A year ago I set out our aim to become the benchmark European SOCIMI for the active management of real estate assets. Just twelve months later I can confirm that we have come ever closer to achieving this goal.

In our determination to turn this dream into a reality, we have worked resolutely to build one of the most important rental property portfolios in Spain, a portfolio which during its first complete year of operation has generated excellent results. I would particularly like to emphasise the high quality and recurring nature of these results: according to the prestigious EPRA standard, Lar España’s adjusted Recurring Profit, or EPRA Earnings (as reported by real estate companies that adhere to best practices in the sector), amounted to € 13.4 million, which has meant that we have been able to propose to the Ordinary General Meeting that it make a payment of € 12 million to our shareholders.

Lar España’s established objective was to invest its shareholder equity and the funds resulting from its planned borrowings over a period of between 18 and 24 months. We achieved that objective in just 15 months. However, that was not all. We achieved it through acquisitions that for the most part were off-market deals, thanks to the reputation and knowhow of our manager, Grupo Lar;

Once this had been achieved, and with a view to taking advantage of new investment opportunities, our shareholders reaffirmed their trust in Lar España and unanimously subscribed a share capital increase for the amount of € 135 million. This operation allowed us to acquire five magnificent assets worth € 282 million. Notable among these is Megapark Barakaldo: a unique retail complex located near Bilbao, which was acquired at a price of € 170 million on a yield of 6.25%.

During the course of the Extraordinary General Meeting, our shareholders authorised the purchase of the 41.22% that we did not yet own of the Portal de la Marina Shopping Centre, and they reiterated their authorisation to make share capital increases under the same conditions, provided that the investment opportunities on which they are based offer prospects for value creation for shareholders.

Our assets performed extraordinarily well during 2015, both because of the signs of the recovery in consumer confidence in Spain, which is a key factor for the Shopping Centres in our portfolio, and because of the active management initiatives employed by the Lar España team across all asset classes.

In addition, the value uplift in the company’s assets, which rose by 6.1% in 2015, once again shows that the implementation of ad hoc business plans through active property management has had real results.

We are more committed than ever to the project that we began just two years ago. Thanks to the support of our shareholders, Lar España Real Estate has built one of the most important rental property portfolios in Spain, investing € 961 million in 27 real estate assets.

We are also especially proud of the assets that are currently in the development or refurbishment phase. They are all intended to cover the current pent-up demand for high quality real estate products, which will be a very important source of income for our shareholders in the future. As regards shopping centres, we would like to make particular mention of the recent investment in a plot of land in Seville for the development of a landmark retail complex, which will be a benchmark entertainment and leisure destination in the region. This is a unique opportunity which, combined with the development of another retail complex in Sagunto, demonstrates Lar España’s commitment to quality retail complexes in markets that are currently under-supplied. As regards offices, the Marcelo Spínola building is being completely renovated in order to increase the insufficient supply of new or refurbished office space within the M-30 ring road. This renovation will bring a return on total investment that will be much higher than would have been achieved if the asset had been left in the condition in which it was acquired. In the residential sector, Lar España has already begun construction work on the most exclusive residential development in central Madrid: Lagasca 99.

We are convinced that the combination of rental assets and works in progress will be a key factor as regards value creation and risk diversification for our shareholders.

At the beginning of 2015 Lar España demonstrated its capacity for innovation in the area of non-banking finance for SOCIMIs, becoming the first SOCIMI to issue a corporate bond, and we can now announce that it has optimised its financing structure still further, achieving a more balanced diversification of its sources of financing and some highly attractive conditions in terms of cost, risk, repayment terms and interest rate hedging. In short, its current financing structure will allow Lar España to develop its investment and business plans without any concerns, offering the most advantageous combination of return and risk for its investors.

As regards financial and operational information, we have achieved a high degree of transparency and consistency: the prestigious EPRA/ NAREIT Global Index has included Lar España alongside all of the world’s most important listed real estate vehicles. The Company was also presented with the European Public Real Estate Association (EPRA) “Gold Award 2015”, in recognition of the quality of the financial information provided. It thus became the first and only SOCIMI to be honoured with this coveted real estate industry award. During this last financial year we have made a significant effort to strengthen our Investor Relations department, which plays a key role in positioning Lar España’s value proposal among both investors and analysts.

A year on, thanks to this effort, our shares are much more liquid than they were a year ago, making them more attractive both for current shareholders and for the markets in general.

We are aware that in a context such as we find ourselves at present, ensuring good governance through transparency, ethics, corporate social responsibility and regulatory compliance is essential if we want to create a sustainable business model that will generate value, not only for our shareholders but also for all our stakeholders as a whole.

Our second year of operations has once again been extremely busy from both an investment and asset management point of view. All of us at Lar España wish to thank our investors for putting their faith in our company and we would like to express the enthusiasm and confidence that we feel for the success of this great project that has been further consolidated over the course of the year.

Mr. José Luis del Valle Doblado

Chairman
April, 2016