2018 was an excellent, game-changing year for Lar España. We achieved significant growth in our financial and operating results and, once again, obtained strong value uplift for the assets in our portfolio.

We were also able to considerably raise the dividend payment for our shareholders. In 2018, the company implemented the strategic decision to focus on our retail properties. By executing this specialist strategy, our retail properties accounted for 90% of our total portfolio at YE 2018. We also went a long way to achieving the goals set out in our business plan – as presented towards the end of 2017 – which boosts our credibility and the confidence of our investors.

This year marks five years since we listed on the stock exchange. We were the first SOCIMI to do so and, in partnership with our shareholders, we created a truly unique and innovative project, with great upside potential. Five years later, we own the largest shopping centre portfolio by GLA and we are the leading retail park owner in Spain.

We have reached the top thanks to our market know-how, consolidating a portfolio of properties that have a competitive edge in their respective catchment areas. Our professional, active and innovative approach to managing our shopping centres has helped us to outperform the Spanish market for twelve straight quarters, both in terms of footfall and sales.

During 2018 we sold mature non-strategic assets, achieving an average value uplift of 55% on the acquisition price.

Lagoh, our new development in Seville, will open to the public in September 2019. This project is unique, both in terms of size and concept, and is set to become the leading leisure and entertainment complex in Andalusia. Over 90% of its GLA has already been pre-let to renowned retailers

Lagasca99, our residential development, is a leading light in Madrid’s luxury sector. 95% of apartments have already been sold, with many homes already delivered to tenants.

These developments are a clear example of our ability to generate value for our shareholders.

We are adapting our shopping centres to the new market reality, investing in technology and digitalisation, in order to create extra value for our shareholders. Throughout 2018, we carried out major refurbishment works at some of our shopping centres, allocating more space to the leisure and food & beverage areas, and placing a clear focus on the customer experience

With our TES project (Technology, Engagement & Sustainability), we are leading the transformation of the retail sector in Spain. The world of retail is at a crossroads, but there are a lot of opportunities ahead.

Our business performed very well in 2018. We registered gross rental income of €78 million. Our EBITDA grew 42% and net profits climbed 7% to over €155 million, before incentive payments to our management company, Grupo Lar.

According to the latest valuation, at 31 December 2018, the value of our portfolio stood at €1,536 million. In like-for-like terms, the value of our properties grew 12.1%, equating to a 40% increase on their acquisition price. During a year in which yields hardly tightened, we would highlight that 100% of this value uplift was thanks to the active management carried out by our management company, Grupo Lar.

In 2018, we closed financing agreements in excess of €200 million. Our LTV stands at 28% and we boast a robust financing structure.

Our excellent results in 2018 were down to sound management, and clearly reflect our strategy. What is more, they have allowed us to propose a remuneration figure of €75 million – or €0.80 per share – to our shareholders, including a special dividend of €25 million relating to the sale of apartments at Lagasca99. This dividend equates to a significant 67% increase y-o-y. During 2018 and at the start of 2019, we completed our first share buyback programme, which aims to increase shareholder returns. In March 2019 we launched a second share buyback programme for up to 5% of the company’s share capital, thereby cancelling the shares acquired to date.

In September 2018, for the fourth year running, Lar España received the EPRA Gold Award in recognition of the quality of the financial information it provided to its main stakeholders. In recognition of its information published on Corporate Social Responsibility and Sustainability, Lar España was awarded the highest distinction by EPRA, winning the Gold Award for the first time.

We would highlight that in 2018, every single one of our shopping centres became BREEAM® certified. BREEAM® is the global leader in assessing and certifying sustainable construction processes, using the most advanced technical assessment methods.

In 2018, Lar España also created over 19,000 direct jobs, reduced its real estate portfolio’s CO2 emissions round to 3% and invested over €442,000 in social initiatives.

Lar España’s most valuable asset is our team and their efforts have been crucial to our success. Our management company Grupo Lar also boasts a highly valuable team, who bring an invaluable mix of commitment, talent and experience to the table.

We are extremely optimistic about the opportunities the future can bring, and we are firmly committed to successfully overcoming current and future retail challenges.

Mr. José Luis del Valle Doblado

Chairman
April, 2019