of their health insurance. This session also analyses the coverage and new features that the

insurance company presents each year.

Management Report – Statement of Non-Financial Information 2022

93

In addition, MERLIN implements other health and wellness measures for all employees with regard

to nutrition and physical well-being, such as providing fruit in the workspaces, or the possibility of

access to physiotherapy services at the corporate offices.

The Company communicates with employees regularly on healthy lifestyles, promoting physical

activity, a balanced diet and digital disconnection, among other things.

The accident rates were as follows:

	2021			2022
Rate	Men	Women	Total	Men	Women	Total
Number of occupational accidents with sick leave	4	6	10	1	1	2
Lost time injury frequency rate (LTIFR)47	3%	6%	5%	1%	1%	1%
Severity rate48	32%	27%	29%	2%	3%	3%
Lost workdays (TLW)49	6	4	5	9	7	8
Occupational diseases (TOD)50	-	-	-	-	-	-
Absenteeism (TA)51	3%	2%	2%	3%	3%	3%
Number of deaths due to occupational accidents or diseases	-	-	-	-	-	-
Number of occupational diseases	-	-	-	-	-	-

Management Report – Statement of Non-Financial Information 2022

94

47 Frequency rate: Frequency of accidents in relation to the total time worked by employees during the reported period.

48 Severity rate: Number of days not worked due to accidents occurring during working hours, per thousand hours worked.

49 TLW: Total lost workdays - impact of occupational diseases and accidents, reflected in the days off of affected workers.

50 TOD: Total occupational diseases - frequency in relation to the total time worked by all employees during the reported

period.

51 TA: Total absenteeism - a measure of actual days lost by an absent employee, expressed as a percentage of total

scheduled working days for employees during the same period.

5.5 Labour relations

5.5.1 Organisation of social dialogue

MERLIN has several public documents such as the Code of Conduct, the Whistleblower Channel, the

Equality Plan and the Protocol against Sexual Harassment. All these codes and procedures ensure

that social dialogue is guaranteed, channelled and of the highest quality standards.

In addition, MERLIN is an organisation with a small number of employees, so social dialogue is direct,

simple and effective. Executive directors and senior management are available to all employees

without having to go through a chain of command. Their mobile phones and email addresses are

made available to all employees and conflict resolution is streamlined. MERLIN carries out an

employee satisfaction survey every two years. In 2021, matters relating to social dialogue were

among the most highly rated.

In terms of communication channels, the Human Capital Area sends communications to the entire

organisation through emails, and programs such as Microsoft Forms are also used to launch surveys

on different social actions and to be able to carry out these actions depending on how well they are

received by the organisation’s employees. Employees have access to various corporate information

and documentation through the Employee Portal.

5.5.2 Employees subject to collective bargaining agreements

All employees in Spain are subject to a collective bargaining agreement, and their salary set out in

this collective agreement is higher than that of their peers. None of the employees in Portugal are

subject to collective bargaining agreements. The same legal conditions apply to employees in

Portugal as to those in Spain, provided that they are more advantageous than those under

Portuguese law.

5.5.3 Balance of collective bargaining agreements

MERLIN compensates 100% of the remuneration of employees on medical or parental leave so that

the employee does not receive less pay for being on sick or parental leave. If an employee is on sick

leave, they will therefore receive the same salary as if they were working. The same will apply in

cases of parental leave.

5.5.4 Mechanisms to promote employee involvement in management

MERLIN conducts a Biannual Satisfaction Survey for all employees and also a Semi-Annual

Satisfaction Survey for certain departments of the organisation where turnover is higher.

The most highly rated questions were on the working environment, employee camaraderie and

training. They scored 8.4 out of 10.

Management Report – Statement of Non-Financial Information 2022

95

To improve employee satisfaction, in 2022 the Company officially announced that employees would

have more flexibility regarding when they arrived at work and when they left. In addition, a chapter

on work-life balance was published in the Employee Handbook to make all employees aware of

these measures regarding flexible working hours.

In addition to the Satisfaction Survey, the Company has various ways of communicating with

employees. 

The Employee Portal is a website and an app to which all employees have access. This is a

communication channel used for administrative purposes. Through the Employee Portal employees

can check their pay slips, download employment documents, access the work calendar, access

employee discounts and post announcements for other colleagues to see. They also have access to

the employee telephone directory, which includes the department to which each employee belongs

and a photo of each employee, making it much more personal and easier to reach everyone,

especially for employees who have only been with the company for a short time. 

MERLIN opts for in-person work at the office, which is the Company’s main form of work

organisation, as it promotes communication, collaboration and a sense of belonging.

MERLIN is able to detect the different interests of employees through emails, with Microsoft Forms

surveys, to undertake actions of social interest such as the Sports Leagues or the No School Day.

MERLIN encourages dialogue and employee participation in the Company’s decision-making process.

For example, through the Donations and Sponsorship Protocol, the Company allocates part of the

funds earmarked for donations to those foundations that employees are directly involved with, thus

taking into consideration the employees’ favourite foundations to collaborate with them.

5.5.5 Employees with disabilities

MERLIN is also committed to including and integrating people with disabilities into its workforce.

As mentioned throughout the document, MERLIN guarantees ease of accessibility to its assets and

backs this commitment up by obtaining AIS certification.

In this context, the Company currently has a total of 7 disabled employees on its staff, all of whom

have permanent contracts — 5 of them part-time and 2 full-time —, representing 2.7% of MERLIN’s

workforce. These staff members are fully integrated and perform necessary and valued functions at

the Company. The Company exceeds the requirements under the current law in this area (Spanish

General Disability Act [Ley General de la Discapacidad], former Spanish Social Integration of Disabled

Persons Act [Ley de Integración Social de los Minusválidos]) through direct hiring.

Professional category	2021	2022
Heads of business, departments or senior technicians	-	1
General services	5	6
Total	5	7

Management Report – Statement of Non-Financial Information 2022

96

5.6 Diversity and equal opportunities

MERLIN promotes equal opportunities, especially in access to employment, training, promotion and

working conditions. As stated in its Code of Conduct and its Protocol against Sexual Harassment,

MERLIN rejects any and all discrimination in the workplace on the basis of race, colour, nationality,

social origin, age, gender, marital status, sexual orientation, ideology, political opinions, religion or

any other personal, physical or social condition of an individual. The Group provides professionals

with a whistle-blowing channel to report any discriminatory conduct or harassment in the

workplace. No such complaints were received in 2022.

In terms of gender equality, in 2021 MERLIN worked on its Equality Plan in compliance with Royal

Decree Law 6/2019. The Equality Plan was finally approved after a process of analysing the Group’s

situation in terms of equality and the negotiation and drafting of the Plan by the Negotiating

Committee, and came into force on 18 January 2022, with its validity extended for a period of four

years, until January 17th 2026. The Equality Plan was registered by the Directorate General for

Employment on August 18th 2022.

The Equality Plan applies to all MERLIN Properties employees and lays down the guiding principles of

the Group’s conduct in this area, along with a series of objectives and metrics, some of which include

addressing the under-representation of women throughout the organisational structure, promoting

women’s participation in training activities to enhance leadership and compensation by MERLIN for

sick leave and parental leave. MERLIN is also committed to promoting equal parental leave for both

parents. The Group also supports all types of diversity beyond gender among the workforce. MERLIN

employees professionals of different nationalities but is equally commitment to local employment.

In 2022, 90% of the workforce was Spanish, 6% Portuguese and 4% from other European or South

American countries.

MERLIN has 7 employees with different abilities (2.7%), which exceeds the legal requirement of 2%.

These employees have indefinite contracts and perform functions which are necessary and valuable

to the Group.

Professionals joining the Group

MERLIN seeks out the best individuals to add differential value through their work, which contributes

to the Group’s success, providing them with stable, high-quality employment.

In 2022, MERLIN hired a total of 52 new professionals to the staff, which represents a recruitment

rate of 20%. In addition, 9 employees moved into new positions within the Group, demonstrating its

commitment to internal mobility and talent retention.

Management Report – Statement of Non-Financial Information 2022

97

Profile of MERLIN’s recruitment Profile in 2022

Category	Age range	Men	Women	Total
Directos	>50 years old	1	-	1
Middle management	<30 years old	2	-	2
	30-50 years old	2	1	3
Other professionals	<30 years old	17	9	26
	30-50 years old	7	10	17
	>50 years old	1	2	3
Total		30	22	52

Talent retention mechanisms

MERLIN believes that employee commitment is essential and therefore seeks to ensure that

employees identify with the corporate philosophy, values and objectives. The Group works to

motivate and reward employees through three main lines of action:

1)Performance-based remuneration:

MERLIN employees receive fixed annual remuneration along with annual variable remuneration tried

to the fulfilment of the Group’s objectives and to each employee’s individual performance.

In addition, all Group employees receive life and accident insurance for themselves and health

insurance for the employee’s entire family unit. The workforce also benefits from flexible

compensation options (MERLIN Flex) for training, childcare vouchers, transport vouchers, restaurant

vouchers and shares of the Group. In addition, employees have access to discounts in different

categories such as accommodation, theatre and pharmacy.

2)Continuing professional development:

MERLIN offers all professionals the opportunity to get involved in different projects and to assume

new responsibilities throughout their professional careers. Training is a fundamental part of career

development and, therefore the Group ensures that training is available to all employees.

A total of 6,654 hours of training were provided in 2022, an increase of 37% compared to the

previous year. This represents a total investment of € 87,239 in training in 2022.

Age range	Men	Women	Total
<30 years old	250	562	812
30-50 years old	2,267	933	3,200
>50 years old	1,030	1,613	2,642
Total	3,546	3,108	6,654

Hours of training by professional category:

Professional category	Hours of training
Directors	136
Middle management	3,754
Other professionals	2,764
Overall total	6,654

Management Report – Statement of Non-Financial Information 2022

98

The hours of training increased by 37% compared to 2021. In addition, 95% of employees received

some kind of training. Employees received an average of 27 hours of training per employee.

Likewise, MERLIN offers its employees on-the-job training to enhance their development process.

This training consists of three tools:

•Personalised training: MERLIN gives its employees the opportunity to select the courses that

best suit their specific needs. If necessary, MERLIN provides guidance, through the

experience of its staff members, so that employees can choose those courses that best suit

their needs.

•Knowledge sharing: MERLIN considers it a priority to strengthen and share the knowledge

accumulated both in terms of the tools developed and the management procedures honed.

The Group therefore provides annual in-house training courses given by MERLIN staff to

their colleagues.

•Language Training Plan: Merlin extended the scope of its Language Training Plan, offering

language courses through online and/or face-to-face classes to all Group employees.

As in the past, the training activities focused mainly on the following categories:

•Personalised training tailored to the needs of each employee accounts for 74% of total

training.

•Language training accounts for 19% of total training.

•Knowledge sharing, which is training provided by MERLIN’s own professionals, accounts for

7% of total training.

Personalised training includes various types of courses, the most representative of which are: 3

Master’s programme in Business Management and Administration, 2 Management Development

Programmes, 1 Master’s programme in Urban Planning and 1 Master’s programme in Technical

Management.

3)Direct relationship with employees:

The horizontal nature of the Group’s organisational chart fosters direct relationships between

employees and, in particular, between those with varying levels of responsibility. In 2022, MERLIN

reinforced communication channels and initiatives such as the Employee Portal, and made

improvements to the platform to facilitate communication between employees and management,

with emails sent on a regular basis, face-to-face meetings between employees and visits to the

Group’s various assets.

Management Report – Statement of Non-Financial Information 2022

99

6. Management of stakeholders

6.1 Stakeholder management model

Transparency with stakeholders

MERLIN considers it a priority to provide complete, accurate and truthful information on the Group’s

performance and activities, and to maintain sufficient relationship channels with its stakeholders,

actively communicating with them and responding to their main demands and expectations.

The Company’s relationship with stakeholders is regulated in the Stakeholder Relations Policy. One

of the key principles of the policy is the transparency of the information shared with stakeholders,

which must be complete, correct and truthful. In keeping with this principle and with the

recommendations of the CNMV’s Good Governance Code published in June 2020, aside from this

policy MERLIN also has a general financial, non-financial and corporate reporting policy that serves

as a framework for preparing and monitoring the financial, non-financial and corporate information

shared with stakeholders.

This policy is also intended to guide the Group in prioritising and integrating the various stakeholders

in the decision-making process by encouraging their participation.

As a result of this prioritisation exercise, MERLIN has identified investors, employees, tenants, end

users and the communities surrounding our assets as our main stakeholders. Other stakeholders

have also been identified, such as regulatory bodies, government agencies, analysts, suppliers and

the media, with which the Group has an occasional or regular relationship.

To ensure a consistent and smooth relationship with stakeholders, MERLIN provides them with

various communication channels, some general, some specific but always based on the relevance of

each stakeholder, and they are managed by the Investor Relations and Marketing Departments.

The various communication channels most notably include the different corporate reports and

presentations published periodically by the Group with information on its activities and

performance, and the General Shareholders Meeting, which in 2022 was held in person with the

option of attending online. During the year MERLIN continued to have a presence at 24 of the

sector’s most important events and conferences, held meetings with more than 400 investors, gave

6 asset tours to those investors who requested them and organised a Capital Markets Day in

Barcelona where more than 35 investors attended in person.

The table below shows the main stakeholder relations channels, and the concerns and expectations

they convey to MERLIN through these channels:

Management Report – Statement of Non-Financial Information 2022

100

Main stakeholders of MERLIN Properties
		Communication channels
Main stakeholders	Relevant aspects in the Company	Face-to-face meetings	Conferences, workshops, events and roadshows	Corporate website	Periodic reports and corporate presentations	Satisfaction surveys	Telephone and email contact	Communication agency
Investors	•Long-term dividend. •Share value.	•	•	•	•		•
Analysts	•Relevant information. •Company’s operations. •Share price performance.	•	•	•	•		•
Employees	•Labour uncertainty and stability. •Working conditions. •Working hours.	•	•	•	•	•	•
Tenants	•Personalised service. •Portfolio flexibility.	•		•		•	•
Suppliers	•Maintenance, development and remodelling of the Company’s assets.	•					•
Local communities	•Economic and social impacts of assets on local communities.	•	•				•
Regulatory bodies	•Significant events of the Company. •Compliance with current law and periodic reporting obligations.				•		•
Public Administration	•Compliance with current law governing the Company’s properties (permits, licences, etc.).	•					•
Media	•Transactions and significant events	•	•	•	•		•	•

Management Report – Statement of Non-Financial Information 2022

101

6.1.1 Shareholder return

In 2022 MERLIN had relatively stable performance within the REIT sector, with the share price falling

by 8.3% in the period, although compared to the sector the stock market performance has been

exceptionally good (EPRA Index -38.8% and European comparables52 -28.6%). The Company achieved

a cash flow per share (FFO per share) of € 0.62 per share and an EPRA NTA of € 15.67.

A total of € 562 million (€ 1.20 per share) was paid out to shareholders during the year, which

includes an interim dividend of profit for the year of € 0.95 per share. Total shareholder return

measured as the change in EPRA NTA per share and the dividends per share paid out during the year

was 4.7%, as shown in the table below. Alignment with shareholders is reflected in the percentage of

staff who are shareholders of the Company (44%) and the 1.4% of shares held by the management

team53. The management team owns 8 times their base salary in MERLIN shares, demonstrating a

strong commitment and total alignment with shareholders.

	Per share (€)	Millions of €os
EPRA NTA 31/12/2021	16.11	7,567
NTA growth in 2022	-0.44	-205
EPRA NTA 31/12/2022	15.67	7,363
Dividend per share (DPS)	1.2	564
NTA growth + DPS (shareholder return)	16.87	7,927
Shareholder rate of return	4.70%	4.70%

6.1.2 Treasury shares

As of 31st December 2022, the Parent company has treasury shares amounting to €17,166 thousand.

The changes in 2022 were as follows:

	Number of	Thousands of
	shares	€
Balance as of 1 January 2021	4,836,503	54,149
Additions	374	3
Disposals	(1,951,386)	(21,847)
Balance as of 31 December 2021	2,885,491	32,305
Additions	6,625	122
Disposals	(1,355,932)	(15,261)
Balance as of 31 December 2022	1,536,184	17,166

Management Report – Statement of Non-Financial Information 2022

102

52 European comparables include Inmobiliaria Colonial, Gecina, Unibail-Rodamco, Segro and British Land

53 Including related persons

The shareholders at the Annual General Meeting held on 10 April 2019 revoked the unused portion

of the authorisation granted by the shareholders at the General Meeting of April 2018 and

authorised the acquisition of treasury shares by the Parent company itself or by Group companies

pursuant to section 146 et seq. of the Ley de Sociedades de Capital, complying with the requirements

and restrictions established in current law during the five-year period.

The disposals of treasury shares, amounting to € 15,261 thousand (average cost of € 11.20 per

share), relate mainly to the second and last delivery of shares under the 2017-2019 Incentive Plan

(see Note 15) in the amount of € 14,133 thousand and to the delivery of shares to employees as part

of the flexible remuneration plan in the amount of € 864 thousand.

The Group has a liquidity agreement for securities listed on the Lisbon Stock Exchange (Euronext

Lisbon), having made net sales of 9,740 shares in 2022, with a value of € 142 thousand.

As of 31 December 2022, the Parent company held treasury shares representing 0.327% of its share

capital.

6.1.3 Stock market performance

On 31 December 2022, MERLIN shares closed at a price of € 8.78, representing an 8.25% drop in

their price compared to the closing price on 31 December 2021 (€ 9.57).

6.1.4 Dividends policy

The Company’s dividend policy takes into account sustainable levels of distribution and reflects the

Company’s expectation of obtaining recurring profits. The Group does not intend to create reserves

that cannot be distributed to shareholders, except those required by law.

Under the REIT regime, after complying with any relevant requirement of the Ley de Sociedades de

Capital, the Parent company will be required to adopt agreements to distribute the profit obtained

in the year to shareholders in the form of dividends and this distribution must be approved within six

months of the end of each year, as follows: (i) at least 50% of the profit from the transfer of

properties and shares or equity interests in qualified subsidiaries, provided that the remaining profit

is reinvested in other real estate assets within no more than three years of the date of the transfer,

otherwise, 100% of the profit must be distributed as dividends after such period has elapsed; (ii)

100% of the profit obtained from receiving the dividends paid by qualified subsidiaries; (iii) at least

80% of the remaining profit obtained.

If the resolution to distribute dividends is not passed within the legally established period, the Parent

company will lose its REIT status for the financial year to which the dividends refer.

The Company’s dividend policy establishes a minimum distribution of 80% of the AFFO (“Adjusted

FFO”), understood as the cash flow from operations less interest paid and less ordinary maintenance

expenses for the assets.

On 27 May 2022, the final dividend for 2022 was paid in the amount of € 117,112 thousands (€ 0.25

per share). In addition, an interim dividend of profit for the year of € 351,169 thousands (€ 0.75 per

Management Report – Statement of Non-Financial Information 2022

103

share) was paid on 18 August 2022. Lastly, on 2 December 2022, an interim dividend of € 93,646

thousands (€ 0.20 per share) was paid out of the profit for 2022.

6.2 Supply chain

Sourcing local products and services

By sourcing products and services locally, MERLIN has a positive impact on the communities where

its assets are located.

In 2022, payments to suppliers of products and services totalled € 112.6 million, with an average

period of payment to suppliers of 28.7 days54, in line with that established by Ley de medidas de

lucha contra la morosidad en las operaciones comerciales (Law 15/2010 of July 5).

When hiring suppliers, MERLIN prioritises local suppliers that meet the Group’s social and

environmental standards. For developments and the refurbishments of its assets in particular, in

keeping with the sustainable construction standards in which the Group is certified, MERLIN

purchases local raw materials and works with local contractors, which is an added benefit for the

local economy. In addition, MERLIN’s contracts with suppliers and lessees include clauses

referencing both MERLIN’s compliance policies and its Code of Conduct.

Annual expenditure on purchases and contracts associated with MERLIN’s assets (€M)

In accordance with the Procurement Procedure, the sustainability factors are an additional

component to those currently in place to assess each of the CAPEX and OPEX tenders based on

environmental, social and governance criteria.

In 2022, MERLIN has modified the Procurement Procedure to require in all tenders over 150

thousand euros the response, by suppliers, to an ESG questionnaire with environmental, social and

governance issues.

Management Report – Statement of Non-Financial Information 2022

104

54All the information required on the average payment period required by Final Provision Two of Law 31/2014, can be

found in Note 13 to the Consolidated Financial Statements.

Thus, during the year, MERLIN requested information from 110 suppliers representing 72% of the

investment in asset improvement and rehabilitation (CAPEX) at December 31, 2022, requesting

information and details in the environmental, social and regulatory compliance areas, including

issues related to human rights compliance (policies, lawsuits, etc.) for each third party evaluated.

Internal Audit audited 78% of the questionnaires received (55% of the Capex as of December 31,

2022; amounting to €126 million).

As a result of the audit, the relationship between the volume of works and services contracted to

suppliers and compliance with ESG requirements has become evident, with the higher the amount

contracted and, therefore, the larger the supplier, the better the scoring. Likewise, it has been

decided to continue with this exercise on an annual basis in order to evaluate MERLIN's supply chain

by monitoring its suppliers to guarantee a minimum admissible standard in future tenders. Finally,

and from the analysis of the results obtained, especially for those with very low scores, they should

be analyzed by the Technical Department with a view to the continuity of services. On the other

hand, this analysis should facilitate dialogue between MERLIN and its suppliers as a means of

facilitating best practices, especially with those suppliers who are in a more advanced situation.

6.3 Maximising the well-being of users of the assets

The Group views these spaces as an opportunity to offer high quality, value-added service to provide

the tenants and users of the assets with the best possible experience. MERLIN has therefore set up

the following framework for collaborating with tenants and user that consists of four basic pillars:

Management Report – Statement of Non-Financial Information 2022

105

2022 MILESTONES

FUTURE OBJECTIVES

•Obtaining WELL Gold certification for the Castellana 85 office building. •Progress on Smart and Wired score. •Increase in the number of assets with clean air purification technology. •Cumulative installation of 1,494 electric vehicle charging points. •Expansion of MERLIN Hub (6,125 users) to the Pozuelo and Las Rozas business parks. •Installation of intelligent building systems installed in the Castellana 85 building in Madrid.

•Satisfaction surveys and making them automated in LOOM spaces. •CAU project for incident management in offices. •Construction of the A1 bus lane. •Installation of facial recognition in access to office buildings. •Installation of intelligent building systems installed in the Plaza Ruiz Picasso building in Madrid.

KEY INDICATORS FOR THE YEAR
55,56	DATA 2022	CHANGES 2021-2022
Level of satisfaction54	2.92	n/a55
Asset occupancy	95.1%	+60 bps
Assets with accessibility certifications	69	+8 assets

Management Report – Statement of Non-Financial Information 2022

106

55 Surveys conducted at multi-tenant offices, single-tenant offices and shopping centres. The overall score is calculated in

terms of the Average Quality Index (AQI) taken from the surveys.

56 More tenants have received the satisfaction survey, so the evolution is not comparable.

MERLIN’s distinguishing features in its relationship with tenants

MERLIN works to build relationships of trust with tenants and strives for the highest level of

satisfaction by fostering active communication based on dialogue and teamwork.

2.92 over 4 overall score on satisfaction surveys	Working together MERLIN is committed to the active involvement of asset users in optimising their performance and making the most of the assets’ services and functionalities to keep them completely satisfied
100% of assets have tenant relationship channels	Constant communication MERLIN encourages active communications with tenants through the various channels available to them so as to identify possible concerns and needs, solve problems and hear their suggestions for maximising their experience
69 assets with AIS certification including 7 with the highest rating	Commitment to accessibility MERLIN guarantees ease of accessibility to its assets and backs this commitment up by obtaining AIS certification

Well-being of tenants and users of the assets

Maximising the well-being of its tenants and users of the assets is one of the basic pillars of MERLIN’s

management. Among other things, well-being includes indoor air quality, lighting, connectivity, and

complementary services available to users.

MERLIN is committed to ventilation as a key element of indoor air quality. This is achieved by

installing filters, renovating equipment, and using thermal insulation in buildings to prevent harmful

substances from the outside getting in. In terms of lighting quality, the Group prioritises natural light

and the installation of LED lighting to avoid glare and provide adequate illumination of the space.

Along these lines, MERLIN has air filtration and purification systems installed in its office assets, with

the aim of improving users’ health and the sustainability of the assets.

These solutions use filtration and ventilation to reduce suspended particles, biological agents

(viruses, bacteria, and fungi), volatile organic compounds (VOCs) and chemical pollutants, thus

reducing the incidence of cyclical diseases and improving the users’ working experience in offices.

In environmental matters, the environmental solutions installed generate energy savings in the

buildings’ air conditioning systems, since the filters used have lower air resistance than traditional

filters and have longer useful lives, which also cuts down on waste.

As part of its commitment to improving the digital infrastructure of its buildings, MERLIN has

continued to certify office assets with the Wired Score seal. This is an online connectivity standard

that guarantees the fastest upload and download speeds at all offices, including common areas and

outdoor spaces, and provides the assets with the necessary infrastructure to adapt to future

technological advances.

Management Report – Statement of Non-Financial Information 2022

107

MERLIN also provides the users of its asset with a series of complementary services to enhance the

user experience, such as the MERLIN Hub, for which approximately € 731 million57 were earmarked

in 2022.

Sustainable mobility

The mobility of the users of its assets is a key aspect for MERLIN. Accordingly, the Group prioritises

assets that are strategically located with good public transport options, especially for the office

portfolio, which enhances users’ quality of life.

MERLIN also developed other initiatives at its office assets, such as providing shuttle services,

promoting carsharing and carpooling services, and the use of electric bicycles to travel from public

transport stations to the offices. MERLIN also promotes the installation of electric vehicle charging

points at the assets in its strategic portfolios (offices, logistics and shopping centres), with 1,494

currently installed.

Through these initiatives, MERLIN promotes and encourages users of the MERLIN Hub community to

opt for alternative and sustainable forms of transport through specific mobility plans, thus

contributing to the decarbonisation of the cities where it operates.

Assets accessibility

In terms of accessibility, MERLIN considers it a priority to maximize the millions of people who can

access shopping centres each year, regardless of their abilities, so that they can enjoy their

experience in them. Along these lines, the Group continues to increase the number of certified

assets based on the Accessibility Indicator System (AIS), which assesses the usability, comfort and

safety conditions of the building.

All of the assets in the shopping centre portfolio are AIS certified. These shopping centres are

constantly improving their accessibility performance, which in turn implies higher ratings obtained

within the framework of this certification. In 2022 the Marineda, Larios and Saler shopping centres

obtained the highest possible score awarded by AIS (five stars). MERLIN continues to add to the

number of certified office assets, with a total of 56 certified assets at year-end (8 more than in 2021).

R&D&I activities

In relation to R&D&I activities and other innovative initiatives, MERLIN is committed to offering its

tenants and users the highest quality comprehensive service, beyond the asset management itself,

integrating the most innovative solutions in its assets to maximize the user experience. In line with

this philosophy, during the last year MERLIN has continued to focus on improving the quality of life

of users in its assets. Thus, it has continued to implement Mayordomo Smart Points, consisting of a

system of smart lockers that allow users to conveniently receive packages and the provision of

various services that help to achieve a work-life balance. By the end of 2022, 33 MERLIN assets had

such points, an increase of 18% compared to 2021.

In addition, MERLIN remains committed to LOOM flexible workspaces as a solution to the hybrid

work model.  During the year, MERLIN has continued to promote numerous technological projects to

place MERLIN at the forefront of solutions for its customers and internal management. These include

Management Report – Statement of Non-Financial Information 2022

108

57 This amount includes the shuttle service and the expenses charged and not charged.

the office building sensorization program, the energy consumption reading project, the photovoltaic

self-consumption project and the development of different user experience apps

Sustainability, maximising efficiency

MERLIN is highly committed to the sustainability of its portfolios and maximises their efficiency in

the use of resources by benchmarking against international industry standards. The Group integrates

sustainability into its decision-making process, focusing on the well-being of its tenants and

improving its assets, with a carbon footprint that is as low as possible.

MERLIN offices also seek excellence in energy efficiency through LEED and BREEAM certification.

Omnichannel in shopping centres

For shopping centres, MERLIN continues to be committed to omnichannel shopping and is therefore

expanding the Click&Collect points for online order pick-up. At the end of the year, this portfolio had

a total of 28 such points.

Community

MERLIN offers numerous opportunities to its users with the intent of promoting networking and

enriching each employee’s workday. There are many opportunities during the workday to connect

with other users, whether or not they are from your own company. A programme of events and

experiences has also been designed, such as solidarity stalls, sports activities, talks with experts on

current affairs.

Some of the initiatives carried out in 2022 include the Spanish Cancer Association (AECC) solidarity

stall, a talk on Women’s Day with numerous speakers and blood donations organised by the Red

Cross at the various asset locations. In addition, MERLIN contributes to different types of social

initiatives by illuminating the façade of Torre Glòries in different colours, such as the collaboration

with Pride Barcelona or with the Duchenne Syndrome Foundation. 

Constantly listening to users

MERLIN believes it is essential to provide tenants and users with sufficient communication channels

to maintain active dialogue and generate a relationship of trust. This allows MERLIN to understand

their needs and expectations and to detect opportunities and possible areas for improvement in

asset management.

Among these channels, satisfaction surveys stand out. In 2022, surveys were sent to all tenants of

multi-tenant and single-tenant offices and shopping centres, with a total participation of 22.9%. The

tenants rated specific aspects that influence their well-being such as the condition of common areas,

the management of information and MERLIN’s attention to possible incidents, administrative

management, treatment of staff and overall satisfaction with the service. The average overall

satisfaction rate according to the survey was 2.92 out of 4, which translates to 86.3% of satisfied

tenants.58

Regarding the portfolio of logistics assets, since 2020 MERLIN has had a Facility Management service

integrated in all logistics assets that provides monitoring and advice to tenants on maintenance,

technical and legal matters. This initiative creates a framework for collaboration with tenants, which

makes it possible to do things like adapt response times to the seriousness of the incident reported

Management Report – Statement of Non-Financial Information 2022

109

58 A satisfied tenant is one with an Average Quality Index (AQI) higher than 2.5 out of 4.

by the tenant. To streamline two-way communications, tenants can share information in real time

on a collaborative IT platform.

For the shopping centre portfolio, since 2021 MERLIN has enhanced communications with tenants at

all levels to build closer relationships. Along these lines, the Company has launched the LIFE! portal

at its centres. Besides serving as an online communication channel, it centralises management and

optimises the use of resources in a more efficient, interactive and paper free manner.

The LIFE! portal allows tenants to have direct, smooth two-way communications with MERLIN’s

shopping centre management team. The tool also has a repository of documentation with relevant

information on each asset and two different marketing sections: the first one with promotions that

are then published in the app and on the shopping centre’s website; and the second one with

promotions for the employees of the operators of MERLIN’s shopping centres.

In relation to the offices, the CAU project has been developed, which makes it possible to manage

incidents or complaints from users of office assets and monitor the information for better follow-up.

MERLIN maintains a direct relationship with clients so that any type of incident is resolved and

managed through the Group’s managers located at the assets.

An incident management system is currently in the process of being installed in the office assets

where the resolution and handling of incidents can be pooled. In addition, the Group has complaint

forms at its shopping centres and a portal on its intranet where tenants and users can report any

type of incident.

In 2022, 11 complaints were received (2 more than in 2021) and 11 were satisfactorily resolved.

6.4 Development and relationship with the environment

Generating positive impacts on the environment

2022 MILESTONES	FUTURE OBJECTIVES
•Creation of an interactive museum and a panoramic observatory of the city of Barcelona at Torre Glòries. •Construction of an entrance and exit to the A-1 and M11 from the Chamartín Tower •Continuation of the Merlin ART project, with the installation in the assets of works by young Spanish artists such as Gravitación by Fernando Suarez.	•Promote the Renazca preliminary project •Construct the A1 bus lane. •Execute and complete the remodelling of the area surrounding the office building located in Plaza Ruiz Picasso 11. •Renovate the Clara Campoamor gardens, in Barcelona

Management Report – Statement of Non-Financial Information 2022

110

KEY INDICATORS FOR THE YEAR
	DATA 2022	CHANGES 2021-2022
Economic value distributed (€M)	864.6	63.4
Purchases from suppliers (€M)	112.6	13.8
Average period of payment to suppliers (days)	28.7	-9.2
Social or environmental complaints from communities (N.º)	0	=
Social contribution of the Group (LBG/ONLBG Method) €M	3.7	408.7

6.4.1 Improving cities

MERLIN is firmly committed to and responsible for the physical and social environment in which it

operates, and seeks to have the best possible impact through different initiatives to improve the

cities in which its assets are located.

Along these lines, all of the Group’s assets contribute to the development of the communities in

which they are located, for example, through sourcing local products and services. In addition, 31%59

of the portfolio assets have specific development programmes, impact assessments and local

community participation, with the shopping centre portfolio having the most of these types of

programmes (96%), as it has the strongest links to local communities. Meanwhile, 44% of offices and

6% of logistics assets have specific programmes.

MERLIN’s distinguishing features in its relationship with local communities

MERLIN maintains stable and lasting relationships with the local communities around its assets

based on the creation of positive impacts and two-way communications using different channels.

This enables the Group to identify their needs and expectations, which we try to satisfy through

different programmes and initiatives, offsetting any potential negative impacts arising from their

activities.

MERLIN continues to work with local agents to enhance the value of public spaces around our assets,

reinforcing the social and economic value contributed by these assets.

Management Report – Statement of Non-Financial Information 2022

111

59 By GLA; including offices, shopping centres and logistics assets, excluding assets under development (WIP).

€3.7 M in MERLIN’s contribution to communities	Impact management and value creation MERLIN works to maximise the positive impacts of its activities and to minimise and, where applicable, offset the negative ones.
€2.6 M earmarked in 2022 for the redevelopment of public spaces	Quality spaces MERLIN uses its own resources to renovate the public spaces around its assets, maximising the value of the contribution to the communities surrounding its assets.
More than 140,000 downloads of user relationship apps in shopping centres	Dialogue and transparency MERLIN establishes and maintains ongoing and smooth relations with the communities linked to its assets, continuously adding new channels to strengthen these relationships.
Over 27% more followers on LinkedIn compared to 2021 X-Madrid, Spain’s shopping centre with the most followers on Instagram	Impact on social media MERLIN meets the milestones and objectives set in terms of followers and engagement rate by following a content strategy that prioritises quality over quantity.

Job creation

MERLIN’s assets contribute to local employment both directly, through the hiring of personnel, and

indirectly through the companies that provide ancillary services such as maintenance, facility

management, security and cleaning. In addition, the economic environment surrounding the asset

also benefits from the creation of hospitality and retail services to meet the needs of the users of the

assets.

Management Report – Statement of Non-Financial Information 2022

112

Initiatives for improving cities

Improvement of public spaces

The rehabilitation of public spaces surrounding its assets is a key part of MERLIN’s strategy of delivering value to local communities, including other assets in the area. MERLIN is currently working on the refurbishment of the spaces adjacent to the Plaza Ruíz Picasso asset. In 2022 MERLIN completed the creation of a public square in the Saler shopping centre in Valencia. The work consisted of creating a new public square in front of the main façade of the shopping centre, which overlooks the City of Arts and Sciences of Valencia, in keeping with the design of this environment, and offering citizens landscaped areas with benches and ornamental fountains for recreation and socialising. In addition, services such as new rest areas with wireless mobile phone charging points, contactless technology in restrooms to reduce water consumption and electric car chargers have been implemented. Furthermore, all light fixtures have been equipped with LED technology.

Enhancement of the local area

Through its refurbishment projects such as MERLIN Hub and Renazca, the Group acts as a driver for the revaluation of the areas surrounding its assets. In 2022 MERLIN inaugurated the on and off ramp from the M-11 to the A-1 for Isla de Chamartín. The project was carried out through a collaboration agreement between the Madrid Municipal Council and MERLIN with the aim of improving access to Isla de Chamartín. This area had a single road (Dulce Chacón) that served as access to the residential and office buildings in the area, so an alternative was needed to resolve this limited access. It was a public-private partnership with which MERLIN and the Madrid Municipal Council reached a milestone in promoting sustainable mobility, with MERLIN financing and executing the work in the amount of € 2.5 million.

6.4.2 Social initiatives

MERLIN creates value for society by supporting various initiatives and activities that ultimately have

a positive impact on the development of the surrounding communities. These initiatives are

approached from two different levels: on the one hand, at the corporate level and on the other

hand, at the asset level.

Management Report – Statement of Non-Financial Information 2022

113

–Contribution at the corporate level

At the corporate level, most of MERLIN’s contributions to the community are part of its CSR Plan,

under which MERLIN commits up to 0.1% of its gross annual revenue to social programmes or

projects. This financial contribution is divided into two parts: the first part is the Group’s direct cash

contribution, and the second part is MERLIN’s matching contribution, in which it doubles the cash

donations or volunteer hours of employees, executives and directors. It should be noted that

MERLIN does not make any political contributions.

In 2022, the Group donated a total of € 223,575 in direct contributions, with a multiplier effect60 of €

192,374 through the collaboration of 32 employees and directors. Together, these contributions

have supported 73 foundations and directly benefited 6,646 people.

In addition to the CSR Plan, in 2022, for the sixth year in a row, a total of 16 MERLIN employees

taught classes in the university degree programme titled “Intensification in Real Estate Planning and

Management” at the School of Quantity Surveyors of the Polytechnic University of Madrid. And once

again this year, the training included a talk by Ismael Clemente, the Group’s CEO. In all, MERLIN

professionals dedicated 85 hours to this activity. In addition, three of the Group’s employees taught

master level classes at the School of Architecture for a total of 27 hours.

As in past years, MERLIN donated the cash allowance to fund two academic scholarships awarded to

the top two students in this degree programme for a total of € 3,000.

–Contribution through assets

MERLIN also contributes to local development through its assets, supporting different initiatives and

activities in four key areas: training; social action; promotion of culture and local development; and

awareness-raising.

Breakdown of local development programmes by type

Management Report – Statement of Non-Financial Information 2022

114

60 In accordance with the LBG/ONLBG framework, the multiplier effect is considered to be the additional resources that

the company manages to raise for an activity or project from third parties or entities.

Initiatives promoting social cohesion and inclusion

Training activities		Numerous training activities open to the community and activities aimed at LOOM users were held at the Company’s LOOM assets in 2022. These activities focus in particular on the personal and professional growth of its participants, such as yoga activities, seminars on topics of interest such as “Align your project with the SDGs”, “The most effective marketing strategies to attract clients”, “The power of a conversation”, etc. This year at Marineda, there were seven talks on the subject of women at risk of social inclusion joining the workforce, in which a total of 175 women participated. The agreement with the Naru Foundation is also worth mentioning, which gives awareness-raising talks and provides training for the families of cancer patients at the Marineda centre.
Social action		MERLIN continues to collaborate with the Juan XXIII Roncalli Foundation to manage and maintain the urban vegetable gardens at MERLIN Hub, promoting the social and workplace inclusion of workers with intellectual disabilities. In 2022, these gardens yielded 1.95 tonnes of produce. Various MERLIN shopping centres have solidarity stands in their common areas, which are occupied at various times throughout the year by non- profit organisations such as the Red Cross, UNICEF, Doctors without Borders, etc. In addition, the Company offered 2,968 sqm of its logistics centres to the Banc Dels Aliments Foundation during the months of November, December and January for the food bank collection during the Christmas season.
Promoting culture and local development		In 2022, MERLIN has commissioned the Art for Africa exhibition at its Arturo Soria shopping centre. This is an art exhibition and sale of African crafts for the benefit of the Juan José Márquez association with the aim of raising awareness of the problems in Africa and raising funds to be used to improve, enhance and promote schooling and child health through health education programmes in various municipalities in the Ivory Coast. Visitors to the shopping centre were able to enjoy free of charge the works of more than 15 artists that included 40 paintings and ceramic pieces. In addition, the FLECHA project allows users of shopping centres such as Artea or Marineda to visit an art exhibition with the works of top level and emerging artists at affordable prices, thus breaking the traditional barrier of art in galleries. In 2022, the Group continued to showcase the work of young Spanish artists through the MERLIN Art Programme, which acquires and exhibits their work in its main assets, while providing tenants with a better experience. Its latest addition has been Gravitación by Fernando Suarez, in Torre Chamartín. Other pieces of art work include “Caballo” by

Management Report – Statement of Non-Financial Information 2022

115

		Alberto Corazón located in the San Cugat I asset and “Tranpantojo” by J.Vaquero Turcios in Alfonso XI.
Awareness raising activities		In 2022 MERLIN Hub sponsored various social awareness-raising events such as talks by representatives of the Spanish Cancer Association (AECC) for all users of the Ática business park, and the numerous blood donation points set up throughout the year at its assets. In addition, MERLIN’s shopping centres carry out numerous awareness- raising initiatives throughout the year, such as the Back to School Campaign with the delivery of school materials for children and young people at risk of exclusion.

6.4.3 Measuring the distribution of contributions to the MERLIN community 

Contribution to the community

After joining the internationally recognised London Benchmarking Group (LBG) in Spain, MERLIN

measures its contribution to society using the LBG model. This is the most prestigious standard for

measuring the investments made by companies in the form of social and environmental initiatives.

LBG recognises voluntary contributions to social or environmental protection programmes and

donations to non-profit organisations, not restricted to groups that are related to the Group. All

initiatives are located in Spain and are broken down as shown on the following table.

By type of initiative	2021	2022
Social well-being	€412,366	€310,250
Education	€237,298	€225,930
Health	€43,292	€527,408
Art and culture	€12,540	€2,269
Humanitarian aid	€4,173	€2,219
Socioeconomic development	€2,860	€2,530
Environment	€2,461	€2,592,340
Other61	€5,040	€0
TOTAL	€720,030	€3,662,946

Management Report – Statement of Non-Financial Information 2022

116

61 Includes collaborative actions with associations in the shopping centre portfolio.

By motivation

By type of contribution

In terms of sponsorship, the Group continues to support the initiatives of the associations with

which it collaborates, such as sponsoring the paddle tennis tournament for the Ronald McDonald

House Foundation at the Larios shopping centre.

MERLIN also maintains relationships with associations of which it is a member, such as: The Spanish

Association of Offices, Spanish Association of Shopping Centres, European Public Real Estate

Association, Urban Land Institute, Spanish Confederation of Business Organisations, Association of

Real Estate Companies with Rental Properties (ASIPA), GRI, Portuguese Association of Real Estate

Developers and Investors, Madrid Futuro Association and the Barcelona Global Association (see

details in Table GRI 2-28).

Management Report – Statement of Non-Financial Information 2022

117

Contribution to the Sustainable Development Goals (SDGs)

Since its incorporation, MERLIN has integrated sustainability into its activities and decisions. For

MERLIN, the practical implementation of this commitment takes the form of striving to achieve the

Sustainable Development Goals of the 2030 Agenda adopted by the United Nations General

Assembly in 2015.

The SDGs that benefit most from MERLIN’s contributions, as identified in 2022 by the Company, are

discussed below.

SDG 3 - Good health and well-being: MERLIN maximises the user experience by

creating quality spaces that prioritise aspects such as air quality, lighting, and

accessibility.

SDG 4 - Quality education: MERLIN promotes training initiatives by using its assets

to improve social cohesion and inclusion and by offering its employees ongoing

professional development.

SDG 5 - Gender equality: equal opportunities for men and women and non-

discrimination are key aspects for MERLIN in the performance of its activities.

SDG 7 - Affordable and clean energy: Through its assets, MERLIN contributes to the

transition to low-carbon energy by making a commitment to renewable energy and

energy efficiency.

G 8 - Decent work and economic growth: through the refurbishment and operation

of its assets, MERLIN generates quality employment by maximising the user

experience and ensuring the best health and safety conditions.

SDG 9 - Industry, innovation and infrastructure: MERLIN’s assets integrate the latest

trends in innovation and digitalisation at both the building and user level.

SDG 11 - Sustainable cities and communities: Through its assets, MERLIN has a

positive impact on cities from both an environmental and social perspective.

SDG 12 - Responsible consumption and production: MERLIN is committed to

maximising the environmental performance of its assets in line with the market’s

benchmark sustainable construction certifications.

SDG 13 - Climate action: MERLIN is aware of its role the decarbonisation of the

economy, and in 2021 MERLIN developed an emission reduction strategy

(“Pathway to Net Zero”) that involves its entire value chain.

SDG 15 - Life on land: MERLIN analyses and minimises the potential negative

impacts on biodiversity throughout the life cycle of its assets, especially in new

developments and refurbishments

SDG 17 - Partnerships for the goals: MERLIN builds and consolidates relationships

with the public and private stakeholders with which it interacts, especially with the

communities where it operates.

Management Report – Statement of Non-Financial Information 2022

118

7. Capital management

2022 MILESTONES

FUTURE OBJECTIVES

•Divestment of TREE Inversiones Inmobiliarias SOCIMI, S.A. with the corresponding cancellation of the mortgage debt associated with the assets in the amount of € 665 million and cancellation of the corporate syndicated loan in the amount of € 850 million. •Improved credit rating with positive outlook. •Creation of the framework for issuing green/ sustainable debt and converting corporate debt. •Recovery of Capital Markets Day. •Refinancing of the bond maturing in April 2023 for € 743 million.

•In accordance with the commitments of the Green Financing Programme, the Allocation and Impact Reports, which focus on sustainability metrics, will be issued.

KEY INDICATORS FOR THE YEAR
	2022	CHANGES 2022-2021
Share price (€)	8.78	(8.25)%
Distributions to shareholders (€M)	561.9	+267.4%
Number of analysts covering the Group	24	0
Average daily trading volume (€M)	€20.3M	+28.5%

Management Report – Statement of Non-Financial Information 2022

119

7.1 Tax information

7.1.1 Tax strategy

MERLIN contributes to supporting public finances through the payment and collection of taxes

payable to them.

MERLIN’s Board of Directors approved the Group’s tax strategy, the aim of which is to determine the

fundamental principles and pillars on which MERLIN’s fulfilment of its tax obligations is based.

Compliance with its tax obligations is governed by the following principles in its conduct regarding

tax matters:

•Fulfilment of tax obligations and payment of legally required taxes. In particular, MERLIN will

govern its conduct in accordance with that set out in the REIT regime that applies to it, based

on the case law and commentary established in relation to the regime.

•Adoption of actions in tax matters based on a reasonable interpretation of the law.

•Tax treatment and decision making with tax implications based on the business rationale and

reality of transactions and on the distribution of resources, risks and adding value.

•Not using structures that are contrived or that make no economic or business sense so as to

reduce the tax burden of the Group or its shareholders.

•Not operating in territories classified as tax havens for the main purpose of reducing the tax

burden of the Group or its shareholders.

•Maintaining a relationship with the tax authorities based on transparency, good faith,

cooperation, reciprocity and professionalism without prejudice to legitimate disputes that

may arise with the tax authorities in the defence of its interests or those of its shareholders.

•Promoting, together with business associations, improvements in regulations and the

administrative procedures to boost companies’ competitiveness and employment.

Together with the above principles, MERLIN’s Board of Directors will have the necessary internal and

external resources to comply with this tax strategy and the policies approved in implementing it.

This tax strategy will applied and monitored by the Tax Department, under the supervision of the

Group’s Corporate General Manager.

With regard to notification mechanisms, any concerns regarding unethical or illegal conduct and the

organisation’s integrity in relation to taxation are channelled through the whistleblower channel and

the continuous availability of the Head of the Tax Department. In addition, content regarding tax

matters is verified through external audits and tax ICFRs.

Compliance with the tax strategy will be monitored and overseen by the Internal Audit Department,

which, in accordance with the general procedures established for its function, is configured as an

independent function of the Company.

The Audit and Control Committee will therefore monitor the effectiveness of the internal control and

risk management system in accordance with the generally established mechanisms.

Management Report – Statement of Non-Financial Information 2022

120

7.1.2 Profits earned on a country-by-country basis and income tax paid

MERLIN is committed to complying with its tax obligations as an additional way of contributing to

the development of the communities in which it operates in both Spain and Portugal. The Company’s

earnings as at 31th  December 2022 were as follows:

•Income obtained

Income from leases to third parties (€M)	2021*	2022
Spain	338.4	381.1
Portugal	44.4	57.9
TOTAL	382.8	439.0

Income from intra-group transactions with other tax jurisdictions (€M)	2021*	2022
Spain	119.4	23.4
Portugal	23.5	-
TOTAL	142.9	23.4

•Profit before tax

Profit before tax obtained (€M)	2021*	2022
Spain	364.2	(17.5)
Portugal	39.0	65.7
TOTAL	403.2	48.2

•Tangible assets

Management Report – Statement of Non-Financial Information 2022

121

Tangible assets other than cash and cash equivalents (€M)	2021*	2022
Spain	12,024.8	9,884.9
Portugal	1,185.4	1,302.7
TOTAL	13.210,2	11,187.7

•Taxes

Taxes paid (€M)	2021	2022
Spain	165.9	207.7
Portugal	15.1	15.7
TOTAL	180.9	223.4

Corporation tax accrued (€M)	2021*	2022
Spain	1.9	0.9
Portugal	5.9	7.7
TOTAL	7.8	6.8

*2021 reexpresed for discontinued operations.

7.1.3 Total tax contribution

The Total Tax Contribution (TTC) measures the contribution made by a company or group of

companies to the various authorities.

As a general rule, both taxes paid and collected are charged to each fiscal year following a cash basis

approach.

•Taxes paid are those taxes that have incurred an effective cost for companies, e.g.

income tax, social security contributions paid by the company, or certain

environmental taxes.

•Taxes collected are those that have been paid as a result of the company’s economic

activity, without entailing a cost for the companies other than that of their

management, such as employee tax withholdings.

Management Report – Statement of Non-Financial Information 2022

122

Accordingly, the MERLIN Group’s total tax contribution, between Spain and Portugal in 2022,

amounted to € 220.7 million. Based on the nature of the tax and the country of residence of the

companies, the following is a breakdown of the total tax contribution collected and paid by the

Group in 2022 following a cash basis approach:

Spain:

The total contribution in Spain amounted to € 205 million, taking into account direct and indirect

taxation. This amount is differentiated into tax paid and tax collected/withheld. The former are those

Management Report – Statement of Non-Financial Information 2022

123

that entail a cost for the Group, while the latter are those that, without entailing a cost for the

Group, consist of a collection on behalf of third parties. The following summary details both

concepts:

Amounts in million euros.

Taxes paid		2021		2022
Property tax		38.2		36.8
Tax on economic activities		5.5		5.0
Tax on buildings, installations and works		1.4		3.1
Company social security contributions		2.8		3.0
Duties		2.3		2.2
Urban property capital gains tax		2.9		1.4
Transfer tax and stamp duty		2.4		1.4
Corporate Tax		1.9		(1.5)
Others		0.1		0.1
SUBTOTAL		57.5		51.4
Taxes collected/withheld		2021		2022
VAT/Canary Islands general indirect tax		69.6		56.6
Suppliers personal income tax/non-resident income tax		2.3		1.5
Employees personal income tax/non-resident income tax		24.2		24.0
Dividend personal income tax/non-resident income tax		11.4		70.8
Employee social security contributions		0.8		0.6
SUBTOTAL		108.3		153.5

Portugal:

The total contribution in Portugal amounted to € 15.7 million.

Amounts in million euros.

Taxes paid	2021	2022
Property tax	1.1	1
Company social security contributions	0.1	0.2
Transfer tax and stamp duty	0	0.9
Corporation tax	2.5	3
SUBTOTAL	3.7	5.1

Management Report – Statement of Non-Financial Information 2022

124

Taxes collected/withheld	2021	2022
VAT/Canary Islands general indirect tax	6.8	7.7
Suppliers personal income tax/non-resident income tax	4.5	2.5
Employees personal income tax/non-resident income tax	0	0.3
Employee social security contributions	0	0.1
SUBTOTAL	11.3	10.6

Impact of MERLIN’s total tax contribution in 2022

The purpose of this calculation is to measure the business asset represented by the MERLIN Group’s

tax contribution so that it is effectively incorporated into the reputational value given the value it

generates and contributes to society.

Therefore, the impact of the various taxes that entail an outflow of cash for the Group is detailed

below:

Amounts in million euros.

Income tax		2021		2022
Corporation tax		4.4		1.4
Suppliers personal income tax/non-resident income tax		6.7		4.1
Tax on economic activities		5.5		5,0
Urban property capital gains tax		3.0		1.4
SUBTOTAL		19.6		11.9
Taxes on shareholders		2021		2022
Dividend personal income tax/non-resident income tax		11.4		70.8
SUBTOTAL		11.4		70.8
Property taxes		2021		2022
Property tax		39.3		37.8
SUBTOTAL		39.3		37.8

Management Report – Statement of Non-Financial Information 2022

125

Employment-related taxes		2021		2022
Employees personal income tax/non-resident income tax		24.2		24.2
Company social security contributions		2.9		3.2
Employee social security contributions		0.8		0.7
SUBTOTAL		27.9		28.1
Taxes on products and services		2021		2022
VAT/Canary Islands general indirect tax		76.4		64.3
Transfer tax and stamp duty		2.2		2.3
Tax on buildings, installations and works		1.4		3.1
SUBTOTAL		80.0		69.7
Environmental taxes		2021		2022
Duties		2.3		2.2
Others		0.1		0.1
SUBTOTAL		2.4		2.3
TOTAL		180.6		220.7

As mentioned above, in 2022 the MERLIN Group’s total tax contribution amounted to € 220.7 million

between Spain and Portugal, of which 26.2% corresponded to taxes paid and 73.8% to taxes

collected/withheld.

•The taxes paid by the MERLIN Group in 2022 amounted to € 51.4 million, most notably

including property tax that amounted to € 37.8 million, representing 67.2% of its taxes.

•The taxes collected by the MERLIN Group in 2022 amounted to € 164 million, most notably

including taxes withheld on dividends paid that amounted to € 70.8 million, representing

Management Report – Statement of Non-Financial Information 2022

126

42.9%, and taxes on products and services, mainly VAT, amounting to € 64.3 million,

representing 39.4%.

According to the TTC method, the distributed value of a company comprises the sum of the following

components: net interest, wages and salaries (net of taxes withheld from employees), taxes (paid

and collected) and shareholder value (i.e., dividends, reserves, etc.), among others.

Thus, the ratio of distributed tax value reveals what percentage of the total value generated by

MERLIN is allocated to the taxes paid to or collected/withheld for the public authorities. In essence,

the distributed tax value reflects the way in which MERLIN contributes the value it generates to

society.

Finally, at year-end 2022, the Group has received grants from various public bodies for an immaterial

amount.

Financial data (€M and reference to Notes to Consolidated Financial Statements 2022)	2021	2022
Revenue (Note 18.a)	468.2	439.0
Wages and salaries (Note 18.c)	(25.8)	(32.0)
Net interest (Note 18.d)	(130.9)	(105.3)
Changes in value of investment property (Note 7)	177.0	(249.3)
Change in value of financial instruments (Note 14)	73.1	41.2
Profit before tax	518.8	48.2
Profit after tax	512.2	41.4
Profit before tax paid	573.6	97.9
Profit before tax (without market revaluation)	268.7	256.2
Profit before taxes paid (without market revaluation)	323.5	305.9
Profit after taxes paid (without market revaluation)	262.1	249.4
Total taxes paid	61.4	56.5
Total taxes collected/withheld	119.6	164.2
Total tax contribution	180.9	220.7

Tax contribution indicators
1.                Total tax contribution ratio	19%	18%
2.                TTC with regard to revenue	39%	50%
3.                Taxes paid as a percentage of revenue	13%	13%
4.                Taxes collected/withheld as a percentage of revenue	26%	37%
5.                Distributed tax value in the Company	63%	66%

Management Report – Statement of Non-Financial Information 2022

127

In 2022, 18% of the value generated by MERLIN was paid to the tax authorities through taxes paid

and collected/withheld. Thus, for every € 100 of value generated by the Group in 2022, € 18 were

allocated to paying taxes.

For every € 100 of the Company’s revenue, € 50 were allocated to the payment of taxes, of which €

13 are taxes paid and € 37 are taxes collected/withheld. In 2022, for the purposes of the total tax

contribution, taxes paid represented 18.5% of total profit before tax (without revaluation of the

investment property).

7.2 Green financing

7.2.1 Financial strategy

The Group’s strategy is to actively manage both the Group’s assets and the liabilities. In relation to

liabilities, the goal is to extend the average maturity of the debt and to try to maintain borrowing

costs and eliminate the risk arising from interest rate fluctuations. Currently, 99.6% of the

Company’s debt accrues interest at a fixed rate or is subject to interest rate hedges.

7.2.2 Liquidity and capital resources

Debt

MERLIN carried out several transactions involving its financial liabilities in 2022.

The transactions carried out were:

•On 23rd February 2022, the Group repaid its first bond maturing on 23rd May amounting to €

548 million with the funds obtained from a € 500 million bond issue on 21st June 2021.

•On 1st June 2022, the Group converted all its bonds into green bonds under the Green

Financing Framework published on 25th April 2022. The reclassification of the bonds to green

bonds does not entail changes to any other features of the bonds, such as their terms and

conditions, interest or maturity.

•On 16th March 2022, the third one-year extension of the maturity of the mortgage

associated with the bank branches was approved, with the new final maturity date being 31st

March 2034.  Subsequently, on 15th June, the Group made an early repayment for this

mortgage of € 665 million when the shares of TREE Inversiones Inmobiliarias SOCIMI, S.A.

were sold to BBVA.

•In addition, on 21st June 2022, the Group made an early repayment for the corporate loan of

€ 850 million with part of the proceeds from the sale of TREE Inversiones Inmobiliarias

SOCIMI, S.A.

•On 18th November 2022, the Group entered into two 5-year corporate green financing

facilities for an aggregate amount of € 660 million. The financing consists of a syndicated

loan of € 600 million with 5 banks (undrawn at year end) and a bilateral loan for € 60 million. 

Management Report – Statement of Non-Financial Information 2022

128

•On 20th December 2022, the Group drew down € 22 million corresponding to the first

tranche of non-mortgage financing from the European Investment Bank for the logistics

developments in Castilla La Mancha maturing on 20th December 2032.

•At year end, the Group had € 109.2 million not yet drawn down corresponding to tranche 2

of the logistics financing and the green loan signed with the European Investment Bank.

•The new financing will be used to repay the € 743 million bond maturing on 25th April 2023.

At the end of 2022, the Group’s financial debt amounted to € 4,239 million, made up of corporate

financing without mortgage collateral (loans and bonds) and mortgages.

As a result of these transactions, the debt’s average maturity at year end stood at 4.9 years and

there are no significant debt maturities at short-term, the first relevant maturity being the € 743

million bond maturing in 2023, the amount of which would be covered by the new financing

obtained and which would extend the average life of the debt issuance to 6 years.

The debt repayment schedule is as follows:

Available liquidity

MERLIN's cash position at December 31, 2022 amounted to €447 million, including €17 million of

treasury shares.

This liquidity is increased by €1,409 million through the revolving credit line, undrawn at year-end

2022, and undrawn financing from the European Investment Bank and the syndicated loan.

Additionally, the Group has the ability to access the capital markets through the euro medium-term

note (EMTN) programme, which has a limit of € 6,000 million. At 2022 year end, € 1,957 million was

available through this programme.

Off-balance-sheet obligations and transactions

The Group’s investment strategy currently focuses on two pillars, the refurbishment of core assets in

the office and shopping centre segments, developing new logistics warehouses and the new data

centre line of business.

In this regard, as of December 31, 2022, the Group has firm purchase commitments for investment

property amounting to €7 million, excluding committed investments in construction and

improvements.

Management Report – Statement of Non-Financial Information 2022

129

7.2.3 Green financing

On 25th April 2022, the Group published its Green Financing Framework. This programme bring its

financing strategy into line with its sustainability objectives. The Group therefore requested the

conversion of its outstanding senior bonds into green bonds and is committed to linking its future

financing to this programme.

The Green Financing Framework is in line with the Green Bond Principles 2021 (GBP) and the Green

Lending Principles 2021 (GLP) published respectively by the International Capital Markets Association

(ICMA) and the Loan Market Association (LMA), and its four components are as follows:

•Use of proceeds

Allocate the use of the proceeds to a number of eligible project categories in accordance with the

eligibility criteria set out in the Green Financing Framework.

•Process for project evaluation and selection

In line with the approach of integrating Corporate Social Responsibility (CSR), the MERLIN Working

Group will oversee the allocation of the amounts and their CSR performance based on selecting

projects under the criteria described above, the monitoring of the financing instruments issued

under the Green Financing Framework and the management of future updates to the framework.

The Working Group will consist of representatives from the Finance, Treasury, CSR and Investor

Relations departments, and from other technical departments when necessary, and will meet at

least on a monthly basis or as needed.

The responsibilities of the Working Group will include:

–Monitor the eligibility criteria in accordance with the eligible project categories during the

lifetime of the transactions.

–Manage any identified potential ESG risks associated with the eligible project categories:

◦Under the control of the Board of Directors and the Audit and Control Committee,

MERLIN oversees the effectiveness, adequacy and integrity of the Group’s internal

control and risk management systems. ESG risk management is part of the first line

of defence in MERLIN’s risk management plan.

◦MERLIN has also established a certified Environmental Management System based

on ISO 14001 and ISO 50001 standards.

◦Furthermore, as part of the Group’s vision and values, MERLIN is committed to long-

term value creation in a context of transparency, ethics and responsibility in business

and society.

–In particular, when any eligible sustainable building leaves MERLIN’s portfolio or when the

ESG Committee decides to remove an eligible sustainable building from the portfolio of

eligible sustainable buildings, the ESG Committee will make every effort to replace these

assets as soon as possible, once a suitable eligible sustainable building has been identified

for replacement.

•Management of proceeds

MERLIN will allocate the equivalent amount of all the Group’s outstanding green financing to the

eligible project categories set out above.

Management Report – Statement of Non-Financial Information 2022

130

The Working Group will allocate any future financing by verifying on an annual basis the adequacy of

the pre-selected eligible project categories with the total amount of funds obtained through green

financing. In addition, the Working Group will establish a process in its Internal Reporting System to

follow up on the use of the proceeds from the outstanding green financing.

•Reporting

MERLIN, in its commitment to transparency and sustainable engagement, will publish on an annual

basis a report on the allocation of the proceeds and an impact report on the main indicators set out

in the Green Financing Framework:

–An audited report of the allocation of the proceeds detailing the different green

financing or financial instruments and the amount allocated to each eligible project

category divided up by each eligibility criteria.

–A report that will include a quantitative and qualitative measurement of the main

CSR indicators for the eligible project categories selected for allocation of the

proceeds.

Eligible project category	Example of impact indicators
Sustainable buildings	–Breakdown of external certification by asset type (shopping centres, offices and logistics centers) –Average energy intensity of buildings included in the portfolio of eligible sustainable buildings (in kWh/sqm/year) by asset type (shopping centres, offices and logistics centers) –Average greenhouse gas emissions intensity of buildings included in the portfolio of sustainable eligible buildings (in tCO2eq/sqm) by asset type (shopping centres, offices and logistics centers) –CO2 emissions avoided by buildings included in the portfolio of sustainable eligible buildings (in tCO2eq/year) by asset type (shopping centers, offices and logistics centers)
Renewable energy	–Installed capacity (MW) –Expected renewable energy generation (MWh/year) –CO2 emissions avoided (in tCO2e/year)
Energy efficiency	–Expected energy savings (MWh/year)
Clean transport	–Number of electric chargers –CO2 emissions avoided (in tCO2e/year)
Pollution prevention and control	–Estimated CO2 emissions offset (in tCO2e/year)

At year-end 2022, the eligible project category selected by the Group for allocation of the proceeds

was Sustainable Buildings. The main indicators of the Sustainable Buildings portfolio by type of asset

for the 2022 fiscal year are as follows:

Management Report – Statement of Non-Financial Information 2022

131

Indicator62	Offices	Shopping Centers	Logistics
Energy intensity (in kWh/sqm/year)	75.71	63.32	48.83
GHG Intensity (in tCO2eq/sqm) Market- based	0.002	0.003	0.000
Avoided CO2 emissions (in tCO2e/year)	6,646	3,811	75

In addition to the above, the Group has a corporate revolving credit facility in the amount of € 700

million, signed in April 2019, and a mortgage loan in the amount of € 70 million, signed in May 2019,

which are labelled as sustainable financing and are linked to the fulfilment of at least three of the

following KPIs:

•Make sustainable investments in the portfolio

•Obtain LEED/BREEAM asset certifications

•Obtain AIS accessibility certifications

•Ensure a certain amount of energy consumption is from renewable energy sources

The Group has met the target set for 2022 in all four categories.

Management Report – Statement of Non-Financial Information 2022

132

62 Information regarding assets under operational control within the Sustainable Buildings portfolio. In those business

parks comprised of sustainable and non-sustainable buildings, for the purposes of the Green Financing Program, and a

single supply point, total consumption has been considered.

8. About this Report

8.1 Basis of preparation of this report

Reporting scope

This report includes information on MERLIN Properties’ economic, social and environmental

performance in 2022. Where relevant, information from previous years has also been included to

show the evolution of the Group’s performance.

Standards employed

The statement of non-financial information was prepared in accordance with current company law

and following the criteria of selected Sustainability Reporting Standards issued by the Global

Reporting Initiative (GRI Standards), and other criteria described in accordance with each topic in the

Table of Contents of the Statement of Non-Financial Information.

Principles applied

The GRI Standards Sustainability Report guidelines lay down a number of principles that have been

taken into account when preparing the report, which are as follows:

•Stakeholder inclusiveness. The 2022 Statement of Non-Financial Information has been

prepared with stakeholder expectations and concerns regarding the Group’s operations and

performance in mind. These expectations have been considered through the MERLIN

Properties staff who are in contact with their stakeholders and relevant matters published in

the media and included in questionnaires and sustainability ratings targeting investors, such

as DJSI/CSA, EPRA or GRESB have also been analysed.

•Sustainability context at MERLIN Properties. The way in which the Group’s activities and

services interact with the social, economic and environmental context in which it operates

has been evaluated.

•Materiality. A materiality analysis has been conducted to define the most relevant

sustainability aspects for MERLIN Properties. The process followed in this analysis is

explained in the following pages.

•Completeness. After identifying material aspects, the content of the Statement of Non-

Financial Information has been designed to include sufficient information on these aspects

to allow stakeholders to assess and understand MERLIN Properties’ economic,

environmental and social performance in recent years.

GRI principles for information processing and quality

This Statement of Non-Financial Information has been drawn up following the GRI principles

established to ensure the quality of the information:

•Balance. This principle indicates that reports should reflect both positive and negative

aspects of the Group’s performance. By applying this principle, a broad and unbiased picture

of MERLIN Properties’ overall performance has been provided.

Management Report – Statement of Non-Financial Information 2022

133

•Comparability. The Group has compiled and reported information so that stakeholders can

analyse how its performance has evolved in recent years, thus facilitating comparison with

the performance of other organisations.

•Accuracy. The information contained in this Statement of Non-Financial Information is

intended to include sufficient details to meet the expectations expressed by the Group’s

stakeholders.

•Timeliness. MERLIN Properties’ aims to update the content of this Statement of Non-

Financial Information on an annual basis to provide stakeholders with regular access to

information on the Group’s performance.

•Clarity. MERLIN Properties seeks to report on its performance in a manner that is accessible

and clear to all its stakeholders.

•Reliability. MERLIN Properties has described in detail the process for preparing this

Statement of Non-Financial Information, which guarantees that the content can be subject

to external examination to establish the quality and degree of materiality of the information.

Contact details

If you require any clarification regarding the information contained in this Statement of Non-

Financial Information or any aspect of the Group’s sustainability performance, please contact

MERLIN Properties at the following address: info@merlinproperties.com

Management Report – Statement of Non-Financial Information 2022

134

8.2 Information on MERLIN Properties’ sustainability performance

Contents	Response
Aspect: Environment
Scope of disclosure	The scope of the assets on which information is provided regarding their energy consumption, GHG emissions, water consumption and waste is detailed in Appendix I of this report.
GHG emissions per production unit	The GHG emissions ratio in terms of surface area, for all operational assets for which MERLIN exercises operational control, is 0.026 tCO2e/ sqm, including scope 1, scope 2 and scope 3 emissions.
Energy consumption per production unit	The energy consumption ratio in terms of surface area, for all operational assets for which MERLIN exercises operational control, is 0.277 GJ/sqm.
Number and amount of significant environmental fines	No fines of an environmental nature were recognised during 2022.
Policies regarding energy consumption, water consumption, GHG emissions and waste	In accordance with its Sustainability Policy, MERLIN is committed to reducing the consumption of resources and improving the circularity of its assets throughout their life cycle through operational efficiency and minimising the carbon footprint of the entire value chain.
Aspect: Society
Complaints and quality assurance policy.	For the purposes of understanding the expectations and needs of its stakeholders, and offering maximum transparency, MERLIN has implemented numerous communication channels, such as satisfaction questionnaires aimed at its tenants. Within the framework of these questionnaires, any potential complaints and claims that tenants may have are gathered, allowing their concerns and needs to be addressed.
Customer data protection policy	MERLIN has a Personal Data Protection Policy, which guarantees that personal data is processed respecting the principles established in the General Data Protection Regulation (GDPR) (lawfulness, fairness, transparency, purpose limitation, data minimisation, accuracy and limited storage periods).
Donations to foundations and other types of donations	The total amount donated to foundations by the Group was € 416 thousand.
Percentage of female executives and middle managers	The percentage of women in senior management is 11% (1 out of 9) and in middle management 33% (27 out of 82).
Anti-bribery policy	In 2021 MERLIN updated its Anti-Corruption, Bribery and Fraud Policy, which lays out the Group’s basic guiding principles for preventive actions and proactive steps in the fight against corruption, bribery and fraud in all areas of its business activities. Furthermore, the Group is certified under ISO 37,001 Anti Corruption and Bribery
Lost time injury frequency rate (LTIFR) associated with employees	The ratio of days lost in 2022 among MERLIN employees is 9 for men and 7 for women.
Total recordable incident rate (TRIR) associated with employees	The total recordable incident rate (TRIR) in 2022 among MERLIN employees is 1%.
Number of suppliers	The number of suppliers with orders in 2022 was 184.
Number of suppliers audited and audits carried out	Suppliers with orders are analysed in terms of compliance and finance, which includes being up to date with the tax and social security authorities, and the financial solvency of the supplier. In addition, if the tender is for more than € 1 million, the supplier’s execution capacity and the Group’s degree of exposure are analysed. In 2022, there were a total of 573 orders (OpEx and CapEx) and 184 suppliers. The audit described above is carried out for each order.
Percentage of suppliers audited	100% of MERLIN’s suppliers are audited.

Management Report – Statement of Non-Financial Information 2022

135

Percentage of assets with public transport connection63	The percentage of assets with a public transport connection nearby is 97%.
Aspect: Governance
Years with the auditor	MERLIN’s consolidated financial statements have been audited by the same financial auditor for the last 9 years (since the audit corresponding to 2014).
Number of directors and independent directors on the Audit and Control Committee	The Audit and Control Committee is composed of 6 directors, 4 of whom are independent.
Number of executive and non-executive directors	The Board of Directors is composed of 2 executive directors and 11 non- executive directors (7 independent and 4 proprietary directors).
Number of directors and independent directors on the Remuneration and Appointments Committee	The Remuneration and Appointment Committee is composed of 6 directors, 5 of whom are independent.
Number of directors and independent directors on the Sustainability and Innovation Committee	The Sustainability and Innovation Committee is composed of 4 directors, 3 of whom are independent.
Number of female executives	The management team is composed of one woman and 8 men (for a total of 9).
Number of female directors	The Board of Directors is composed of 5 women and 8 men (for a total of 13 members).
Number of Board meetings and percentage of attendance	MERLIN’s Board of Directors met 13 times with 97.63% attendance.
Number of Audit and Control Committee meetings and percentage of attendance	The Audit and Control Committee met 14 times with 95.71% attendance.
Number of Remuneration and Appointments Committee meetings and percentage of attendance	The Remuneration Committee met 11 times (11 as ARC and 2 as AC and RC separately) with 100% attendance.
Number of Sustainability and Innovation Committee meetings and percentage of attendance	The Sustainability Committee met 9 times with 100% attendance.
Share ownership	MERLIN has guidelines for its executives regarding the minimum requirements for holding the Group’s shares on an ongoing basis.
Content considered non-material for the Group
Emission of particles, SO2 and NOx	The main fuel consumed by MERLIN is natural gas, a gas that barely emits SO2 and particles in its combustion. The possible emissions of this type of pollutant are due to the consumption of diesel, a fuel that is hardly used by MERLIN. In addition, NOx emissions are also considered as barely representative, given that the water heaters that use these types of fuels are of a residential type.
Percentage of raw material from sustainable sources	The amount of materials acquired by MERLIN is low, given that the refurbishment processes of the assets are carried out by subcontracted companies.
Policy against child labor	Due to the location of MERLIN’s assets (Spain and Portugal) and the type of activities carried out by the Group, it is considered that there are no risks concerning child labour. In 2022, MERLIN's Board of Directors has approved a Respect for Human Rights Policy that expressly rejects the exploitation of children. This policy will be translated into the supply chain.
Supply chain management at a societal level	In 2022, MERLIN has modified the Procurement Procedure to require in all tenders over 150 thousand euros the response, by suppliers, to an ESG questionnaire with environmental, social and governance issues. In 2022, these questionnaires were obtained for 72% of the CAPEX at 12/31/22 and Internal Audit audited 78% of the questionnaires received (55% of the Capex at 12/31/22; €126 M).

Management Report – Statement of Non-Financial Information 2022

136

63 Percentage obtained in terms of surface area, taking into account those assets that are located at least 500 metres from a public

transport or station. Includes only those assets from the offices and shopping centres portfolios in operation.

8.3 Table of contents of Law 11/2018

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			General information
A brief description of the business model including its business environment, organisation and structure	1.1. Business model Pag. 9-11 2.1The Market (sector) Pag. 22-23	GRI 2-1 GRI 2-6 GRI 2-22
Markets in which it operates	1.4 Business activities Pag. 12-19
Objectives and strategies of the organisation	1.5 Main milestones and objectives Pag. 19-21
Main factors and trends that may affect its future progress	2.2 Outlook Pag. 23
Reporting framework used	8.1. About this report Pag. 132-133	GRI 1 – Requirement 8
Principle of materiality	2.6 Materiality analysis Pag. 29-31	GRI 3-1 GRI 3-2
Environmental issues
Management approach: description and results of the policies related to these matters and the main risks related to these matters linked to the Group’s activities	4. Climate change management Pag. 55-81	GRI 3-3
General detailed information
Detailed information on the current and foreseeable effects of the Company’s activities on the environment and, if applicable, on health and safety	4. Climate change management Pag. 55-81	GRI 3-3
Environmental assessment and certification procedures	4.6 Carbon footprint certification 4.7 Validation of MERLIN’s commitments by independent third parties Pag. 76-79	GRI 3-3
Resources allocated to the prevention of environmental risks	4.2 Environmental and Climate Change Systems Pag. 58-59	GRI 3-3

Management Report – Statement of Non-Financial Information 2022

137

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			Application of the precautionary principle	4.2 Environmental and Climate Change Systems Pag. 58-59	GRI 2-23 GRI 3-3
Amount of provisions and guarantees for environmental risks	4.2 Environmental and Climate Change Systems Pag. 58-59	GRI 3-3
Pollution
Measures to prevent, reduce or redress carbon emissions that seriously affect the environment, taking into account any type of activity-specific atmospheric pollutants including noise and light pollution.	4.5 Decarbonisation of MERLIN Properties’ portfolio Pag. 69-76	GRI 3-3
Circular economy and waste prevention and management
Measures for the prevention, recycling, reuse and other forms of recovering and eliminating waste.	4.4 Environmental performance of MERLIN Properties’ portfolio Pag. 62-68	GRI 3-3 GRI 306-1 (2020) GRI 306-2 (2020) GRI 306-3 (2020) GRI 306-4 (2020) GRI 306-5 (2020)
Actions taken to combat food waste	4.4 Environmental performance of MERLIN Properties’ portfolio Pag. 68	GRI 3-3
Sustainable use of resources
Water consumption and supply in accordance with local limitations	4.4 Environmental performance of MERLIN Properties’ portfolio Pag. 66	GRI 303-3 (2018) as regards the origin of water consumed GRI 303-5 (2018)
Consumption of raw materials and measures taken to use them more efficiently	-	Non-material
Direct and indirect energy consumption	4.4 Environmental performance of MERLIN Properties’ portfolio Pag. 63-66	GRI 302-1
Measures taken to improve energy efficiency	4.3 Development and operation of sustainable assets Pag. 60-61	GRI 3-3

Management Report – Statement of Non-Financial Information 2022

138

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			Use of renewable energies	2.5 MERLIN’s sustainability management Pag. 26-29	GRI 302-1
Climate change
Greenhouse gas emissions generated as a result of the Company’s activities, including use of the goods produced and services provided	4.5. Decarbonisation of MERLIN Properties portfolio Pag.69-76	GRI 3-3 GRI 305-1 GRI 305-2
Measures adopted to adapt to the consequences of climate change	Appendix IV. Report climate risks according to TCFD methodology Pag. 194-202	GRI 3-3
Medium- and long-term targets voluntarily established to reduce greenhouse gas emissions and the means implemented for this purpose	2.5 MERLIN’s sustainability management Pag. 26-29	GRI 3-3 GRI 305-5
Protection of biodiversity
Measures taken to preserve or restore biodiversity	4.9 Protection of biodiversity Pag. 80-81	GRI 3-3
			Impacts caused by activities or operations in protected areas	4.9 Protection of biodiversity Pag. 80-81	GRI 3-3
Social and personnel matters
Management approach: description and results of the policies related to these matters and the main risks related to these matters linked to the Group’s activities	5. Talent creation Pag. 82-99	GRI 3-3
Employment
Total number of employees and breakdown by country, gender, age and professional classification	5.1.1 Composition of the workforce Pag. 85-87	GRI 2-7 GRI 405-1
Total number of employees and breakdown by type of employment contract and annual average number of permanent, temporary and part-time contracts by gender, age and professional classification	5.1.1 Composition of the workforce Pag. 85-87 5.1.2 Average contracts Pag. 87	GRI 2-7 GRI 405-1

Management Report – Statement of Non-Financial Information 2022

139

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			Number of dismissals by gender, age and professional classification	5.1.3 Number of dismissals Pag. 88	GRI 3-3 GRI 401-1
Average remuneration and changes in salaries broken down by gender, age and professional classification or equal value	5.2 Employee compensation Pag. 89-91	GRI 3-3 GRI 2-21
Wage gap, remuneration for the Company’s equal or average job positions	5.2.1 Wage gap analysis Pag.89-90	GRI 3-3 GRI 405-2
Average remuneration for directors and executives, including variable remuneration, attendance fees, termination benefits, long-term savings/pension plans and any other compensation, broken down by gender	5.2.2 Remuneration of non-executive directors Pag. 91 5.2.1 Wage gap analysis Pag. 89-90	GRI 3-3 GRI 2-19 GRI 2-21
Implementation of work disconnection policies	5.1.4 Implementation of work disconnection policies Pag. 89	GRI 3-3
Number of employees with disabilities	5.5.5 Employees with disabilities Pag. 96	GRI 3-3 GRI 405-1
Organisation of work
Organisation of working hours	5.3.1 Organisation of work Pag. 91	GRI 3-3
Number of hours of absenteeism	5.3.2 Total hours of absenteeism Pag. 91-92	GRI 3-3 GRI 403-9 (2018)
Measures designed to facilitate work-life balance and promote the sharing of responsibility by both parents	5.3.3 Measures designed to facilitate work-life balance and promote the sharing of responsibility by both parents Pag. 92-93	GRI 3-3
Health and safety

Management Report – Statement of Non-Financial Information 2022

140

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			Occupational health and safety conditions	5.4 Safety, health and well-being of employees Pag. 93-94	GRI 403-1 (2018) GRI 403-2 (2018) GRI 403-3 (2018) GRI 403-4 (2018) GRI 403-5 (2018) GRI 403-6 (2018) GRI 403-8 (2018)
Occupational accidents, in particular their frequency and seriousness, and work-related illness, broken down by gender	5.4 Safety, health and well-being of employees Pag. 93-94	GRI 403-9 (2018) GRI 403-10 (2018) as regards occupational accidents, in particular their frequency and seriousness, and work-related illness
Labour relations
Organisation of social dialogue, including procedures for informing, consulting and negotiating with staff	5.5.1 Organisation of social dialogue Pag. 95	GRI 3-3
Percentage of employees covered by collective bargaining agreements by country	5.5.2 Employees subject to collective bargaining agreements Pag. 95	GRI 2-30
Balance of collective bargaining agreements, particularly as regards occupational health and safety	5.5.3 Balance of collective bargaining agreements, particularly as regards occupational health and safety Pag. 95	GRI 3-3 GRI 403-4 (2018)
Mechanisms and procedures that the Company has in place to promote the involvement of employees in the Company’s management, in terms of information, consultation and participation	5.5.4 Mechanisms and procedures that the Company has in place to promote the involvement of employees in the Group company’s management, in terms of information, consultation and participation Pag. 95-96	GRI 3-3
Training

Management Report – Statement of Non-Financial Information 2022

141

Information required by Spanish Law 11/2018	Page or section of the report providing the response to the requirement of Law 11/2018	Reporting criteria: GRI
			Policies implemented in the area of training	5.6 Diversity and equal opportunities Pag. 97-99	GRI 3-3
Total number of training hours by professional category	5.6 Diversity and equal opportunities Pag. 97-99	GRI 404-1
Universal accessibility
Universal accessibility for people with disabilities	6.3 Maximising the well- being of users of the assets Pag. 105-110	GRI 3-3
Equality
Measures taken to foster equal treatment and opportunities for men and women	5.6 Diversity and equal opportunities Pag. 97-99	GRI 3-3

Equality plans, measures taken to promote employment, protocols against sexual harassment and gender-based harassment	5.6 Diversity and equal opportunities Pag. 97-99	GRI 3-3
Non-discrimination and diversity management policies	5.6 Diversity and equal opportunities Pag. 97-99	GRI 3-3
Respect for human rights
Management approach: description and results of the policies related to these matters and the main risks related to these matters linked to the Group’s activities	3.3 Ethics and compliance Pag. 50-54	GRI 3-3
Application of due diligence procedures regarding human rights and preventing the risk of human rights violations and, if applicable, measures to mitigate, manage and repair possible abuses	3.3 Ethics and compliance Pag. 53-54	GRI 2-23 GRI 2-26 GRI 412-2
Complaints of human rights violations	3.3 Ethics and compliance Pag. 54	GRI 406-1

Management Report – Statement of Non-Financial Information 2022

142

Measures implemented to promote and comply with the provisions contained in the ILO’s fundamental conventions regarding freedom of association, the right to collective bargaining, the elimination of workplace discrimination and of all forms of forced or compulsory labour and the abolition of child labour	3.3 Ethics and compliance Pag. 53-54	GRI 3-3 GRI 406-1 GRI 407-1 GRI 408-1 GRI 409-1
Fight against corruption and bribery
Management approach: description and results of the policies related to these matters and the main risks related to these matters linked to the Group’s activities	3. Responsible management Pag. 32-54	GRI 3-3
Measures taken to prevent corruption and bribery	3.3 Ethics and compliance Pag. 52-53	GRI 2-23 GRI 2-26 GRI 205-2
Anti-money laundering measures	3.3 Ethics and compliance Pag. 52	GRI 205-2
Contributions to foundations and non-profit entities	6.4.2  and 6.4.3 Pag. 113-117	GRI 413-1
Society matters
Management approach: description and results of the policies related to these matters and the main risks related to these matters linked to the Group’s activities	6. Management of stakeholders Pag. 100-118	GRI 3-3
Commitment to sustainable development
Impact of the Company’s activities on employment and local development	6.4.1 Generating positive impacts on the environment 6.4.2 Social initiatives Pag. 111-116	GRI 203-1
Impact of the Company’s activities on local communities and on the land	6.4.1 Improving cities Pag. 111-113	GRI 3-3 GRI 413-1
Engagement with local community representatives, and communication channels in place	6.4.1 Improving cities Pag. 111-113	GRI 2-29 GRI 413-1
Association or sponsorship activities	6.4.3 Measuring the distribution of contributions to the MERLIN community Pag. 116-118	GRI 2-28
Subcontracting and suppliers

Management Report – Statement of Non-Financial Information 2022

143

Inclusion of social, gender equality and environmental matters in the procurement policy	3.1 Governance Structure Pag. 34	GRI 3-3
Consideration of social and environmental responsibility in relationships with suppliers and subcontractors	6.2 Supply chain Pag. 104-105	GRI 2-6 GRI 308-2 GRI 414-1
Monitoring and audit systems and results	6.2 Supply chain Pag. 104-105	GRI 3-3
Consumers
Measures for the health and safety of consumers	6.3 Maximising the well- being of users of the assets Pag. 105-110	GRI 3-3 GRI 416-1
Consumer claims, complaints and grievance systems	6.3 Maximising the well- being of users of the assets Pag. 105-110	GRI 3-3
Tax information
Profits earned on a country-by-country basis	7.1.2 Profits earned on a country-by-country basis and income tax paid Pag. 121-122	GRI 207-4 (2019)
Income tax paid	7.1.2 Profits earned on a country-by-country basis and income tax paid Pag. 121-122	GRI 207-4 (2019)
Government grants received	7.1.3 Grants Pag. 126	GRI 207-4 (2019)

Management Report – Statement of Non-Financial Information 2022

144

a.GRI Content Index

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
2-1		1.1 Page 9-11 2-1.d Spain and Portugal MERLIN Properties is included in the main benchmark indices: -IBEX 35. -Euro STOXX 600. -FTSE EPRA/ NAREIT Global Real Estate Index. -GPR Global Index. -GPR-250 Index. -MSCI Small Caps. - Dow Jones Sustainability Index Europe.		Organisational details
2-2		8.1 Pag. 132-133 Appendix III – Pag. 185-192 The organisation’s financial statements include MERLIN Properties and all its subsidiaries. Further information can be found in the financial statements included in the directors’ report. The directors’ report is available at www.merlinproperties.com		Entities included in the organisation’s sustainability report
2-3		8.1 Pag. 132-133 2-3.a 2022-2021. MERLIN Properties prepares the report on an annual basis		Reporting period, frequency and contact point
2-4		During 2022, MERLIN has updated the criteria for calculating its GHG emissions, based on the operational control and share of assets established in the GHG Protocol, taking as a criterion the market-based method, according to which the emission factor data derived from electricity consumption must be obtained from the marketers from whom the electricity has been purchased. Previously, the Group calculated the emission factor from the electricity mix for the countries of Spain and Portugal (location-based method). In view of the above, the data for the two previous years have been recalculated to facilitate year-to-year comparability. Pag. 58		Restatement of information

Management Report – Statement of Non-Financial Information 2022

145

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
2-5		The indicators included in the Independent Review Report have been externally verified by Deloitte S.L. in the report is included in Annex VII. Pag.214		External assurance
2-6		1.4 Pag. 12-19 6.2 Pag. 104-105 2-6.b The Group’s supply chain mainly comprises project contractors and other service providers in the operation of the buildings		Activities, value chain and other business relationships
2-7		5.1.1 and 5.1.2 Pag. 85-87		Employees
2-9	Gov-Board	3.1 Pag. 33-40		Governance structure and composition
2-10	Gov-Selec	Pág. 39 The processes for appointing and selecting members of the highest governing body and its committees are described in the Annual Corporate Governance Report (ACGR) and are established in the Group’s Director Selection Policy		Appointing and selecting members of the highest governance body
2-11		3.1 Pag. 39		Chair of the highest governance body
2-12		3.1 Pag. 33-40 3.2 Pag. 40-50		Role of the highest governance body in monitoring impact management
2-14		Board of Directors. MERLIN's Board of Directors, composed of a majority of independent directors, focuses its activity on defining, supervising and monitoring the policies, strategies and general guidelines to be followed by the Group.		Role of the highest governance body in sustainability reporting

Management Report – Statement of Non-Financial Information 2022

146

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
2-15	Gov-Col	Section 28 of the Board Regulations sets out the mechanisms established to prevent and manage potential conflicts of interest		Conflicts of interest
2-16		This information is available in the Annual Corporate Governance Report		Communicating critical concerns
2-17		Pag. 39		Collective knowledge of the highest governance body
2-18		Pag. 40		Assessment of the highest governance body’s performance
2-20		5.2. Pag. 89-91 2-20. a. ii Through the General Meeting		Process for determining remuneration
2-21		5.2. Pag. 89-91		Total annual compensation ratio
2-22		2.5 Pag. 26-29		Statement on the sustainable development strategy
2-23		3.1 Pag. 33-40		Policy commitments
2-26		Board members may seek external advice. These mechanisms are explained in the Group's IAGC 2022.		Mechanisms for seeking advice and raising concerns

Management Report – Statement of Non-Financial Information 2022

147

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
2-28		–Spanish Association of Offices (€1,210) –Spanish Association of Shopping Centres (€5,238) –European Public Real Estate Association (EPRA) (€10,000) Confederación Española de Organizaciones Empresariales (CEOE) (12,000 €) – Association of Real Estate Companies with Rental Assets (ASIPA) (15,000 €) –GRI Club (€4,700 ) –Associação Portuguesa de Promotores e Investidores Imobiliários (€1,257) –Madrid Futuro Association (€12,500)
		Barcelona Global Association (€10,000) •Shout Spanish Entrepreneurs Association (€4,000) •Spanish Global Compact Network (€3,917) •Spanish Association for Investor Relations (AERI) (€3,600) •Companies for Sustainable Mobility (€3,500) •Association for the Progress of Management (€1,854) •Institute of Internal Auditors (€1,800) •Association for the Promotion of the Port of Seville (€1,200) •Barcelona Catalunya Centre Logístic (€950) •Associação Portuguesa de Logística (€650) •SAP Users Association Spain (€750) Total 2022 – 94,125€		List of membership of associations

Management Report – Statement of Non-Financial Information 2022

148

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
2-29		6.1 Pag.100-104		Approach to stakeholder engagement
2-30		5.5.2 y 5.5.3 Pag. 95 94% of the Group’s employees are covered by collective bargaining agreements		Collective bargaining agreements
3-1		2.6 Pag. 29-31		Process for determining material issues
3-2		2.6 Pag. 29-31		List of material aspects

Management Report – Statement of Non-Financial Information 2022

149

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
3		2.6 Pag. 29-31		Management approach
3-1		2.6 Pag. 29-31		Material issue determination process
3-2		2.6 Pag. 29-31		List of material issues
3-3		4, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.8, 2.5, 5, 5.1.3, 5.2, 5.2.1, 5.2.2, 5.1.4, 5.5.5, 5.3.1, 5.3.2, 5.3.3, 5.5.1, 5.5.3, 5.5.4, 5.6, 6.3, 3.3, 3, 6, 6.4.2, 6.2, 6.3		Management of material issues
201-1		6.4.3 Pag. 116-118 MERLIN has measured its contribution to society through the LBG model after joining the London Benchmarking Group (LBG) in Spain.		Direct economic value generated and distributed
201-3		MERLIN Properties does not have a pension plan, so this does not apply to the Group		Defined benefit plan obligations and other retirement plans
201-4		Pag. 126 MERLIN Properties has not received significant financial support from government bodies		Financial assistance received from government
Indirect economic impacts
3		6.4. Pag. 110-118		Management approach

Management Report – Statement of Non-Financial Information 2022

150

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
203-1		Construction of an entrance and exit to the A-1 and M11 from Torre Chamartín at a cost of €2.5M.		Infrastructure investments and services supported
203-2		6.4.2 Pag. 113-116		Significant indirect economic impacts
Taxation
207-1		7.1 Pag. 120-127		Approach to tax
207-2		7.1.1 Pag. 120		Tax governance, control and risk management
20-3		7.1.3 CTT Pag. 122-127		Stakeholder engagement and management of concerns related to tax
207-4		7.1.2. Pag. 121-122		Country-by-country reporting
ENVIRONMENTAL PERFORMANCE
Energy
3		3.3. Pag. 55-81		Management approach
302-1	Elec-Abs Elec-LfL DH&C-Abs DH&C-LfL Fuels-Abs Fuels-LfL	4.4. Pag. 62-68		Energy consumption within the organisation
302-2	Elec-Abs Elec-LfL DH&C-Abs DH&C-LfL Fuels-Abs Fuels-LfL	4.4. Pag. 62-68		Energy consumption outside of the organisation

Management Report – Statement of Non-Financial Information 2022

151

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
302-3		4.4. Pag. 63-66		Energy intensity
G4-CRE1	Energy-Int	4.4. Pag. 63-66		Energy intensity of buildings
Water
3		4.4. Pag. 66		Management approach
303-1		4.4. Pag. 66		Interactions with water as a shared resource
303-2		4.4. Pag. 66 & 168-172. Water from the assets is discharged to the municipal sanitation system, and is treated as domestic water discharge		Management of water discharge-related impacts
303-3	Water-Abs Water-LfL	4.4. Pag. 66 & 168-172 Water is mainly withdrawn through the municipal water supply. In addition, there is a tank that collects rainwater at the Marineda shopping centre		Water withdrawal
G4-CRE2	Water-Int	4.4. Pag. 66		Water consumption intensity of buildings
Emissions
3		4.5 Pag. 69-76		Management approach
305-1	GHG-Dir-Abs GHG-Dir-LfL	4.5 Pag. 70-74		Direct GHG emissions (scope 1)
305-2	GHG-Indir-Abs GHG-Indir-LfL	4.5 Pag. 70-74		Indirect GHG emissions (scope 2)
305-3	GHG-Indir-Abs GHG-Indir-LfL	4.5 Pag. 75-76		Indirect GHG emissions (scope 3)
305-4	GHG-Int	4.5 Pag. 76		GHG emissions intensity
G4-CRE3	GHG-Int	4.5 Pag. 76		GHG emissions intensity of buildings

Management Report – Statement of Non-Financial Information 2022

152

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
Effluents and waste
3		4. Pag 55-81		Management approach
306-3	Waste-Abs Waste-LfL	Pag. 67-68		Waste by type and disposal method
Environmental compliance
3		4. Pag 55-81		Management approach
307-164		MERLIN Properties has not received any fines or sanctions.		Non-compliance with environmental laws and regulations
SOCIAL PERFORMANCE - LABOUR PRACTICES AND DECENT WORK
Employment
3				Management approach
401-1	Emp-Turnover	Rotation 5.1.3 Pag. 88 Employees hires  Pag. 97-98 5.6 Pag. 97-99		New employee hires and employee turnover
401-2		5.2 Pag. 89-91. 100% of employees have access to social benefits		Benefits provided to full-time employees that are not provided to temporary or part- time employees
401-3		Pag. 92  In 2022, 8 men and 5 women		Parental leave
Occupational health and safety
3		5.4 Pag. 93-94		Management approach
403-1		5.4 Pag. 93-94		Occupational health and safety management system
403-2		Pag. 93  MERLIN has an external Occupational Risk Prevention service that annually inspects the offices from which employees work to assess risks.		Hazard identification, risk assessment and incident investigation

Management Report – Statement of Non-Financial Information 2022

153

64 Fines or firm sanctions (in contentious terms) considered significant (over €50,000) arising from sanctions and non-

compliance (excluding administrative and fiscal) for which there is no possibility of appeal and that are directly attributable

to conduct or acts carried out by companies or employees of the Corporation before 31 December 2021.

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
403-3		Pag. 93 MERLIN has an external Occupational Risk Prevention service that annually inspects the offices from which employees work to assess the risks and the adequacy of the facilities in terms of safety and occupational risk prevention.		Occupational health services
403-4		Health and safety committees have not yet been formed		Worker participation, consultation, and communication on occupational health and safety
403-5		Pag. 93 As part of the Welcome Pack, all employees are trained (on a mandatory basis) in Occupational Risk Prevention, through which information is provided on the risks of their jobs and the main mitigating measures.		Worker training on occupational health and safety
403-6		5.4. Employee safety, health and welfare Pag. 93-94		Promotion of worker health
403-7		5.4. Employee safety, health and welfare Pag. 93-94		Prevention and mitigation of occupational health and safety impacts directly linked by business relationships
403-9	H&S-Emp	Additionally, MERLIN also ensures the health and safety of contractors who work on its refurbishment or construction projects.		Work-related injuries

Management Report – Statement of Non-Financial Information 2022

154

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
		During 2020, the Group implemented a reporting system that collects information on occupational accidents recorded at the assets, including the type of accident, the number of days of sick leave caused, and the corrective measures to be taken.
G4-CRE6		Not applicable.		Percentage of the organisation operating in verified compliance with an internationally recognised health and safety management system
Training and education
3		5. Talent creation		Management approach
404-1	Emp-Training	5.6 Diversity and equal opportunity Pag. 97-99		Average hours of training per year per employee
404-2		5.6 Diversity and equal opportunity Pag. 97-99		Programmes to improve employee skills and transition assistance programmes
404-3	Emp-Dev	100% of employees receive performance assessments once a year		Percentage of employees receiving regular performance and career development reviews
Diversity and equal opportunities

Management Report – Statement of Non-Financial Information 2022

155

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
3		5.6 Diversity and equal opportunity		Management approach
405-1	Diversity-Emp	5.6 Diversity and equal opportunity Pag. 97-99		Diversity of governing bodies and employees
SOCIAL PERFORMANCE - SOCIETY
Local communities
3		6.4. Development and relationship with the environment		Management approach
413-1	Comty-Eng	6.4.2. Social initiatives Pag. 113-116 In all assets, dialogue and participation mechanisms have been developed, as described in the management approach		Operations with local community engagement, impact assessments, and development programmes
413-2		Not applicable		Operations with significant actual and potential negative impacts on local communities
G4-CRE7		No one has had to be displaced or resettled		Number of people voluntarily and involuntarily displaced and/or resettled by the Group’s activities, broken down by project
Anti-corruption
3		3.Responsible management		Management approach
205-1		3.3 Ethics and compliance Pag. 50-54 Risks in general, including corruption, are assessed through the Group’s Risk Management System.		Operations assessed for risks related to corruption

Management Report – Statement of Non-Financial Information 2022

156

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
205-2		3.3 Ethics and compliance Pag. 50-54		Communication and training about anti- corruption policies and procedures
205-3		Pag 51. No cases of corruption have been detected		Confirmed incidents of corruption and actions taken
Anti-competitive behaviour
3		3. Responsible Management		Management approach
206-1		MERLIN Properties has not received any lawsuits for anti- competitive behaviour		Legal actions for anti- competitive behaviour, anti-trust, and monopoly practices
Socioeconomic compliance
3		3. Responsible Management		Management approach
419-165		MERLIN Properties has not received any fines or sanctions.		Non-compliance with laws and regulations in the social and economic area
SOCIAL PERFORMANCE - RESPONSIBILITY OVER PRODUCTS
Customer health and safety
3		5.4. Employee safety, health and wellbeing Pag. 93-94		Management approach
416-1		MERLIN assesses the potential health and safety impacts of all its assets on their occupants (tenants and users).		Assessment of the health and safety impacts of product and service categories
416-2	H&S-Comp	No incident of non- compliance with health and safety regulations has been detected		Incidents of non- compliance concerning the health and safety impacts of product and service

Management Report – Statement of Non-Financial Information 2022

157

65 Fines or firm sanctions (in contentious terms) considered significant (over EUR 50,000) arising from sanctions and non-compliance

(excluding administrative and fiscal) for which there is no possibility of appeal and that are directly attributable to conduct or acts carried

out by companies or employees of the Corporation before 31 December 2022.

Information on management approach and indicators	EPRA Sustainability Performance Measures	Page or direct answer	Omissions	Description
Product and service labelling
3		-		Management approach
417-2		Not applicable		Incidents of non- compliance concerning product and service information and labelling
G4-CRE8	Cert-Tot	4.7. Validation of MERLIN's commitments by independent third parties Pag. 77-79		Type and number of sustainability certification, rating and labelling schemes for new developments, management, occupation and refurbishment
Customer privacy
3		3.3 Ethics and compliance		Management approach
418-1		MERLIN Properties has not received any claims for breach of customer privacy or leak of customer data		Substantiated complaints concerning breaches of customer privacy and losses of customer data

Management Report – Statement of Non-Financial Information 2022

158

b. EPRA sBPR Content Index

EPRA Code	GRI Standard	Description	Page and/or direct answer
ENVIRONMENTAL PERFORMANCE INDICATORS
Elec-Abs	302-1	Total electricity consumption	164
Elec-LfL	302-1	Like-for-like total electricity consumption	164
DH&C-Abs	302-1	Total district heating & cooling consumption	164
DH&C-LfL	302-1	Like-for-like district heating & cooling consumption	164
Fuels-Abs	302-1	Total fuel consumption	164
Fuels-LfL	302-1	Like-for-like fuel consumption	164
Energy-Int	CRE1	Energy intensity of buildings	164
GHG-Dir-Abs	305-1	Direct greenhouse gas (GHG) emissions	167
GHG-Indir-Abs	305-2	Indirect greenhouse gas (GHG) emissions	167
GHG-Int	CRE3	Greenhouse gas (GHG) emissions intensity from energy consumption of buildings	167
Water-Abs	303-1	Total water consumption	170
Water-LfL	303-1	Like-for-like water consumption	170
Water-Int	CRE2	Water consumption intensity of buildings	170
Waste-Abs	306-3	Total weight of waste by disposal method	174
Waste-LfL	306-3	Like-for-like weight of waste by disposal method	174
Cert-Tot	CRE8	Type and number of sustainably certified assets	178
SOCIAL PERFORMANCE INDICATORS
Diversity-Emp	405-1	Employee gender diversity	85
Diversity-Pay	405-2	Ratio of basic salary and remuneration of women to men	90
Emp-Training	404-1	Average hours of training per year per employee	98
EPRA Code	GRI Standard	Description	Page and/or direct answer
Emp-Dev	404-3	Percentage of employees receiving regular performance and career development reviews	MERLIN Properties’ employees receive continuous feedback from their managers and have direct and constructive communication that helps them progress in their professional development. In addition, 100% of employees are evaluated each year by area managers and senior management. The results of this evaluation determine the distribution of variable remuneration.
Emp-Turnover	401-1	New employee hires and employee turnover	98 In 2022, there were a total of 22 departures. The voluntary turnover rate in 2022 was 8%.
H&S-Emp	403-2	Employee health and safety	93-94

Management Report – Statement of Non-Financial Information 2022

159

H&S-Asset	416-1	Assessment of the health and safety of the assets	93-94 MERLIN assesses the potential health and safety impacts of all its assets on their occupants (tenants and visitors).
H&S-Comp	416-2	Compliance with health and safety regulations concerning the assets	No incident of non-compliance with health and safety regulations has been detected
Comty-Eng	413-1	Community engagement, impact assessments and development programmes	114-117 In all assets, dialogue and participation mechanisms have been developed, as described in the management approach
GOVERNANCE PERFORMANCE INDICATORS
Gov-Board	2-9	Governance structure and composition	32-40 More information on this indicator can be found in the Annual Corporate Governance Report (ACGR).
Gov-Selec	2-10	Appointing and selecting members of the highest governance body	The processes for appointing and selecting members of the highest governing body and its committees are described in the Annual Corporate Governance Report (ACGR) and are established in the Director Selection Policy
Gov-CoI	2-15	Management of conflicts of interest	Section 28 of the Board Regulations sets out the mechanisms established to prevent and manage potential conflicts of interest

Management Report – Statement of Non-Financial Information 2022

160

Appendix I. Environmental performance reporting in accordance with the EPRA

Sustainability Best Practices Recommendations (SBPR)

MERLIN’s environmental performance report on its assets was prepared in accordance with the

EPRA Sustainability Best Practice Recommendations (3rd edition, 2017). In line with these

recommendations, the following tables include the environmental KPIs of MERLIN’s assets, as

established by the EPRA in these Guidelines66. The tables reflect the environmental performance of

the assets in terms of energy consumption, greenhouse gas (GHG) emissions, water withdrawal and

waste generation, and the percentage of assets with environmental certification.

Key concepts

In accordance with the recommendations of the EPRA sBPR Guidelines, only assets in operation in

2022 are included in the reporting scope for the calculation of MERLIN’s environmental performance

information.

In particular, and in view of their strategic importance to the Group’s overall assets, environmental

performance information is included for the offices, logistics and shopping centre assets, in that

order, based on the surface area in each portfolio, and the calculation excludes any asset in which it

holds a non-controlling interest67. In addition, information on the environmental performance of its

own offices, and properties leased by the Group for the LOOM space, is reported separately.

Based on the EPRA sBPR Guidelines, MERLIN also reports on a series of environmental indicators or

KPIs (integrated in the EPRA Sustainability Performance Measures). These KPIs cover information on

energy consumption, GHG emissions, water withdrawal and waste generation68.

There are two different types of KPIs: total or absolute KPIs and like-for-like KPIs. Absolute KPIs are

calculated in terms of the total asset portfolio, while like-for-like KPIs are calculated considering only

assets that have been in continuous operation for the last three years.

In addition, some of the KPIs are calculated in terms of energy consumption intensity, GHG emissions

and water consumption. These KPIs are calculated as a ratio or quotient between the absolute value

or like-for-like value of GHG consumption or emissions and the surface area over which GHG

consumption or emissions are reported.

Information on the coverage of each KPI is also included throughout the environmental report.

Coverage is defined as the proportion of assets for which there is information available to calculate

each KPI, expressed in this Statement of Non-Financial Information in terms of both the number of

assets and surface area of the assets.

For more accurate performance management of its assets in terms of energy consumption

efficiency, water withdrawal and carbon footprint, MERLIN separates the data for these KPIs by type

of property involved:

Management Report – Statement of Non-Financial Information 2022

161

66 EPRA Sustainability Performance Measures.

67 The scope excludes the Barcelona ZAL Port assets, as they constitute a non-controlling interest.

68 The full definition of these KPIs can be found in more detail in chapter 9.4 of report titled “EPRA sBPR Table of Contents”.

•Assets over which the Group exercises operational control. These are generally multi-tenant

assets where the Group continuously assesses their environmental impact to take the

relevant steps to monitor and reduce environmental impacts.

•Assets over which the Group does not exercise operational control. For these single-tenant

assets, MERLIN’s name is on the power and water utility contracts, so it is able to collect the

data to record the environmental performance of these assets. However, consumption

tracking is handled by the lessee.

•MERLIN’S corporate headquarters and LOOM spaces leased by the Group (only information

on energy consumption and GHG emissions is available for these properties).

Regarding the KPIs related to the amount of waste generated, MERLIN collects waste from the assets

included in its ISO 14001 Corporate Environmental Management System (except in those cases

where this is handled by the owners’ associations), and from other assets that are not included in

the Environmental Management System. MERLIN therefore reports on these KPIs for all of the assets

where it is responsible for waste management.

In general terms, the KPIs are calculated using the information on the utility invoices issued by

power, water and waste collection service providers, and the reports on the refrigerant gas

recharges. No estimates have been used for any of the data. Furthermore, in the case of assets that

form part of an owner’s association, the coefficient of ownership is applied to the energy and water

consumption data. In these cases, the surface area considered in the calculations represents the

proportional part of the coefficient of MERLIN’s ownership or expense in the asset.

Energy consumption

Energy consumption at assets over which MERLIN exercises operational control

MERLIN has like-for-like energy consumption information for 75 office assets, 13 shopping centres

and 24 logistics warehouses, and absolute data for 88 office assets, 14 shopping centres and 30

logistics warehouses69. The coverage area of the information on energy consumption is broken down

below.

	Like-for-Like portfolio		Absolute portfolio
	Reported surf.		Reported surf.		% area covered (surface)24
Offices	791,580	sqm	854,879	sqm	69%
Logistics warehouses	334,419	sqm	484,085	sqm	30%
Shopping centres	456,502	sqm	516,551	sqm	98%
Total	1,582,501	sqm	1,855,515	sqm	56%

Management Report – Statement of Non-Financial Information 2022

162

69 Appendix II contains a list of the assets included in the reporting of this type of environmental performance information.

Broken down by country, the surface area covered in Spain is 1,732,502 sqm in absolute terms and

1,519,537 sqm in like-for-like terms; while in Portugal the breakdown is 123,013 sqm and 62,964

sqm, respectively.

It is worth mentioning that the source of the energy consumption data depends on the type of asset

and the type of energy source. The following distinctions are made when it comes to calculating

electricity usage:

•Assets where MERLIN controls the total electricity used throughout the building, including

common areas and tenant (or private) areas. In these cases, coverage is calculated based on

the surface area of the corresponding asset.

•Assets where MERLIN controls the electricity used for lighting the common areas and

running the air conditioning systems of the entire asset. In these cases, it is also calculated

based on the surface area of the corresponding asset.

•Assets where MERLIN only controls the electricity consumed in the common areas. In these

cases, coverage is calculated based only on the surface area of the corresponding asset

common areas.

For fuel and district heating & cooling, energy consumption information is available for the asset as a

whole.

For both the like-for-like portfolio and absolute portfolio, the largest proportion of energy

consumption comes from the grid, with a much smaller proportion from the use of fuel (diesel or

natural gas) for some of the offices and shopping centres within the reported coverage. To a lesser

extent, it also includes the consumption of district heating & cooling at three office assets in

Barcelona: Torre Glòries, Pere IV and the Poble Nou 22@ business park, connected to the Districlima

network.

Energy consumption at like-for-like assets in 2022 was 100,074,509 kWh, of which 66% refers to

offices, 33% to shopping centres and the rest (1%) to logistics assets. Broken down by type of energy

source, 81,984,073 kWh came from electricity (82%), 14,160,632 kWh from natural gas (14%),

2,039,435 kWh from diesel fuel and gasoil (2%) and 1,926,369  kWh from district heating & cooling

(2%). As regards consumption by country, 95,509,630 kWh corresponds to Spain (95%) and

4,610,640 kWh to Portugal (5%).

In the like-for-like office portfolio, energy consumption was 66,214,236 kWh, which is very similar to

consumption in 2021. This consumption is split between 78% electricity, 16% natural gas, 3% diesel

B/C and 3% District Heating & Cooling. With regard to like-for-like logistics assets, energy

consumption was 1,029,432 kWh (all electricity consumption) compared to 970,164 kWh in 2021.

Energy consumption in the shopping centers was 32,830,912 kWh, 7.5% less than in 2021, broken

down into 89% electricity consumption and 11% natural gas.

There was a decrease of 2.3% in energy consumption at like-for-like assets70 compared to 2021,

mainly due to the implementation of energy saving measures and the control of the facilities, since it

was expected that there would be an increase in this consumption compared to 2021 due to the

disappearance in 2022 of the health restrictions due to the COVID-19 pandemic and the increase in

occupancy in offices, logistics activity and the footprint in shopping centers.

Management Report – Statement of Non-Financial Information 2022

163

70 Assets that have been operating continuously for the last three years are included.

Energy consumption in absolute terms in 2022 was similar to 2021. Energy consumption in absolute

terms in 2022 was 121,206,691 kWh between offices (60%), logistics warehouses (10%) and

shopping centers (30%). Broken down by type of energy source, 102,522,493 kWh corresponded to

electricity (85%), 14,188,047 kWh to natural gas (12%), 2,039,435 kWh to Diesel C/B (1%) and

2,456,715 kWh to District Heating & Cooling (2%). Broken down by country, energy consumption in

Spain accounted for 112,422,239 kWh (93%) and in Portugal 8,784,452 kWh (7%).

In the office portfolio, energy consumption in absolute terms in 2022 was 72,314,383 kWh which

represents an increase of 2.7% compared to 2021. This energy consumption is split between 79%

electricity, 15% natural gas, 3% Diesel C/B and 3% District Heating & Cooling. In relation to logistics

assets, energy consumption was 11,887,674 kWh (entirely electricity consumption) compared to

11,310,262 kWh in 2021. In the shopping centers portfolio, energy consumption was 37,004,763

kWh, 6.7% less than in 2021, differentiated into electricity consumption (90%) and natural gas

consumption (10%).

Energy intensity in the like-for-like portfolio was 77 kWh/sqm, down 2.8% on 2021, and in the

absolute portfolio it was 60.8 kWh/sqm, down 1.4% on 2021.

With regard to the generation of renewable energy at assets under operational control, a total of

884,684 kWh were produced in 2022 for self-consumption, distributed among the Aquamarina office

assets (170,563 kWh), the Sanchinarro Business Park (190,415 kWh), the Vía Norte Business Park

(46,000 kWh), Castellana 280 (56,147 kWh), María de Portugal T2 (122,064 kWh), the Las Tablas

Business Park (44,995 kWh), the Puerta de las Naciones Business Park (2,746 kWh), WTC6 (35,697

kWh), WTC8 (20,727 kWh), Sant Cugat I (35,754 kWh) and Sant Cugat II (15,140 kWh) and the

Marineda shopping centre (139,236 kWh) and El Saler shopping centre (5,201 kWh). A total of

914,210 kWh produced at the Coslada Complex logistics warehouse (487,510 kWh), the Marineda

shopping centre (240,713 kWh) and the Vía Norte Business Park (30,516 kWh) were also sent to the

grid. These assets are included in the Sun Project, where the number of photovoltaic generation

facilities is expected to increase in the coming years.

MERLIN continued to increase the proportion of renewable electricity purchased from green energy

suppliers for assets under its operational control. Electricity consumption from these types of

suppliers totalled 99.2% in 2022, which represents an increase of 2.1% compared to the previous

year.

As for other energy sources used by the assets, the energy consumed for district heating & cooling is

partly renewable (2,270,674 kWh) and partly non-renewable (208,779 kWh). Energy consumption

from fuels comes from entirely non-renewable sources.

Management Report – Statement of Non-Financial Information 2022

164

Energy consumption for MERLIN Properties’ portfolios (under operational control)

EPRA Code	Indicador y unidades			Total MERLIN					Offices					Shopping centres					Logistics assets
				Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like
				2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021
Elect- Abs, Elect-LfL	Electricity (kWh)[1]	Electricity consumption	Common areas	26,967,445	26,322,415	21,587,139	21,378,446	1%	15,273,859	14,546,870	14,359,028	13,942,695	3%	10,823,474	11,031,795	6,649,662	6,892,933	-4%	870,112	743,750	578.449	542.817	7%
			Tenant space	75,113,846	73,202,813	60,360,934	59,810,142	1%	41,562,597	38,681,930	37,376,252	35,428,413	5%	22,533,699	23,954,382	22,533,699	23,954,382	-6%	11,017,549	10,566,500	450.983	427.347	6%
		Electricity from renewable sources (%)		99%	97%	100%	96%		99%	95%	100%	94%		100%	100%	100%	100%		100%	100%	100%	100%
		Total electricity consumption		102,522,493	99,773,707	81,948,073	81,188,588	1%	57,277,659	53,477,280	51,735,280	49,371,109	5%	33,357,173	34,986,177	29,183,361	30,847,315	-5%	11,887,661	11,310,251	1,029,431	970.164	6%
DH&C- Abs, DH&C- LfL	District heating & cooling (kWh)	Electricity consumption	Common areas	854,881	678,182	416,553	560,212	-26%	854,881	678,182	1,509,816	1,087,592	39%	-	-	-	-		-	-	-	-
			Tenant space	1,601,834	1,087,592	1,509,816	1,087,592	39%	1,601,834	1,087,592	252,547	205,721	23%	-	-	-	-		-	-	-	-
		District heating & cooling from renewable sources (%)		92%	89%	92%	88%		92%	89%	92%	88%		-	-	-	-		-	-	-	-
		Total district heating & cooling consumption		2,456,715	1,765,774	1,926,369	1,647,804	17%	2,456,715	1,765,774	1,926,369	1,647,804	17%	-	-	-	-		-	-	-	-
Fuels- Abs, Fuels- LfL	Fuel (kWh)1	Fuel	Common areas	2,561,948	3,341,148	2,561,948	3,341,148	-23%	-	-	-	-		2,561,948	3,341,148	2,561,948	3,341,148	-23%	-	-	-	-
			Tenant space	13,665,534	16,268,574	13,638,118	16,256,744	-16%	12,579,932	14,954,764	12,552,516	14,942,934	-16%	1,085,602	1,313,811	1,085,602	1,313,811	-17%	-	-	-	-
		Fuel from renewable sources (%)		0%	0%	0%	0%		0%	0%	0%	0%		0%	0%	0%	0%		-	-	-	-
		Total fuel consumption		16.227.482	19,839,285	16,200,067	19,597,893	-17%	12,579,932	15,184,326	12,552,516	14,942,934	-16%	3,647,551	4,654,959	3,647,551	4,654,959	-22%	-	-	-	-
Energy- Int	Energy intensity (kWh/sqm)			60.8	61.8	77.0	78.7		83.2	79.7	87.6	86.8		71.6	77.2	71.9	78.4		19.6	20.0	11.7	11,0
Coverage (based on number of assets)				131	123	113	113		87	85	76	76		14	14	13	13		30	24	24	24
% of data estimated					0		0%			0%		0%			0%		0%			0%		0%

Management Report – Statement of Non-Financial Information 2022

165

Energy consumption at assets over which MERLIN does not exercise operational control

With regard to the assets not under MERLIN’s operational control (single-tenant), the Group has

information on energy consumption in like-for-like terms for 1 logistics warehouse, and in absolute

terms for 1 office asset and 4 logistics warehouses71 (all located in Spain). The table below shows the

coverage area of the information on energy consumption.

	Like-for-Like portfolio		Absolute portfolio
	Reported surf.		Reported surf.		% area covered (surface)
Offices	-	sqm	10,495	sqm	1%
Logistics warehouses	35,285	sqm	155,540	sqm	10%
Shopping centres	-	sqm	-	sqm	0%
Total	35,285	sqm	166,035	sqm	5%

In absolute terms, energy consumption for assets not under the Company’s operational control was

3,375,832 kWh in 2022, split between offices (25%) and logistics warehouses (75%). Electricity

accounted for all of the energy consumed, distributed in the same proportion. There was a 18%

decrease compared to 2021, due to the fact that consumption information was available for less

assets of this kind.

In the like-for-like portfolio (made up of one logistics asset), energy consumption was 1,758,837

kWh, all of which was electricity. This consumption is 22% higher than in 2021.

Energy intensity in the absolute portfolio was 16.3 kWh/sqm and 49.8 kWh/sqm in the like-for-like

portfolio.

Management Report – Statement of Non-Financial Information 2022

166

71 Appendix I contains a list of the assets included in the reporting of this type of environmental performance information.

Energy consumption for MERLIN Properties’ portfolios (not under operational control)

EPRA Code	Indicator and units		Total MERLIN					Offices					Shopping centres					Logistics assets
			Absolute		Like-for-like			Absolute		Like-for-like			Absoluto		Absolute			Like-for-like		Absolute
			2022	2021	2022	2021	Evol.	2022	2021	2022	2021	Evol.	2022	2021	2022	2021	Evol.	2022	2021	2022	2021	Evol.
Elect- Abs, Elect- LfL	Electricity (kWh)	Total electricity consumption	3,375,832	2,867,167	1,758,837	1,438,105	22%	833,001	-	-	-		-	-	-	-		3,375,832	2,867,167	1,758,837	1.438.105	22%
		Electricity from renewable sources (%)	99%	97%	100%	96%	4%	100%	0%	0%	0%		0%	0%	0%	0%		100%	100%	100%	100%	0%
DH&C- Abs, DH&C- LfL	District heating & cooling (kWh)	Total district heating & cooling consumption	-	-	-	-		-	-	-	-		-	-	-	-		-	-	-	-
		Fuel from renewable sources (%)	0%	0%	0%	0%		0%	0%	0%	0%		0%	0%	0%	0%		0%	0%	0%	0%
Fuels- Abs, Fuels- LfL	Fuel (kWh)	Total fuel consumption	-	-	-	-		-	-	-	-		-	-	-	-		-	-	-	-
		District heating & cooling from renewable sources (%)	0%	0%	0%	0%		0%	0%	0%	0%		0%	0%	0%	0%		0%	0%	0%	0%
Energy- Int	Energy intensity (kWh/sqm)		16.3	12.5	49.8	40.8		0.0	0.0	0.0	0.0		0.0	0.0	0.0	0.0		16.3	12.5	49.8	40.8
Coverage (based on number of assets)			5	8	1	1		1	-	-	-		-	-	-	-		4	8	1	1
% of data estimated				0%		0%		0%	0%	0%	0%		0%	0%	0%	0%			0%		0%

Management Report – Statement of Non-Financial Information 2022

167

Electricity consumption at MERLIN’s corporate headquarters and LOOM spaces

MERLIN has corporate headquarters in Madrid, Barcelona and Lisbon. Given that the Madrid

headquarters are the most representative with a surface area of 2,412 sqm, the energy consumption

figures for these offices are reported below. Electricity consumption was 198,185 kWh, which

indicates a consumption intensity of 82.17 kWh/sqm, an increase of 5% compared to 2021, with no

fuel consumption at this building.

In addition, the Company has three buildings, of which it is the lessee, that exclusively host FlexSpace

areas as part of the LOOM brand (Fábrica de Tapices, Huertas and Salamanca). Of these three

buildings, the Group controls electricity consumption at Huertas and Salamanca, with a total area of

3,031 sqm, 1,100 sqm and 1,931 sqm, respectively.

In 2022, electricity consumption was 529,511 kWh (178,008 kWh at Huertas and 351,503 kWh at

Salamanca), which represents an increase of 11% compared to 2021 (476,474 kWh). The

consumption intensity is 174.7 kWh/sqm. There is no fuel consumption at these locations.

Energy consumption at properties leased by LOOM

EPRA Code	Indicator		Buildings leased by LOOM
			2022	2021	Evol.
Elect-Abs, Elect-LfL	Electricity (kWh)	Total electricity consumption	529,511	476,474	11%
		Electricity from renewable sources (%)	100%	100%	-
Fuels-Abs, Fuels-LfL	Fuel (kWh)	Total fuel consumption	N/A	N/A	-
		Fuel from renewable sources (%)	N/A	N/A	-
Energy-Int	Energy intensity (kWh/m2)		174.7	157.2	11%
% of estimated data			-	0%	-

Management Report – Statement of Non-Financial Information 2022

168

Energy consumption at MERLIN Properties’ corporate headquarters72

EPRA Code	Indicator		Buildings leased by LOOM
			2022	2021	Evol.
Elect-Abs, Elect-LfL	Electricity (kWh)	Total electricity consumption	198,185	188,638	5%
		Electricity from renewable sources (%)	100%	100%	-
Fuels-Abs, Fuels-LfL	Fuel (kWh)	Total fuel consumption	N/A	N/A	-
		Fuel from renewable sources (%)	N/A	N/A	-
Energy-Int	ENERGY INTENSITY (kWh/m2)		82.2	78.2	-
% of estimated data			-	0%	-

Water withdrawal

Water withdrawal at assets over which MERLIN exercises operational control

Regarding water withdrawal at assets under operational control (multi-tenant), MERLIN has like-for-

like information on water withdrawal at 72 office assets, 10 logistics warehouses and 11 shopping

centres. In absolute terms, there is information for 82 offices, 11 logistics warehouses and 13

shopping centres73. The table below shows the coverage area of the information on water

withdrawal.

	Like-for-Like portfolio		Absolute portfolio
	Reported surf.		Reported surf.		% area covered (surface)
Offices	786,390	sqm	855,402	sqm	69%
Logistics warehouses	334,419	sqm	363,150	sqm	24%
Shopping centres	456,502	sqm	516,551	sqm	98%
Total	1,577,311	sqm	1,735,103	sqm	52%

Management Report – Statement of Non-Financial Information 2022

169

72 The energy consumption figures for the corporate headquarters do not include fuel consumption, so the consumption

figures on the table refer exclusively to the electricity grid.

73 Appendix II contains a list of the assets included in the reporting of this type of environmental performance information.

Broken down by country, the surface area covered in Spain for water withdrawal is 1,612,090 sqm in

the absolute portfolio and 1,514,347 sqm in the like-for-like portfolio. In Portugal, this area is

123,013 sqm and 62,964 sqm, respectively.

For office and shopping centre assets, the source information available to MERLIN refers, as a

general rule, to the water withdrawal for the entire asset. However, the data for logistics assets

sometimes refers to common areas only and other times to the entire asset.

With regard to like-for-like performance data, the total volume of water withdrawal in 2022 at the

assets under MERLIN’s operational control was 609,418 m3, broken down as follows: office assets

(42%), logistics warehouses (7%) and shopping centres (51%). Compared to 2021, there was a 17.9%

increase mainly due to the rise in foot traffic at offices and shopping centres as a result of the

loosening of COVID-19 pandemic restrictions, and due to the high temperatures during the summer,

which led to an increase in watering frequencies and watering times for all landscaped areas of the

assets.

In the like-for-like office portfolio, water withdrawal was 252,547 m3 in 2022, up 22.8% in 2021. At

logistics warehouses, water withdrawal was 44,321 m3, up 17.7% in 2021. Lastly, the volume at

shopping centres was 312,549 m3, up 14.3% in 2021.

In absolute terms, the volume of water captured in 2022 was 680,084 m3 , distributed among the

consumption of the office portfolio (41%), logistics warehouses (7%) and shopping centers (52%).

The volume of water captured in absolute terms increased by 27.1% compared to 2021. Broken

down by country, the volume of water captured in Spain was 621,908 m3 (91% of the total) and in

Portugal, 58,176 m3 (9% of the total).

In the office portfolio, water withdrawal in 2022 in absolute terms was 280,208 m3, 25.7% more

than in 2021, in logistics assets 45,075 m3, 16.1% more than in 2021, and in shopping centers

354,802 m3, 29.8% more than in 2021.

Practically all water withdrawal comes from the municipal network, representing a total volume of

674,399 m3 in absolute terms (99.2% of the total water withdrawn). At the Marineda shopping

centre in La Coruna, some of the water comes from a rainwater tank. Based on the 2022 rainfall in

this area and the tank’s catchment area74, it is estimated that the volume of water collected and

used at this asset is around 5,446 m3.

Lastly, water withdrawal intensity in the like-for-like portfolio was 0.46 m3/sqm, up 18.0% in 2021,

and in the absolute portfolio it was 0.48 m3/sqm, up 26.4% on 2021

Management Report – Statement of Non-Financial Information 2022

170

74 The estimate considers the annual recorded rainfall in La Coruna in 2021, according to data provided by Meteogalicia, and a catchment

area of about 16,000 sqm. A 10% loss rate was assumed.

Water withdrawal for MERLIN Properties’ portfolios (under operational control)

EPRA Code	Indicator and units	Total MERLIN					Offices					Shopping centres					Logistics assets
		Absolute		Like-for-like			Absolute		Like-for-like			Absoluto		Like for Like			Absolute		Like-for-like
		2022	2021	2022	2021	Evol.	2022	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2021	2022	2022	2021
Water- Abs, Water- LfL	Water consumption in common areas (m3)	216,201	171,571	192,509	169,430	14%	30,126	24,825	27,762	22,799	22%	178,106	138,549	156,853	138,549	13%	7,969	8,197	7,894	8,081	-2%
	Water consumption in tenant spaces (m3)	463,883	363,484	416,908	347,326	20%	250,082	198,042	224,786	182,922	23%	176,696	134,814	155,696	134,814	15%	37,105	30,628	36,427	29,590	23%
	Water consumption in the entire building (m3)	680,084	535,055	609,417	516,756	18%	280,208	222,867	252,547	205,721	23%	354,802	273,364	312,549	273,364	14%	45,075	38,825	44,321	37,672	18%
	Total water consumption (m3)	680,084	535,055	609,417	516,756	18%	280,208	222,867	252,547	205,721	23%	354,802	273,364	312,549	273,364	14%	45,075	38,825	44,321	37,672	18%
Water- Int	Water consumption intensity (m3/ sqm)	0.477	0.377	0.463	0.392		0.350	0.275	0.345	0.279		0.965	0.776	0.878	0.776		0.175	0.151	0.194	0,165
Coverage (based on number of assets)		123	121	113	113		84	83	76	76		14	13	13	13		25	25	24	24
% of data estimated			0%		0%			0%		0%			0%		0%			0%		0%

Management Report – Statement of Non-Financial Information 2022

171

Water withdrawal at assets over which MERLIN does not exercise operational control

With regard to the assets not under MERLIN’S operational control (single-tenant), the Group has

information on water withdrawal in like-for-like and absolute terms for 3 office assets75 (all located

in Spain). The table below shows the coverage area of the information on water withdrawal.

	Like-for-Like portfolio		Absolute portfolio
	Reported surf.		Reported surf.		% area covered (surface)30
Offices	37,570	sqm	37,570	sqm	3%
Logistics warehouses	26,613	sqm	26,612	sqm	2%
Shopping centres	-	sqm	-	sqm	0%
Total	64,182	sqm	64,182	sqm	2%

In absolute terms, for assets not under MERLIN’S operational control, water withdrawal from the

municipal network amounted to 19,631 m3 in 2022 (water withdrawal intensity of 0.31 m3/sqm),

with office assets accounting for all consumption. Consumption in 2022 was 1% lower than in 2021.

In the like-for-like portfolio, consumption in 2022 was 19,631 m3 (water withdrawal intensity of 0.31

m3/sqm), which represents a decrease of 6% compared to 2021.

Management Report – Statement of Non-Financial Information 2022

172

75 Appendix II contains a list of the assets included in the reporting of this type of environmental performance information.

Water withdrawal for MERLIN Properties’ portfolios (not under operational control)

EPRA Code	Indicator and units	Total MERLIN					Offices					Shopping centres					Logistics assets
		Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like
		2022	2021	2022	2021	Chang es	2022	2021	2022	2021	Chang es	2022	2021	2022	2021	Chang es	2022	2021	2022	2021	Chang es
Water -Abs, Water -LfL	Total water consumpti on (m3)	19,631	19,912	19,631	18,469	6%	17,091	17,148	17,091	15,706	9%	0	0	0	0		0	2,764	0	0	-8%
Water -Int	Water consumpti on intensity (m3/sqm)	0.306	0.289	0.306	0.288		0.455	0.405	0.455	0.418		0.000	0.000	0.000	0.000		0.000	0.104	0.000	0.000
Coverage (based on number of assets)		3	5	3	3		3	4	3	3							0	1	0	0
% of data estimated			0%		0%			0%		0%		0%	0%	0%	0%		0%	0%	0%	0%

MERLIN has no water data for its corporate headquarters or for the leased LOOM buildings.

Management Report – Statement of Non-Financial Information 2022

173

Waste management

In relation to waste management, the Group has like-for-like information on 58 office assets, 8

shopping centres and 1 logistics warehouse, and it has information in absolute terms on 82 office

assets, 11 shopping centres and 1 logistics warehouse76 (all located in Spain). The table below shows

the coverage area of the information on waste management.

	Like-for-Like portfolio		Absolute portfolio
	Reported surf.		Reported surf.		% area covered (surface)31
Offices	689,860	sqm	733,058	sqm	59%
Logistics warehouses	36,234	sqm	36,234	sqm	2%
Shopping centres	456,502	sqm	456,502	sqm	87%
Total	1,182,596	sqm	1,225,794	sqm	37%

In 2022, assets in the like-for-like portfolio accounted for a total of 6,993 tonnes of waste, 99.9% of

which was non-hazardous waste, and the rest was hazardous. The assets in the absolute portfolio

accounted for 7,512 tonnes of waste, 99.9% of which was non-hazardous waste and the remainder

hazardous.

In like-for-like terms, there was an overall increase in waste managed in 2022 compared to 2021

(19.6%). This increase is mainly due to the waste managed at shopping centres (which accounts for

91% of the total waste managed). This is a result of an increase in business and foot traffic at these

types of assets, in view of the lifting of COVID-19 restrictions this year.

In absolute terms, there was an increase of 21.2% in the amount of waste managed in 2022

compared to 2021. This increase is slightly higher than that recorded in the like-for-like portfolio.

Management Report – Statement of Non-Financial Information 2022

174

76 Appendix I contains a list of the assets included in the reporting of this type of environmental performance information.

Waste generation at assets managed by MERLIN

EPRA Code	Indicator	Total MERLIN					Offices					Shopping centres					Logistics assets
		Absolute		Like-for-like			Absolute		Like-for-like			Absoluto		Like for Like			Absolute		Like-for-like
		2022	2021	2022	2021	Evol.	2022	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2021	2022	2022	2021
Waste- Abs,	Total generation of non- hazardous waste (t)	7,506.3	6,189.4	6,987.8	5,841.3	20%	180.9	179.9	180.6	179.3	1%	6,871.7	5,203.0	6,353.6	4,855.5	31%	453.7	806.5	453.7	806.5	-44%
Waste-LfL	Total generation of hazardous waste (t)	5.9	6.5	4.8	6.1	-21%	2.7	4.2	2.1	3.8	-45%	3.2	2.3	2.7	2.3	17%	0.0	0.0	0.0	0.0
	Waste to be eliminated (t)	356.8	210.9	0.6	0.5	17%	0.6	0.7	0.4	0.4	0%	356.2	210.2	0.2	0.2	0%	0.0	0.0	0.0	0.0
	Waste to be recovered through energy (t)	42.7	4.2	4.6	3.6	27%	4.3	3.8	3.7	3.3	14%	38.5	0.3	0.8	0.3	161%	0.0	0.0	0.0	0.0
	Waste to be recovered (t)	2.6	4.1	2.0	4.0	-49%	1.4	2.6	1.3	2.4	-48%	1.2	1.5	0.7	1.5	-55%	0.0	0.0	0.0	0.0
	Waste to be recycled (t)	7,110.0	5,976.6	6,985.4	5,839.3	20%	177.4	176.9	177.2	176.8	0%	6,479.0	4,993.2	6,354.5	4,856.0	31%	453.7	806.5	453.7	806.5	-44%
Coverage (based on number of assets)		88/180	90 / 180	75 / 75	75 / 75		74 /110	77 / 112	66 / 66	66 / 66		14 / 14	12 / 15	11 / 11	11 / 11		1 / 56	1 / 53	1 / 1	1 / 1
% of data estimated			0%		0%			0%		0%	-		0%		0%	-		0%		0%

There is no information available on waste generation at corporate headquarters or the LOOM buildings.

Management Report – Statement of Non-Financial Information 2022

175

Scope 1 and scope 2 greenhouse gas (GHG) emissions

GHG emissions at assets over which MERLIN exercises operational control

First, taking a location-based calculation approach77 and considering the like-for-like portfolio, the

sum of scope 1 and scope 2 GHG emissions was 14,167 tCO2eq, 8.6% more than in 2021. Specifically,

direct emissions (scope 1), which include emissions from the consumption of diesel and natural gas

in the assets and refrigerant gas recharges, amounted to 2,545 tCO2eq. Indirect emissions (scope 2)

associated with the generation of electricity consumed at the assets and the consumption of district

heating & cooling totalled 11,622 tCO2eq.

In terms of like-for-like, broken down by portfolio, Scope 1 and 2 emissions from office assets were

1,350 tCO2eq and 6,780 tCO2eq, respectively, those from logistics warehouses 94 tCO2eq in Scope 2

and those from shopping centers 1,195 tCO2eq and 4,748 tCO2eq.

In relation to the portfolio in absolute terms, the sum of Scope 1 and 2 location based GHG

emissions were 17,210 tCO2eq, up 8.8% compared to 2021. By scope, 2,670 tCO2eq correspond to

Scope 178 emissions and the remaining 14,540 tCO2eq to Scope 279 emissions. Broken down by type

of asset, Scope 1 and 2 emissions from office assets, in absolute terms, were 1,475 tCO2eq and 7,420

tCO2eq respectively, those from logistics warehouses 1,625 tCO2eq in Scope 2 and those from

shopping centers 1,195 tCO2eq and 5,495 tCO2eq.

Compared to 2021, there is a slight decrease in Scope 1 emissions and an increase in Scope 2

emissions, mainly derived from the increase in the number of assets reported and the increase in the

Spanish emission factor published by REE.

Furthermore, broken down by country, in absolute terms, Scope 1 and 2 GHG emissions in Spain

were 16,005 tCO2eq (2,670 tCO2eq of Scope 1 and 13,336 tCO2eq of Scope 2), while in Portugal they

were 1,204 tCO2eq, all of them Scope 2.

In terms of GHG emissions intensity, the value in terms of the Like for Like portfolio was 0.011

tCO2eq/m2 (9% higher than in 2021) and in absolute terms, 0.011 tCO2eq (9% higher than in 2021).

Direct emissions from fuel consumption in assets under MERLIN’s operational control (scope 1) were

obtained following the recommendations of the Ministry of Ecological Transition and Demographic

Challenge (MITERD). A location-based calculation method was used to determine the indirect

emissions associated with electricity consumption at assets under MERLIN’S operational control

(scope 2). For this calculation, MERLIN consulted the emission factors in the countries where its

assets are located: Spain and Portugal80.

Management Report – Statement of Non-Financial Information 2022

176

77 Scope 1 emissions were calculated considering the factors recommended by the Spanish Ministry for Ecological

Transition and Demographic Challenge (MITERD). Scope 2 location-based emissions from electricity consumption were

calculated considering the emission factor of the electricity mix for Spain and Portugal. The emission factor of the

electricity mix is a rate that represents the CO2 emission intensity associated with generating the electricity that is

consumed. Therefore, it is a significant indicator of the ratio of low carbon energy sources to the country’s total electricity

production.

Scope 2 location-based emissions from district heating were obtained from the emission factor provided by Districlima, and

emissions from district cooling were obtained considering the emission factor of the Spanish electricity mix and a grid loss

percentage of 10%.

78 Includes fuel consumption and refrigerant gas recharges.

79 Includes electricity and District Heating & Cooling consumption.

80 The 2022 factor for Spain was obtained from the information published by Red Eléctrica de España (REE), while for the

factor for Portugal was taken from the data published by the Energy Observatory sponsored by the Portuguese Ministry of

Environment and Climate Action.

Greenhouse gas emissions for MERLIN Properties’ portfolios (under operational control)

EPRA Code	Indicator and units	Total MERLIN					Offices					Shopping centres					Logistics assets
		Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like			Absolute		Like-for-like
		2022	2021	2022	2021	Changes	2022	2021	2022	2021	Changes	2022	2021	2022	2021	Changes	2022	2021	2022	2021	Changes
-	Direct scope 1 emissions, refrigerant gases (tCO2eq)	2,151	2,000	2,026	1,906	6%	1,475	1,564	1,350	1,470	-8%	676	436	676	436	55%	0	0	0	0
-	Direct scope 1 emissions, fuels (tCO2eq)	519	677	519	677	-23%	0	0	0	0		519	677	519	677	-23%	0	0	0	0
GHG-Dir- Abs, GHG- Dir-LfL	Direct scope 1 emissions (tCO2eq)	2,670	2,676	2,545	2,582	-1%	1,475	1,564	1,350	1,470	-8%	1,195	1,113	1,195	1,113	7%	0	0	0	0
GHG- IndirAbs, GHG-Indir- LfL	Indirect scope 2 emissions (tCO2eq)	14,540	13,148	11,622	10,468	11%	7,420	6,242	6,780	5,958	14%	5,495	5,455	4,748	4,432	7%	1,625	1,452	94	78	21%
-	Total emissions - Scopes 1+2 (tCO2eq)	17,210	15,824	14,167	13,051	9%	8,894	7,805	8,130	7,428	9%	6,690	6,567	5,943	5,545	7%	1,625	1,452	94	78	21%
GHG-Int	EMISSIONS INTENSITY (tCO2eq/sqm)	0.011	0.010	0.011	0.010		0.011	0.009	0.011	0.010		0.013	0.013	0.013	0.012		0.007	0.008	0.001	0.001
Coverage (based on number of assets)		136	131	112	112		92	89	75	75		14	14	13	13		30	28	24	24
% of data estimated			0%		0%			0%		0%			0%		0%			0%		0%	-

Management Report – Statement of Non-Financial Information 2022

177

Certificates

The table below details the number and types of asset certifications In each portfolio. They Include

energy certifications under Royal Decree 235/2013; LEED/BREEAM sustainable construction

certificates; and ISO 14001 and ISO 50001 Management Systems certifications.

The percentage of certified assets is calculated by surface area, considering only the operating assets

in the office, shopping centre and logistics portfolios, and WIP assets: Plaza Pablo Ruiz Picasso, Ática

1 and Cerro Gamos business park. Not included in the calculation are the Barcelona ZAL Port assets,

the net lease portfolio assets, other non-strategic assets or the rest of the WIP assets.

Management Report – Statement of Non-Financial Information 2022

178

Certificates

EPRA Code	Indicator and units	Total MERLIN		Offices		Shopping centres		Logistics assets
		Absolute	Like-for-like	Absolute	Like-for- like	Absolute	Like-for-like	Absolute	Like-for-like
Cert-Tot	Energy certificates (% surface area)	97%	97%	99%	100%	91%	90%	97%	100%
	Coverage (based on number of assets)	187 of 190	111 of 112	118 of 118	75 of 75	15 of 15	12 of 13	57 of 57	24 of 24
	Sustainable building certificates (% surface area)	88%	99%	94%	97%	97%	100%	79%	100%
	Coverage (based on number of assets)	161 of 190	109 of 112	97 of 118	72 of 75	118 of 118	13 of 13	50 of 57	24 of 24
	Management systems (% surface area)	37%	67%	66%	90%	59%	68%	5%	11%
	Coverage (based on number of assets)	89 of 190	76 of 112	78 of 118	67 of 75	8 of 15	8 of 13	2 of 57	1 of 24

Management Report – Statement of Non-Financial Information 2022

179

Appendix II. Methodology for calculating scope 3 GHG emissions

In line with its “Pathway to Net Zero” strategy, in 2022 the Company reinforced the calculation of its

indirect scope 3 GHG emissions, those resulting from the Company’s activities at sources that are

neither owned nor controlled by the Company. MERLIN therefore calculated its GHG emissions in the

most relevant categories defined in the GHG Protocol based on the Group’s lines of business.

Type of emission	GHG protocol category	Emissions (tCO2eq)
Emissions related to the supply chain	1. Goods and services purchased	7,372
	2. Capital goods	41,228
	4. Upstream transport and distribution	1,005
Upstream emissions from fuels	3. Fuel and energy-related activities	2,734
Emissions associated with employee commuting	7. Employee commuting	8,741
Emissions associated with assets where MERLIN is a lessee	8. Upstream leases	119
Emissions associated with assets where MERLIN is a lessor	13. Downstream leases	72,475
TOTAL		133,674

Category 13 - Downstream leased assets

Based on the emission intensity data per square meter (kgCO2e/sqm) included in the energy

certifications for most of MERLIN’S strategic assets (as discussed in section 4.7. of this Statement of

Non-Financial Information in the subsection titled “Energy rating of MERLIN’S assets”), MERLIN has

estimated GHG emissions from energy consumption at assets over which the Company does not

exercise operational control. These are scope 3, category 13 emissions (referred to as “Downstream

leased assets” in the GHG Protocol). The calculation focuses on the asset portfolios designated as

strategic, as they are most representative of the Group’s assets (offices, logistics assets and shopping

centres).

Given the characteristics of this type of emissions, the GHG emissions of this category are calculated

using a location-based approach (i.e., considering the electricity mix of the country where the asset

is located).

Depending on the type of asset, GHG emissions from energy sources managed and/or controlled by

tenants (scope 3, category 13 GHG emissions) may account for the total (see point 1 below) or only a

Management Report – Statement of Non-Financial Information 2022

180

portion of the asset’s GHG emissions (see point 2). There are also some cases where MERLIN

manages and/or controls all of the asset’s energy consumption and, therefore, the scope 3, category

13 GHG emissions associated with that asset are zero (see point 3)81.

1.In the case of single-tenant assets, the tenant has control over all of the fuel (if fuel is used

for air conditioning) and electricity consumption. Thus, based on the energy certification

reports, the GHG emissions of the asset as a whole were estimated and assigned to scope 3,

category 13.

2.For most multi-tenant assets, the tenant has partial control over the electricity consumed at

the asset. Based on the energy certification reports, the GHG emissions from electricity

consumption (under the tenant’s control) were calculated and the GHG emissions were

assigned to scope 3, category 1382.

3.For the remaining multi-tenant assets where the tenant does not control any of the asset’s

energy sources, no estimates are made of the asset’s GHG emissions.

In all cases, a GHG emissions intensity factor per square meter (kgCO2e/sqm), “updated” to 2022, is

obtained at the asset-to-asset level. This correction of the factor is critical to the calculations, as both

Spain and Portugal have experienced a sharp increase in energy generation from renewable sources

in recent years. The intensity factor is based on the GHG emissions intensity that appears on the

energy certification, considering both the year in which the certification report is issued, and the

type of energy sources used by the asset (electricity and fuel or only electricity)83.

For assets that do not have an energy rating, an average emissions intensity factor was calculated

and considered for each strategic portfolio (offices, logistics assets and shopping centres).

In the particular case of single-tenant assets for which MERLIN has compiled energy consumption

data for 2022 based on invoices, which are in turn re-invoiced to the tenant (see sub-section on

“Energy consumption at assets over which MERLIN does not exercise operational control” of

Appendix I84), GHG emissions were calculated by multiplying the consumption data on the invoices

by the same emission factors used to calculate the scope 1 and scope 2 emissions (using a location-

based approach). In these specific cases, it was not necessary to create estimates from data on

energy ratings.

GHG emissions for this category are estimated at 72,475 tons CO2e. The breakdown between

strategic portfolios is 28,531 ton CO2e corresponding to offices, 34,771 ton CO2e corresponding to

logistics assets and 9,173 ton CO2e to shopping centers. The table below specifies the GHG

emissions corresponding to single-tenant assets and private energy consumption in multi-tenant

assets:

Management Report – Statement of Non-Financial Information 2022

181

81 According to the GHG Protocol guidelines for electricity consumption, the buyer of the electricity (i.e. the party billed by

the electricity seller) is the one that controls the energy.

82 GHG emissions associated with energy sources under MERLIN’s control refer to the scope 1 and scope 2 GHG emissions

reported in the section of Appendix I titled “Scope 1 and scope 2 greenhouse gas (GHG) emissions”.

83 Since energy certification reports are valid for 10 years, there are cases where the data on GHG emissions intensity

(kgCO2e/sqm) for an asset refer to equipment and systems that have already been replaced with more efficient ones

(especially on refurbishment projects). Consequently, on a global level the estimates are considered to provide an “upside”

value of the scope 3 GHG emissions of the portfolios.

84 See also Appendix III “Breakdown of the environmental performance reporting scope”. These assets are the ones marked

“Yes*” in the “Energy Report” column (“Yes” with an asterisk).

Portfolio	Total scope 3, category 13 GHG emissions	Scope 3 by asset type
		Single-tenant	Multi-tenant (private energy consumption)
Offices	28,531 ton CO2e	10,960 ton CO2e	17,571 ton CO2e
Logistics warehouses	34,771 ton CO2e	25,155 ton CO2e	9,616 ton CO2e
Shopping centres	9,173 ton CO2e	0 ton CO2e	9,173 ton CO2e
Total	72,475 ton CO2e	36,115 ton CO2e	36,360 ton CO2e

Other scope 3 categories

Emissions related to the supply chain

Using the billing data of suppliers, in 2022 MERLIN estimated the scope 3 emissions associated with

its supply chain (categories 1, 2 and 4 of the GHG Protocol) based on its purchase data for 2022. The

Group has therefore followed an Environmentally-Extended Input-Output Model (based on the

WIOD 2016 database), which takes into account national emission factors by activity sectors. Under

this approach, GHG emissions in 2022 were 49,605 tCO2eq.

Upstream emissions from fuels

Category 3 of the GHG Protocol computes GHG emissions from fuels consumed by MERLIN that are

produced upstream (prior to combustion) as well as GHG emissions associated with electricity losses

due to transportation and distribution and upstream GHG emissions from fuels used in electricity

generation85. Considering the above concepts, GHG emissions for this category amount to 2,734

tCO2eq in terms of absolute portfolio.

Emissions associated with employee commuting

In relation to emissions from employee commuting (category 7 of the GHG Protocol), MERLIN

calculated the emissions associated with the Group’s employees commuting to and from work and

those associated with MERLIN Hub users commuting to and from these assets.

To learn more about how MERLIN employees commute, the Group launched a survey to find out

about their commuting habits to and from work. Total GHG emissions in 2022 were therefore

estimated to be 243 tCO2eq, which is 0.98 tCO2eq per employee.

In addition to the calculations discussed in this section, GHG emissions produced by office workers at

the MERLIN Hub Madrid Norte (New Business Area A-1 in Madrid) were also estimated. To do so, the

Company used information from the Transport to Work Plans (TWP) prepared for this set of assets

by the Office of Sustainability and Mobility (OSM). The effects of the shuttle service arranged by

Management Report – Statement of Non-Financial Information 2022

182

85 Data on electricity losses in the transmission grid with respect to demand in Spain were obtained from the Red Eléctrica

de España (REE) Sustainability Report 2022.

MERLIN (through the OSM) on the mobility of these users were also taken into account. The shuttle

connects key points in the city of Madrid with the group of offices that make up MERLIN Hub Madrid

Norte. Taking into consideration that there are an estimated 18,000 employees working at offices in

this area of Madrid, GHG emissions in 2022 stood at 8,498 tCO2eq (0.47 tCO2eq per employee).

The difference between the GHG emissions intensity ratio per employee in the case of MERLIN staff

compared to MERLIN Hub Madrid Norte employees is mainly due to a higher rate of remote working

among MERLIN Hub Madrid Norte employees compared to MERLIN employees.

These GHG emissions are associated with the commuting of MERLIN office users and, like the GHG

emissions produced by commuting MERLIN employees (reported in this section), they are assigned

to scope 3, category 7 in accordance with GHG Protocol guidelines. However, both types of

emissions are reported separately, since the calculation of GHG emissions associated with the

commuting of the users of these assets is optional within this category.

Emissions associated with assets where MERLIN is a lessee

MERLIN also calculates scope 3, category 8 emissions as defined by the GHG Protocol by accounting

for emissions from assets where it is a lessee. This category includes GHG emissions associated with

electricity consumption at the Group’s corporate headquarters in Madrid and GHG emissions from

the LOOM Huertas and LOOM Salamanca locations. Overall GHG emissions in this category were

138.1 tCO2eq (0.025 tCO2eq /m2) in 2022, broken down between the corporate headquarters (51.8

tCO2eq, 0.022 tCO2eq /m2) and LOOM spaces (86.3 tCO2eq, 0.285 tCO2eq /m2).

Scope 3 emissions report in accordance with EPRA sBPR

Management Report – Statement of Non-Financial Information 2022

183

Greenhouse gas emissions for MERLIN’s portfolios (not under operational control)

EPRA Code	Indicator and units	Total MERLIN					Offices					Shopping centres					Logistics assets
		Absolute		Like-for-like			Absolute		Like-for-like			Absoluto		Like for Like			Absolute		Like-for-like
		2022	2021	2022	2021	Evol.	2022	2022	2021	2022	2021	2022	2021	2022	2021	2022	2021	2021	2022	2022	2021
-	Scope 3 emissions, refrigerant gases (tCO2eq)	0	0	0	0		0	0	0	0		0	0	0	0		0	0	0	0
-	Scope 3 emissions, fuels (tCO2eq)	0	0	0	0		0	0	0	0		0	0	0	0		0	0	0	0
-	Indirect scope 3 emissions, electricity (tCO2eq)	317	344	221	166	33%	0	0	0	0		0	0	0	0		317	344	221	166	33%
GHG- IndirAbs, GHG-Indir- LfL	Total scope 3 emissions (tCO2eq)	317	344	221	166	33%	0	0	0	0		0	0	0	0		317	344	221	166	33%
GHG-Int	EMISSIONS INTENSITY - Scope 3 (tCO2eq/ sqm)	0.002	0.002	0.004	0.003		0.000	0.000	0.000	0.000		0.000	0.000	0.000	0.000		0.002	0.002	0.004	0.003
Coverage (based on number of assets)		5	7	2	2												5	7	2	2
% of data estimated			0%		0%			0%		0%			0%		0%			0%		0%

Management Report – Statement of Non-Financial Information 2022

184

Greenhouse gas emissions for properties leased by LOOM

EPRA Code	Indicator and units	Offices
		2022	2021	Evol.
GHG-Dir-Abs, GHG-Dir-LfL	Direct emissions – Scope 1 (t CO2eq)	N/A	N/A	-
GHG-Indir Abs, GHG-Indir- LfL	Indirect emissions - Scope 2 (t CO2eq)	86.3	68.5	26%
-	Total emissions – Scope 1+2 (t CO2eq)	86.3	68.5	26%
GHG-Int	EMISSIONS INTENSITY (t CO2 eq/m2)	0.028	0.023	-
% of estimated data		-	0%	-

Greenhouse gas emissions for MERLIN Properties’ corporate headquarters

EPRA Code	Indicator and units	Offices
		2022	2021	Evol.
GHG-Dir-Abs, GHG-Dir- LfL	Direct emissions – Scope 1 (t CO2eq) (1)	19.5	17.7	10%
GHG-Indir Abs, GHG- Indir-LfL	Indirect emissions - Scope 2 (t CO2eq)	32.3	27.1	19%
-	Total emissions – Scope 1+2 (t CO2eq)	51.8	44.8	16%
GHG-Int	EMISSIONS INTENSITY (t CO2 eq/m2)	0.021	0.019	-
% of estimated data		-	0%	-

Management Report – Statement of Non-Financial Information 2022

185

Appendix III. Breakdown of the environmental performance reporting scope

Asset name	Portfolio	Building number	Surface (m2)	Energy reported (GJ)	Water reported (m2)	Waste reported (ton)	Sustainable construction certificate	ISO 14001	ISO 50001	Energy rating
Torre Castellana 259	Offices	1	21,390	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Castellana 280	Offices	1	16,853	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Castellana 278	Offices	1	14,468		Yes*		LEED GOLD			Yes
Castellana 93	Offices	1	11,621	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Alcala 40	Offices	1	9,315							Yes
Principe de Vergara 187	Offices	1	11,302				LEED GOLD			Yes
Alfonso XI	Offices	1	9,945	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Pedro de Valdivia 10	Offices	1	6,721	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
PE Churruca	Offices	3	12,832	Yes	Yes	Yes	LEED GOLD(1)/ SILVER(2)	Yes	Yes	Yes
PE Complejo Princesa	Offices	3	33,573	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
Juan Esplandiu 11-13	Offices	1	28,008	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
Eucalipto 33	Offices	1	7,301	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Eucalipto 25	Offices	1	7,368	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Santiago de Compostela 94	Offices	1	13,130	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Josefa Valcarcel 48	Offices	1	19,893				LEED GOLD			Yes
PE Alvento	Offices	2	32,928	Yes	Yes	Yes	LEED SILVER	Yes	Yes	Yes
Cristalia	Offices	1	11,713	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
PE Puerta de las Naciones	Offices	4	39,150	Yes*	Yes*	Yes*	LEED PLATINUM(1)/ GOLD (3)	Yes (2)	Yes (2)	Yes
Ribera del Loira 60	Offices	1	54,960				LEED GOLD			Yes
Partenon 12-14	Offices	1	19,609	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes

Management Report – Statement of Non-Financial Information 2022

186

Partenon 16-18	Offices	1	18,345	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Arturo Soria 128	Offices	1	3,226	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Torre Chamartin	Offices	1	18,295	Yes	Yes	Yes	LEED PLATINUM	Yes	Yes	Yes
Arturo Soria 343	Offices	1	6,621	Yes	Yes		LEED GOLD	Yes	Yes	Yes
Elipse	Offices	1	7,515	Yes	Yes	Yes		Yes	Yes	Yes
Fuente de la Mora	Offices	1	4,482	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Aquamarina	Offices	1	10,685	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
PE Via Norte	Offices	6	37,224	Yes*	Yes*	Yes*	LEED GOLD (5)	Yes (5)	Yes (5)	Yes
PE Sanchinarro	Offices	2	17,191	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
PE Las Tablas	Offices	3	27,184	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Avenida de Burgos 210	Offices	1	6,176				LEED GOLD			Yes
Avenida de Burgos 208	Offices	1	1,200				LEED GOLD			Yes
Encinar	Offices	1	3,623	Yes	Yes	Yes	LEED GOLD	Yes		Yes
Avenida de Bruselas 24	Offices	1	9,163	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Avenida de Bruselas 26	Offices	1	8,895	Yes	Yes			Yes	Yes	Yes
Avenida de Bruselas 33	Offices	1	33,718				LEED GOLD			Yes
Avenida de Europa 1A	Offices	1	12,606		Yes*	Yes	LEED PLATINUM	Yes		Yes
Avenida de Europa 1B	Offices	1	10,495	Si*	Yes*	Yes	LEED PLATINUM	Yes	Yes	Yes
Maria de Portugal T2	Offices	3	17,140	Yes*	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
PE Adequa	Offices	5	69,379	Yes	Yes	Yes	BREEAM VERY GOOD (2) /LEED PLATINUM (3)	Yes	Yes	Yes
PE Ática	Offices	3	16,325	Yes	Yes	Yes	LEED GOLD (1) / BRREAM GOOD (1)	Yes	Yes	Yes
Atica 5	Offices	1	9,526	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Atica 6	Offices	1	3,434	Yes	Yes					Yes
PE Atica XIX	Offices	3	15,411	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes

Management Report – Statement of Non-Financial Information 2022

187

PE Cerro Gamos	Offices	3	25,431	Yes	Yes	Yes	LEED GOLD (2) / LEED SILVER(1)			Yes
PE Alvia	Offices	3	23,567	Yes*	Yes*	Yes*	LEED GOLD (1) / BREEAM GOOD (1)	Yes (2)	Yes (2)	Yes
Diagonal 605	Offices	1	14,908	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Diagonal 514	Offices	1	10,163	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
Diagonal 458	Offices	1	4,174	Yes	Yes	Yes	BREEAM GOOD	Yes		Yes
Trianon	Offices	1	18,400	Yes	Yes
PE Vegacinco	Offices	2	10,896	Yes	Yes
Zaragoza - Aznar Molina	Offices	1	4,488
Balmes 236-238	Offices	1	6,187							Yes
Vilanova 12-14	Offices	1	16,494				LEED SILVER			Yes
E-Forum	Offices	1	5,190	Yes						Yes
Torre Glories	Offices	1	37,614	Yes	Yes	Yes	LEED GOLD / BREEAM EXCELENTE	Yes	Yes	Yes
Diagonal 199	Offices	1	5,934	Yes	Yes	Yes	LEED SILVER	Yes	Yes	Yes
PE Poble Nou 22@	Offices	4	31,348	Yes	Yes	Yes	LEED GOLD	Yes	Yes	Yes
WTC6	Offices	1	14,461	Yes	Yes		LEED GOLD	Yes	Yes	Yes
WTC8	Offices	1	14,597	Yes	Yes		LEED GOLD	Yes	Yes	Yes
PLZFB	Offices	1	10,615	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
Sant Cugat I	Offices	1	15,377	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Sant Cugat II	Offices	1	10,008	Yes	Yes	Yes	LEED SILVER	Yes	Yes	Yes
Marques de Pombal 3	Offices	1	12,461	Yes	Yes		LEED GOLD			Yes
Torre Lisboa	Offices	1	13,715				LEED GOLD			Yes
Central Office	Offices	1	10,310	Yes	Yes		LEED GOLD			Yes
Torre Zen	Offices	1	10,207	Yes	Yes		LEED GOLD			Yes
Art	Offices	1	22,150	Yes	Yes		LEED GOLD			Yes

Management Report – Statement of Non-Financial Information 2022

188

TFM	Offices	1	7,837	Yes	Yes					Yes
Lisboa Expo	Offices	1	6,740				LEED GOLD			Yes
Nestle	Offices	1	12,260				LEED GOLD			Yes
Lerida - Mangraners	Offices	1	3,228							Yes
Sevilla - Borbolla	Offices	1	13,037				LEED SILVER			Yes
Granada - Escudo del Carmen	Offices	1	2,041							Yes
Castellana 85	Offices	1	16,474	Yes	Yes	Yes	LEED PLATINUM	Yes	Yes	Yes
Pere IV	Offices	1	2,018	Yes	Yes					Yes
Plaza de Cataluña 9	Offices	1	3,159	Yes	Yes					Yes
Monumental	Offices	1	25,358				LEED GOLD			Yes
Liberdade, 195	Offices	1	16,510							Yes
Covered area (surface)	Offices		1,173,509	854,879	892,971	733,058	1,114,489	781,497	761,094	1,159,202
Covered area (number of assets)	Offices		109	84	87	74	93	75	72	109
% Covered area (surface)	Ofiicnas			73%	76%	62%	95%	67%	65%	99%
% Covered area (number of assets)	Offices			77%	80%	68%	85%	69%	66%	100%
Plaza Ruiz Picasso	Offices WIP	1	31,577				LEED SILVER	Yes	Yes	Yes
PE Churruca	Offices WIP	1	4,651				LEED GOLD	Yes	Yes	Yes
PE Ática	Offices WIP	1	7,080					Yes	Yes	Yes
PLZFA	Offices WIP	1	11,411							Yes
PE Cerro Gamos	Offices WIP	2	10,674				LEED GOLD (3)/ LEED SILVER (1)			Yes
Serante	Offices WIP	3	8,602							Yes
Covered area (surface)	Offices WIP		73,995	0	0	0	64,354	43,307	43,307	73,995
Covered area (number of assets)	Offices WIP		9	0	0	0	4	3	3	9
Covered area (surface)	Total Offices		1,247,503	854,879	892,971	733,058	1,178,843	824,804	804,401	1,233,197

Management Report – Statement of Non-Financial Information 2022

189

Covered area (number of assets)	Total Offices		118	84	87	74	97	78	75	118
% Covered area (surface)	Total Offices			69%	72%	59%	94%	66%	64%	99%
% Covered area (number of assets)	Total Offices			71%	74%	63%	82%	66%	64%	100%
Marineda	Shopping Centers	1	100,577	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Arturo Soria	Shopping Centers	1	6,069	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Centro Oeste	Shopping Centers	1	10,867	Yes	Yes	Yes	BREEAM GOOD			Yes
Tres Aguas	Shopping Centers	1	66,994	Yes	Yes	Yes	BREEAM VERY GOOD			Yes
X-Madrid	Shopping Centers	1	47,117	Yes	Yes	Yes	BREEAM EXCELENTE	Yes	Yes
Larios	Shopping Centers	1	37,956	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
Porto Pi	Shopping Centers	1	32,570	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
Artea	Shopping Centers	1	25,922	Yes	Yes	Yes	BREEAM EXCELENTE	Yes	Yes	Yes
Arenas	Shopping Centers	1	31,905	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
Vilamarina	Shopping Centers	1	32,191	Yes	Yes	Yes	BREEAM VERY GOOD			Yes
El Saler	Shopping Centers	1	29,001	Yes	Yes	Yes	BREEAM VERY GOOD	Yes	Yes	Yes
La Vital	Shopping Centers	1	20,878	Yes	Yes	Yes	BREEAM VERY GOOD			Yes
Bonaire	Shopping Centers	1	14,455	Yes	Yes	Yes				Yes
Almada	Shopping Centers	1	60,049	Yes	Yes		BREEAM VERY GOOD			Yes
Covered area (surface)	Shopping Centers		516,551	516,551	516,551	456,502	502,096	311,117	311,117	469,434
Covered area (number of assets)	Shopping Centers		14	14	14	13	13	8	8	13
% Covered area (surface)	Shopping Centers			100%	100%	88%	97%	60%	60%	91%

Management Report – Statement of Non-Financial Information 2022

190

% Covered area (number of assets)	Shopping Centers			100%	100%	93%	93%	57%	57%	93%
Callao 5	Shopping Centers WIP	1	9,642				BREEAM CORRECTO			Yes
Covered area (surface)	Shopping Centers WIP		9,642	0	0	0	9,642	0	0	9,642
Covered area (number of assets)	Shopping Centers WIP		1	0	0	0	1	0	0	1
Covered area (surface)	Total Shopping Centers		526,193	516,551	516,551	456,502	511,738	311,117	311,117	479,076
Covered area (number of assets)	Total Shopping Centers		15	14	14	13	14	8	8	14
% Covered area (surface)	Total Shopping Centers			98%	98%	87%	97%	59%	59%	91%
% Covered area (number of assets)	Total Shopping Centers			93%	93%	87%	93%	53%	53%	93%
A2-Coslada	Logistics	1	28,491				BREEAM CORRECTO			Yes
A2-Coslada Complex	Logistics	1	36,234	Yes	Yes	Yes	BREEAM GOOD	Yes	Yes	Yes
A4-Getafe (Cla)	Logistics	1	16,100				BREEAM GOOD			Yes
A2-Meco I	Logistics	1	35,285	Yes*			BREEAM CORRECTO			Yes
A4-Pinto I	Logistics	1	11,099				BREEAM GOOD			Yes
A4-Pinto II	Logistics	1	58,990							Yes
A4-Getafe (Gavilanes)	Logistics	2	39,591	Yes			LEED GOLD	Yes		Yes
A2-Meco II	Logistics	1	59,814				LEED PLATINUM			Yes
A2-San Fernando I	Logistics	1	11,179				LEED GOLD			Yes
A2-San Fernando II	Logistics	1	33,592	Yes						Yes
A4-Seseña	Logistics	1	28,731	Yes	Yes		LEED GOLD			Yes
A2-Alovera	Logistics	1	40,287				BREEAM GOOD			Yes

Management Report – Statement of Non-Financial Information 2022

191

A2-Azuqueca II	Logistics	1	97,459				LEED PLATINUM			Yes
A2-Cabanillas I	Logistics	1	70,134				BREEAM GOOD			Yes
A2-Cabanillas II	Logistics	1	15,078							Yes
A2-Cabanillas III	Logistics	1	21,879				LEED GOLD			Yes
A2-Cabanillas Park I A	Logistics	1	38,054				LEED GOLD			Yes
A2-Cabanillas Park I B	Logistics	1	17,917				LEED GOLD			Yes
A2-Cabanillas Park I C	Logistics	1	48,468				LEED GOLD			Yes
A2-Cabanillas Park I D	Logistics	1	47,892				LEED GOLD			Yes
A2-Cabanillas Park I E	Logistics	1	49,793				LEED SILVER			Yes
A2-Cabanillas Park I F	Logistics	1	20,723				LEED SILVER			Yes
A2-Cabanillas Park I G	Logistics	1	22,506	Yes			LEED GOLD			Yes
A2-Cabanillas Park I H	Logistics	1	25,247	Yes			LEED GOLD			Yes
ZAL Port	Logistics	0	0
Barcelona-PLZF	Logistics	9	132,796	Yes	Yes		BREEAM GOOD			Yes
Zaragoza-Pedrola	Logistics	1	21,579				BREEAM GOOD			Yes
Zaragoza-Plaza I	Logistics	1	20,764	Yes*			BREEAM GOOD			Yes
Valencia-Almussafes	Logistics	1	26,613	Yes	Yes		BREEAM GOOD			Yes
Valencia-Ribarroja	Logistics	1	34,992				BREEAM VERY GOOD			Yes
Vitoria-Jundiz I	Logistics	1	72,717	Yes*			BREEAM VERY GOOD			Yes
Vitoria-Jundiz II	Logistics	1	26,774	Yes*						Yes
Sevilla Zal	Logistics	13	138,777	Yes	Yes		LEED GOLD (1)/ LEED SILVER (2)/ BREEAM GOOD (2)/ BREEAM CORRECTO (8)			Yes
Lisboa Park A	Logistics	1	45,198							Yes
A2-Cabanillas Park II A	Logistics	1	47,211							Yes
A2-Cabanillas Park I J	Logistics	1	44,722							Yes
Covered area (surface)	Logistics		1,486,683	639,626	363,150	36,234	1,215,118	75,825	36,234	1,486,683

Management Report – Statement of Non-Financial Information 2022

192

Covered area (number of assets)	Logistics		56	34	25	1	50	3	1	56
% Covered area (surface)	Logistics			43%	24%	2%	82%	5%	2%	100%
% Covered area (number of assets)	Logistics			61%	45%	2%	89%	5%	2%	100%
A2-Cabanillas Park II B	Logistics WIP	1	44,989
Covered area (surface)	Logistics WIP		44,989	0	0	0	0	0	0	0
Covered area (number of assets)	Logistics WIP		1	0	0	0	0	0	0	0
Covered area (surface)	Total Logistics		1,531,672	639,626	363,150	36,234	1,215,118	75,825	36,234	1,486,683
Covered area (number of assets)	Total Logistics		57	34	25	1	50	3	1	56
% Covered area (surface)	Total Logistics			42%	24%	2%	79%	5%	2%	97%
% Covered area (number of assets)	Total Logistics			60%	44%	2%	88%	5%	2%	98%
Covered area (surface)	Total		3,305,368	2,011,055	1,772,673	1,225,794	2,905,699	1,211,745	1,151,751	3,198,956
Covered area (number of assets)	Total		190	132	126	88	163	89	84	188
% Covered area (surface)	Total			61%	54%	37%	88%	37%	35%	97%
% Covered area (number of assets)	Total			69%	66%	46%	86%	47%	44%	99%

* MERLIN does not exercise operational control over these assets and, therefore, consumption data are included in the environmental performance information of the asset portfolio not under

operational control.

Like-for-like assets are highlighted in bold.

The Trianón, Vegacinco business park and Zaragoza-Aznar Molina assets were excluded from the portfolio in 2022 and, therefore, only consumption data for the time during which they were in

operation are reported.

NOTE: Land reserves are not included in the table above.

Management Report – Statement of Non-Financial Information 2022

193

Appendix IV.  Climate risk reporting in accordance with TCFD methodology

Since its inception, MERLIN has integrated sustainability into both its activities and decision-

making process, understanding its relevance not only in stakeholder relations, but also in the

performance of financial metrics.

As a leader in its sector, MERLIN is aware of the substantial changes taking place due to climate

change and its impact on the economy and, specifically, on its business activities.

MERLIN has continued to make progress in this direction and in 2022 prepared its first report

following the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD),

thus disclosing information on climate change risks and opportunities in a transparent and

comparable manner for its stakeholders.

The Company is therefore ahead of and well positioned regarding regulation on climate-related risks

such as Spanish Law 7/2021, of 20 May, on climate change and energy transition (Ley 7/2021 de

cambio climático y transición energética), Regulation (EU) 2020/852 of the European Parliament and

of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable

investments and amending Regulation (EU) 2019/2088 (and delegated acts implementing the above

that supplement the regulation associated with the European green taxonomy) or the Corporate

Sustainability Reporting Directive (CSRD).

The TCFD recommendations, which were launched in 2017, are structured around four pillars: (i)

Governance, (ii) Strategy, (ii) Risk Management, and (iv) Metrics and Targets, and eleven

recommendations that support effective disclosure in each pillar.

In October 2021, the TCFD issued an update on the implementation of the TCFD recommendations.

This document also includes recommendations at the sector level, in particular for real estate asset

management companies such as MERLIN. This report details the four pillars and eleven

recommendations, and the sector-specific issues. The data included in this report refer to the

financial year from 1 January to 31 December 2022, and include the entire MERLIN Group.

Scenario analysis

To identify climate-related risks and opportunities, MERLIN first prepared a preliminary list of risks

and opportunities based on the risks identified by the TCFD and in the Commission Delegated

Regulation 2021/2139 (climate delegated act), information on competitors and an analysis of

scientific and regulatory literature. The result of this work was adapted to MERLIN’s reality and

circumstances through interviews with the Company’s main managers.

The preliminary list of physical risks was analysed for the scenario in which emissions remain stable,

SSP2-4.5 “Middle of the road”, and the scenario where emissions are very high SSP5-8.5 “Fossil-

fuelled development”. Risks were assessed for the short (2021-2040), medium (2041-2060) and long

term (2081-2100) for all of the Company’s assets.

Management Report – Statement of Non-Financial Information 2022

194

Transition risks were analysed considering the Net Zero Emissions by 2050 Scenario (NZE Scenario of

the International Energy Agency). This scenario is considered to be consistent with the European

target of achieving net zero emissions by the same date.

For the preliminary risks and opportunities, different criteria were analysed to identify the inherent

and residual risk of each asset. Finally, a cut-off has been established for the residual risk level

resulting from the analysis carried out to differentiate between risks that are considered material

and those that are not.

Governance

Supervisory functions of the Board

MERLIN’s highest governing body is the Board of Directors, which is made up of 13 directors, most of

whom are independent directors. The Board focuses on defining, supervising and monitoring the

policies, strategies and guidelines to be followed by the Group. The Board is also responsible for

long-term strategy and for monitoring its implementation. The Board relies on its delegated

committees for practical implementation.

The Audit and Control Committee, with the support of the Sustainability and Innovation

Committee, has been responsible for identifying and assessing MERLIN’s financial and non-financial

risk management and control systems since 2021, including those related to climate change. In

addition, the main function of the Sustainability and Innovation Committee is to promote

responsible and sustainable business practices, integrating environmental, social and governance

aspects, and to promote innovation and the digitalisation of the Company.

In 2022, the Board of Directors met 13 times and dealt with specific climate change issues at 6 of

these meetings86. In addition, in 2022 the Sustainability and Innovation Committee reviewed the ESG

risks identified and assessed, and particularly focused on climate-related risks, supporting the Audit

and Control Committee in preparing MERLIN’s Corporate Risk Map, which has been updated and

approved by the Board of Directors on two occasions, each time including ESG risks such as those

related to climate change.

Supervisory functions of the management team

MERLIN’s Chief Executive Officer (CEO) and Chief Operating Officer (COO), who are also Board

members, are ultimately responsible for executing the strategy approved by the Board of Directors,

including the implementation of the sustainability strategy. In turn, this strategy includes those

aspects linked to climate-related risks and opportunities.

Management Report – Statement of Non-Financial Information 2022

195

86 More information on MERLIN’s organisational structure and corporate governance can be found at

Annual Corporate Governance Report 2022: https://www.merlinproperties.com/en/corporate-governance/

annual-reports/

MERLIN’s Statement of Non-Financial Information 2022: https://www.merlinproperties.com/en/investors/

financial-information/

At the operational level, a Sustainability Committee has been in place since 2021 to monitor the

progress of the Company’s various sustainability plans and initiatives, and to follow up on

sustainability objectives and indicators. The Committee comprises several members of the

management team who lead the asset management, technical, treasury and finance, investor

relations and internal audit areas of the Company.

The asset management area and the technical department take into consideration the vision of the

assets and how they pertain to climate-related risks and opportunities. The investor relations area is

actively involved in the two-way communication of investors’ concerns regarding this issue. The

treasury and finance area takes into consideration financial markets and green financing compliance

indicators (100% reclassified by 2022). Lastly, the internal audit department, in supporting the Audit

and Control Committee, is responsible for drawing up and updating the Company’s Risk Map, which

includes climate-related risks.

In 2022, as a result of the climate risk identification and assessment analysis, 7 material or priority

climate-related risks were identified.

In addition, the Investment Committee takes into consideration climate-related risks and

opportunities when preparing the Company’s investment plans.

The management team, the CEO, the COO and the Sustainability and Innovation Committee report

on a regular basis to the Board of Directors on the progress made regarding sustainability.

Figure1: MERLIN’s organisational structure. Source: Own preparation

Strategy

Climate-related impacts and resilience

Based on historical data on MERLIN’s operations and business development, it seems that physical

risks, mainly extreme precipitation, including snowfall, and high winds, are the most recurrent. In

Management Report – Statement of Non-Financial Information 2022

196

addition, these climate-related risks have occasionally affected some of the Company’s assets,

causing damage to structural elements and resulting in unforeseen expenses for repairs such as

maintenance work due to leaks and waterproofing. As a preventive measure, technical specifications

have been tightened in recent years in tenders for the construction of asset structures.

To date, no transition risks have been identified that have had a significant impact on the Company,

with the exception of the potential mandatory installation of electric vehicle charging points

(pending legislative approval). MERLIN has gone beyond the potential minimum regulatory

requirements, looking ahead at potential regulations and changes in consumer preferences, and

accelerating the development of a low carbon economy.

These types of events, in addition to MERLIN’s commitment, have encouraged the Company to

develop and implement adaptation and mitigation measures to respond to such risks. MERLIN has

therefore incorporated climate-related aspects into its overall risk management system, which is

described in detail in the next section of the report on risk management.

In addition, the decarbonisation of buildings is one of the challenges facing the real estate sector.

MERLIN has therefore taken climate-related aspects into consideration in its strategy from the very

beginning. In 2022, the Company continued to make progress in this regard by approving its

Pathway to Net Zero, which is described below.

General process for identifying climate-related risks

In line with its climate change commitment, in 2022 MERLIN continued to further improve the

identification and assessment of climate-related risks and opportunities, and has therefore taken the

following steps:

1.Prepare a list of physical and transition risks indicated by the TCFD reference framework and

the Commission Delegated Regulation 2021/2139 (“climate delegated act”).

2.Analyse MERLIN’s main competitors in terms of information reported in their TCFD and CDP

(Carbon Disclosure Project) reports.

3.Review and analyse scientific articles related to the building sector and specific applicable

regulations.

4.Review MERLIN’s ability to adapt to the main physical and transition risks identified given

the current context.

5.Interview MERLIN’s stakeholders to conduct a more comprehensive analysis of climate

change-related risks and opportunities, and the adaptation and mitigation measures in

place.

6.Obtain the preliminary list identifying both physical and transition risks, and opportunities.

This list of risks is expected to be updated on a regular basis.

Risk management

General risk management

Management Report – Statement of Non-Financial Information 2022

197

MERLIN has a Risk Management System based on the principles, key elements and methodology

established in the COSO Framework87, which aims to minimise the volatility of results (profitability)

and, therefore, maximise the Group’s economic value, incorporating risk and uncertainty into the

decision-making process to provide reasonable assurance of achieving the strategic objectives

established, providing shareholders, other stakeholders and the market in general with an adequate

level of guarantees to ensure that the value generated is protected.

Based on a comprehensive view of risk management, MERLIN has adopted a methodological

approach based on the Enterprise Risk Management Framework - Integrating with Strategy and

Performance (COSO ERM 2017), which emphasises the importance of enterprise risk management in

strategic planning and incorporates it throughout the Company, since risk influences strategy and

performance in all areas, departments and functions.

The general guiding principles regarding risk management are set out in MERLIN’s Risk Management

and Control Policy88, which was initially approved by the Board of Directors in February 2016 and

updated in April 2022.

MERLIN’s non-financial risks are managed by the Board of Directors, through the Audit and Control

Committee and with the coordination and cooperation of the Sustainability and Innovation

Committee and the Appointments and Remuneration Committee, and by senior management with

the support of the Internal Audit department.

In 2022, MERLIN’s Risk Map was regularly updated to reflect every six months the perception of the

Company’s main executives and governing bodies of the risks faced by MERLIN.

MERLIN’s Risk Map is broken down into different key areas for achieving the Group’s objectives:

strategy, governance, business, resources, social and sustainability. This last group includes the risks

related to climate change based on the review and recommendations of the on Sustainability and

Innovation Committee.

MERLIN’s Risk Management System assesses all risks in terms of impact and probability, obtaining a

residual risk indicator for the current year, identifies those key performance indicators (KPIs) and key

risk indicators (KRIs) to be reported, and assigns those responsible for reporting, and those

responsible for implementing or developing the mitigating measures identified for each of the risks.

In addition, all risks are assessed in terms of time frame (short, medium and long term), and in terms

of speed, persistence and adaptability89.

Climate risk management

Management Report – Statement of Non-Financial Information 2022

198

87 Committee of Sponsoring Organizations of the Treadway Commission.

88 More information can be found at https://www.merlinproperties.com/en/corporate-governance/corporate-governance-

normative/

89  More information on MERLIN’s organisational structure and corporate governance can be found at:

•Annual Corporate Governance Report 2022: https://www.merlinproperties.com/en/corporate-governance/

annual-reports/

•MERLIN’s Statement of Non-Financial Information 2022: https://www.merlinproperties.com/en/investors/

financial-information/

First, it should be noted that the management of climate-related risks and opportunities is

integrated into MERLIN’s overall risk management process described in the previous section.

The Internal Audit department is responsible for coordinating the identification and assessment of

climate-related risks and opportunities, along with the Company’s other risks, although in this case it

may rely on support from the Sustainability Committee, as mentioned in the “Governance” section.

In 2022, MERLIN worked with PwC advisors to further identify and assess these risks and

opportunities.

To identify climate-related risks, MERLIN analyses climate scenarios for the short (2021-2040),

medium (2041-2060) and long term (2081-2100) for its assets. Physical risks are classified as acute

and chronic events, while transition risks include regulatory, legal, technological, market and

reputational risks.

The same methodology is followed regarding climate-related opportunities, which are classified in

terms of resource efficiency, energy source, products and services, and markets.

After identifying climate change risks and opportunities, they are assessed in terms of likelihood and

impact on a qualitative scale of 1 to 5. Any mitigation and adaptation measures implemented in the

assets to reduce the impact of the risk should it materialise are also taken into account.

The Company reviews the Risk Map every six months to analyse whether any climate-related risks

that may affect MERLIN need to be included or modified.

The Company is also aware of the role tenants play in achieving its climate strategy and managing

related risks. Therefore, as mentioned in the previous section, MERLIN’s Pathway to Net Zero

focuses on reducing tenant emissions, which can have a considerable impact in relation to transition

risks.

Assets subject to physical risks

MERLIN has chosen two climate change scenarios to model the potential future impacts of climate

change on its business and the resilience of its strategy. These scenarios have been taken from the

Intergovernmental Panel on Climate Change (IPCC) and include five possible climate futures with

different emission concentrations and socioeconomic changes in areas such as population, urban

density, education, land use and wealth. Each scenario is labelled to identify both the level of

emissions and the Shared Socioeconomic Pathway (SSP)90 used in these calculations.

MERLIN’s climate-related risk analysis has taken into account a scenario in which emissions remain

stable, SSP2-4.5 “Middle of the road”, and the scenario where emissions are very high SSP5-8.5

“Fossil-fuelled development”. In both cases, risks have been assessed in the short (2021-2040),

medium (2041-2060) and long term (2081-2100), in line with the IPCC recommendations, focusing

on the consequences in Spain and Portugal as this is where the Company’s assets are located.

For each physical risk initially identified, the following criteria have been analysed at the asset level

to calculate the inherent risk level:

Management Report – Statement of Non-Financial Information 2022

199

90 Shared Socioeconomic Pathways.

(i)Hazard/Climate impact, taking into account the driving variable.

(ii)Exposure of the asset, analysed through external sources that assess the location of the

asset and the impact of the driving variable. 

(iii)Vulnerability of the asset.

(iv)The measures that MERLIN takes to adapt its assets have also been considered, which allows

the residual risk for each asset to be obtained.

Identification of transition risks

Similarly, in relation to transition scenarios, the medium- and long-term forecasts of the

International Energy Agency (IEA) use a scenario approach to examine future energy trends.

Of the three scenarios proposed by the IEA, the normative scenario of Net Zero Emissions by 2025

(NZE Scenario) has been used in the transition risk analysis applied to MERLIN; this scenario has an

emissions trajectory consistent with keeping the global temperature rise below 1.5ºC, would enable

universal access to modern energy services and would result in significant improvements in air

quality.

As in the case of physical risks, the following criteria have been analysed for the transition risks

initially identified to obtain the inherent risk level at the asset level: (i) economic impact that a

measure taken may have on MERLIN’s activity, and (ii) probability of occurrence of the identified

transition risk. The mitigation measures implemented by MERLIN have also been analysed to

determine the Company’s capacity to react to the transition risks identified, which gives a level of

residual risk per asset.

Identification of climate-related opportunities

The opportunities related to climate change vary depending on MERLIN’s strategic planning or risk

management. Following a preliminary identification of climate-related opportunities, they have been

assessed in accordance with the following criteria:

•Potential impact of measures currently in place that generate savings or that may be

beneficial for future change.

•Likelihood of application of the measure in question or opportunity for access to be

implemented at the Company.

Identification of assets with material risks and opportunities and their financial impact

Depending on the methodology used to assess both the physical and transition risks, and the

material opportunities of MERLIN’s assets, a threshold has been considered regarding the level of

residual risk resulting from the analysis carried out to determine materiality.

The main climate-related risks and opportunities identified for MERLIN are set out below.

Type	Risk characterisation	Potential impact for MERLIN
Physical climate- related risk (acute)	Extreme precipitation	Breakage and damage to structural elements of the asset and possible personal injury. Devaluation of the asset in the medium to long term, increase in the price of the insurance policy for future years and financial losses.
Physical climate- related risk (acute)	River flooding

Management Report – Statement of Non-Financial Information 2022

200

Type	Risk characterisation	Potential impact for MERLIN
Transition climate- related risk (regulatory/legal)	Applying a carbon price to direct or indirect greenhouse gas emissions	Financial impact in the medium or long term by applying a carbon price for direct greenhouse gas emissions from its assets, and indirect upstream and downstream emissions from its value chain.
Transition climate- related risk (regulatory/legal)	Mobility-related urban planning policies that can change travel patterns	Increased investment in retrofitting existing assets to new requirements for low emission zones in urban areas and other mitigation or adaptation measures with an impact on buildings and transport.
Transition climate- related risk (market)	Potential devaluation of assets as a result of the rate decarbonisation being insufficient	Potential devaluation of assets (stranded assets) in the case of slower decarbonisation than the trend required by the European Union.
Transitional climate- related risk (technological)	Increase in operating expenses due to higher energy prices	Increased operating expenses as a result of volatile energy prices, which may disrupt project development and lead to supply shortages for suppliers.
Opportunity (mitigation-linked services)	Use of more efficient modes of transport	Potential leadership in the sector and increase in asset value as a result of the installation of charging points for electric vehicles.
Opportunity (mitigation-linked services)	Switching to more efficient buildings and use of low-emission energy sources	Potential leadership in the sector with energy efficient assets and reduced carbon footprint by using energy from renewable sources (e.g. solar photovoltaic).
Opportunity (mitigation-linked services)	Use of incentives in supporting policies	Potential leadership in the sector and promotion of consumer awareness (green clause in leases).
Opportunity (energy saving)	Use of new technologies	Decrease in costs as a result of reduced energy consumption from fossil fuels.
Opportunity (adaptation-linked services)	Commitment and transparency	External verification of all sustainability commitments assumed to generate confidence among the various stakeholders.

Table1: Main climate-related risks and opportunities identified for MERLIN. Source: Own preparation

MERLIN has also begun to assess the risks and opportunities related to climate change from a

financial perspective in line with the EFRAG climate change standard published on 15 November

2022, which is effective for reporting financial years beginning on or after 01/01/2024.

Management Report – Statement of Non-Financial Information 2022

201

The conclusions drawn from the process of analysing physical and transitional risks and climate-

related opportunities are taken into account in the Company’s strategic and financial planning, e.g.

in determining MERLIN’s investment and divestment plan. The Company also continues to

implement various measures in line with its decarbonisation strategy on the Pathway to Net Zero.

Management Report – Statement of Non-Financial Information 2022

202

Appendix V. Reconciliation of Alternative Performance Measures to the

financial statements

In accordance with the recommendations issued by the European Securities and Markets

Authority (ESMA), the alternative performance measures (“APM”) are described as follows

GLOSSARY

Average debt maturity (years) - This APM represents the average debt duration of the Company

until maturity It is a relevant metric as it provides the investor with the relevant information about

the repayment commitments of the financial liabilities It is calculated as the addition of the pending

years to maturity of each loan multiplied by its outstanding loan amount and divided by the total

outstanding amount of all loans Given the nature of the metric, it is not possible to reconcile it with

the Group financial statements but the main information is available in the consolidated financial

statements.

Average passing rent - It represents the rent per square meter per month at which an asset or

category of assets are rented at a moment in time The average passing rent is a relevant

performance metric as it shows the implied rents of all the prevailing lease contracts of the company

at a moment in time per square meter and per month enabling the comparison with market rents

Given the nature of the metric, it is not possible to reconcile it with the financial statements.

Release spread - Difference between the new rent signed and the old prevailing rent on renewals

(same space, same tenant) or relets (same space, different tenant) during last twelve months The

release spread provides the investor with a view on the prospective rental behaviour when

negotiating with the tenants It is calculated on a lease by lease basis and therefore it is not possible

to reconcile it with the financial statements.

Rents Like-for-like - Amount of the gross rents comparable between two periods. It is calculated on

an asset by asset basis excluding from both periods the rents derived from acquisitions or disposals

executed in such periods as well as other adjustments like early termination penalties from lease

contracts We consider the rental like-for-like growth a relevant metric to understand the evolution

of rents of an asset or an asset category It is calculated on an asset by asset basis and therefore it is

not possible to reconcile it with the financial statements.

Gross annualized rents - Passing rent as of the balance sheet date multiplied by 12 We consider the

gross annualized rents a relevant performance metric as it represents the total amount of rents of

the prevailing lease contracts at a given time enabling the calculation of the return of each asset

(Gross yield) Given the nature of the metric, it is not possible to reconcile it with the financial

statements.

GAV - The GAV is the Gross Asset Value as of the latest available valuation report plus the advanced

payments of turn-key projects and developments at cost The GAV is a standard valuation metric for

comparison purpose, recognized on a global basis in the real estate sector, and performed by an

independent external appraisal The reconciliation with the financial statements appears in Section 5

of this report (Notes to the consolidated balance sheet).

Gross yield - It represents the return of an asset or category of assets. It is calculated by dividing the

annualized gross rent between the latest available GAV.

Wault - Weighted average unexpired lease term, calculated as the number of years of unexpired

lease term, as from the date balance sheet, until the lease contract first break weighted by the gross

rent of each individual contract We consider the Wault a relevant metric as it provides the investor

with the average term of secured leases and gives a sense of risk or opportunity to renegotiate the

Management Report – Statement of Non-Financial Information 2022

203

prevailing lease contracts Given the nature of the metric, it is not possible to reconcile it with the

Group financial statements.

Revenues - Is the addition of the total gross rent income, and the other operating income excluding

extraordinaries The reconciliation with IFRS appears in the table thereafter.

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.

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.

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

Management Report – Statement of Non-Financial Information 2022

204

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.

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 MERLIN Properties | 55 the rating agencies and creditors to evaluate the level of

indebtedness The reconciliation with IFRS metrics appears in the table hereafter.

Financial debt – The financial debt is calculated as the sum of any amount owed by the Group in the

short and long-term as a result of loans, credits, bonds, debentures, and in general any instrument of

a similar nature The financial debt 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.

Percentage of debt at a fixed rate or with interest rate hedges - The percentage of debt at a fixed

rate or with interest rate hedges is calculated as the sum of fixed-rate financial debt and variable-

rate financial debt with associated interest rate change hedging transactions in relation to the

Group’s financial debt The percentage of debt at a fixed rate or with interest rate hedges 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 company exposure to interest rate movements Given the nature of the

metric, it is not possible to reconcile it with the Group financial statements but the main information

is available in the consolidated financial statements.

Average cost of debt - The average cost of debt is calculated as the ratio between the passing

interest cost including derivatives corresponding to interest bearing debt and the Group’s financial

debt The average cost of debt is a performance metric widely used by investors to assess the cost of

borrowed funds, as well as the rating agencies and creditors to evaluate the capacity to fulfil interest

obligations. Given the nature of the metric, it is not possible to reconcile it with the Group financial

statements but the main information is available in the consolidated financial statements.

Liquidity position - The liquidity position is calculated as the sum of the Group’s cash plus the

amount corresponding to receivables from corporate transactions, the treasury stock position at

market value, and the undrowned credit facilities available The liquidity position is a performance

metric widely used by investors to assess the level of financial flexibility, as well as the rating

agencies and creditors to evaluate the capacity to meet debt maturities The reconciliation with IFRS

metrics appears in the table hereafter.

Net debt - The net debt is calculated as the financial debt less cash and cash equivalents (e.g.

disposal receivables or treasury stock) The net debt 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.

Investment in energy efficiency improvements - The investment in energy efficiency improvements

is defined as investments aimed at measuring, controlling, or directly or indirectly reducing, energy

consumption or carbon footprint in all assets over which we have operational control This

performance metric, although not widely used by investors, rating agencies or creditors, is provided

to assess the level of investments in ESG (environmental, social and corporate governance) measures

Management Report – Statement of Non-Financial Information 2022

205

Given the nature of the metric, it is not possible to reconcile it with the Group financial statements,

but the main information is available in the consolidated financial statements.

Total tax contribution - Total Tax Contribution (TTC) measures the contribution made by a company

or group of companies to the different governments. In general, both taxes borne, and taxes

collected are imputed to each fiscal year, on a cash basis.

•Taxes borne are those taxes that have entailed an effective cost for the companies, such as

taxes on profits, social security contributions payable by the company, and certain

environmental taxes

• Taxes collected are those that have been paid as a consequence of the company’s economic

activity, without entailing a cost for the companies other than managing them, such as withholding

taxes levied on employees This performance metric, although not widely used by investors, rating

agencies or creditors, is provided to assess the amount of taxes collected or paid by the company

given the nature of the metric, it is not possible to reconcile it with the Group financial statements.

Reconciliation of the APM to the financial statements

(1)Profit for the period excluding revaluation adjustment, impact of derivatives and including income from

dividends received.

(2)Current income tax excluding impact from sales of non-current assets

Management Report – Statement of Non-Financial Information 2022

206

1)Including Silicius at amortized cost (€86.6 million) net of the impact of the derivative

2)Including DCN loan

3)Amount effectively disbursed by MERLIN. Excludes both undisbursed amounts and pre-sold commercial

inventories. Total trade inventories amounted to €37.7 million as of FY22

4)MtM of non-current assets

Management Report – Statement of Non-Financial Information 2022

207

FY22

Management Report – Statement of Non-Financial Information 2022

208

FY21 - The EPRA NAV metrics for fiscal 2021 are presented below. This information corresponds to

that included in the consolidated financial statements for fiscal year 2021. This information has not

been reexpresed in accordance with the recording of the reexpresed discontinued operations in the

consolidated financial statements for 2022.

Management Report – Statement of Non-Financial Information 2022

209

FY22

FY21 - The EPRA NAV metrics for fiscal 2021 are presented below. This information corresponds to

that included in the consolidated financial statements for fiscal year 2021. This information has not

been reexpresed in accordance with the recording of the reexpresed discontinued operations in the

consolidated financial statements for 2022.

Management Report – Statement of Non-Financial Information 2022

210

FY22

Management Report – Statement of Non-Financial Information 2022

211

FY21 - The EPRA NAV metrics for fiscal 2021 are presented below. This information corresponds to

that included in the consolidated financial statements for fiscal year 2021. This information has not

been reexpresed in accordance with the recording of the reexpresed discontinued operations in the

consolidated financial statements for 2022.

Management Report – Statement of Non-Financial Information 2022

212

FY22

Management Report – Statement of Non-Financial Information 2022

213

FY21 - The EPRA NAV metrics for fiscal 2021 are presented below. This information corresponds to

that included in the consolidated financial statements for fiscal year 2021. This information has not

been reexpresed in accordance with the recording of the reexpresed discontinued operations in the

consolidated financial statements for 2022.

Appendix VI. Post-closing events

As of the date of this report, there are no significant post-closing events.

Management Report – Statement of Non-Financial Information 2022

214

Appendix VII. Independent review report

Management Report – Statement of Non-Financial Information 2022

215

Management Report – Statement of Non-Financial Information 2022

216

Management Report – Statement of Non-Financial Information 2022

217

Management Report – Statement of Non-Financial Information 2022

218

MERLIN PROPERTIES, SOCIMI, S.A.

Preparation of the Consolidated Financial Statements and Consolidated Directors’ Report relating to the

fiscal year ended December 31, 2022.

In accordance with articles 365 and 366 of the Companies Registry Regulations, in relation to subarticle one of

article 253 of the Capital Companies Law in force, the Board of Directors of MERLIN Properties, SOCIMI, S.A. (the

“Company”) has prepared (formulado) (in English) the consolidated financial statements and the consolidated

directors’ report (which has attached, as a separate section, the Annual Corporate Governance Report, the Annual

Director Remuneration Report and the Statement of Non-Financial Information), relating to the year ended

December 31, 2022, in single electronic format according with the Commission Delegated Regulation (EU)

2018/815 of 17 December 2018 and included in the electronic file/s with the following hash code/s

Number: ___________________________________________________________________

(The “Consolidated Financial Statements File”).

In addition, through the execution and signature of this signature page, and pursuant to subarticle two of said article

253, the members forming the Company’s Board of Directors declare that they have signed, in their own

handwriting, the entire contents of the Consolidated Financial Statements File.

_______________________________________ Mr. Javier Garcia-Carranza Benjumea (Chairman)	_______________________________________ Mr. Ismael Clemente Orrego (Deputy Chairman)
________________________________________ Ms. Francisca Ortega Hernández-Agero (Member)	________________________________________ Ms. Ana Forner Beltran (Member)
________________________________________ Ms. María Luisa Jorda Castro (Member)	________________________________________ Ms. Pilar Cavero Mestre (Member)
________________________________________ Mr. Juan María Aguirre Gonzalo (Member)	________________________________________ Mr. Miguel Ollero Barrera (Member)
________________________________________ Mr. Fernando Javier Ortiz Vaamonde (Member)	________________________________________ Ms. Ana María García Fau (Member)
________________________________________ Mr. Emilio Novela Berlin (Member)	________________________________________ Mr. George Donald Johnston (Member)
________________________________________ Mr. Ignacio Gil-Casares Satrústegui (Member)

Madrid, 27 February 2023

Management Report – Statement of Non-Financial Information 2022

219

MERLIN Properties, SOCIMI, S.A.

DECLARATION OF RESPONSIBILITY FOR THE 2022 FINANCIAL STATEMENTS

The members of the Board of Directors of Merlin Properties, SOCIMI, S.A. declare that, to the best of their

knowledge, the individual financial statements of Merlin Properties, SOCIMI, S.A. and the consolidated financial

statements with its subsidiaries, for the year ended December 31, 2022, prepared (formuladas) (in English) by the

Board of Directors at the meeting held on February 27, 2023, in accordance with the applicable accounting

principles and in single electronic format, offer a true and fair view of the net worth, financial situation and results of

Merlin Properties, SOCIMI, S.A. and of the subsidiaries included in the consolidated group, taken as a whole, and

that the directors’ reports accompanying the individual and consolidated financial statements (along with their

attachments and supplementary documentation including the Statement of Non-Financial Information as part of the

Consolidated Directors' Report) include a true analysis of the business performance, results and position of Merlin

Properties, SOCIMI, S.A. and of the subsidiaries included in the consolidated group, taken as a whole, and a

description of the main risks and uncertainties they face.

________________________________________ Mr. Javier Garcia-Carranza Benjumea (Chairman)	________________________________________ Mr. Ismael Clemente Orrego (Deputy Chairman)
________________________________________ Ms. Francisca Ortega Hernández-Agero (Member)	________________________________________ Ms. Ana Forner Beltran (Member)
________________________________________ Ms. María Luisa Jorda Castro (Member)	________________________________________ Ms. Pilar Cavero Mestre (Member)
________________________________________ Mr. Juan María Aguirre Gonzalo (Member)	________________________________________ Mr. Miguel Ollero Barrera (Member)
________________________________________ Mr. Fernando Javier Ortiz Vaamonde (Member)	________________________________________ Ms. Ana María García Fau (Member)
________________________________________ Mr. Emilio Novela Berlin (Member)	________________________________________ Mr. George Donald Johnston (Member)
________________________________________ Mr. Ignacio Gil-Casares Satrústegui (Member)

In Madrid, on February 27, 2023

Management Report – Statement of Non-Financial Information 2022

220