Lar Espana Real Estate SOCIMI SA

MAD:LRE

Earnings Call Transcript 2021-Q4

[San Pedro Hernán Lopez de Uribe]

Good

afternoon, everyone,

and

thank

you

for

joining

us

today.

This

is

Hernán

San

Pedro.

Welcome

to

our

full

year

2021

results

presentation.

As

always,

the

presentation

and

the

press

release

has

been

sent

to

our

distribution

list

and

all

the

financial

information

is

available,

too, in

our

website

and

at

the

CNMV

official

website.

Presenting

for

us

today

are

José

Luis

del

Valle,

Chairman

of

Lar

España

Board

of

Directors;

Miguel

Pereda,

Chairman

of

Grupo

Lar;

José

Manuel

Llovet,

Chief

Executive

Officer

of

Commercial

Real

Estate

of

Grupo

Lar;

and

Jon

Armentia,

Corporate

Director

and

CFO

of

Lar

España.

After

the

presentation,

we

will

answer

any

questions

you

may

have.

And

now,

let

me

hand

the

call

over

to

José

Luis

del

Valle.

[José Luis del Valle Doblado]

Thank

you,

Hernán.

Good

afternoon

and

welcome

everybody.

2021

has

been

a

busy

year

for

all of

us.

Earlier

in the

year,

we

executed

the

sale

of

our

portfolio

of

22

supermarkets

as

part

of

our

asset

rotation

strategy.

In

June,

we

signed

an

extension

of

our

investment

management

agreement

with

Grupo

Lar

in

revised

and

more

attractive

terms.

Later

in

the year,

we

closed

our

third

share

buyback

program

and

5%

of

our

share

capital

was

later

amortized.

A

key

highlight

of

the

year

was

the

issuance

of

two

green

bonds, achieving

both

maturity

extensions

and

improvement

in

our

cost. €400

million

were

issued

in

June

and

July

and

€300

million

were

issued

in

October.

With

all

this,

we

have

been

able

to

maintain

strong

balance

sheet

and

to

keep

a

sound

cash

position

while

at

the

same

time,

getting

our

operating

results

back

to

pre-pandemic

levels

and

continuing

to

improve

our

portfolio.

Let

me

now

turn

over

the

call

to

our

Vice

Chairman

and

Chairman

of

Grupo

Lar,

Miguel

Pereda

for

more

details.

[Miguel Pereda Espeso]

Thank

you,

José

Luis,

and

good

afternoon,

everybody.

And

thanks

for

joining

us

in

our

full-year

2021

results.

As

José Luis

has

rightly

said,

2021

has

been

the

year

of

recovery

for

Lar

España.

In

2020,

GDP

fell

globally

by

around

4%

and

in

Spain

by

more

than

10%.

In

the

face

of

that

slowdown

in

the

economy,

as

can

be

seen

in

the

IMF

data,

2021

has

returned

to

positive

figures

and

stabilized

in

the

forecast

for

the

following years.

The

phenomenon

is

true

for

all

developed

economies.

This

is

sort

of

the

case

for

Spain

where

the

latest

IMF

data

indicate

growth

forecast

of

5.8%

for

2022

and

3.8%

for 2023.

It

is

important

to note

that

this

growth

comes

with

high

levels

of

inflation,

which

are

lasting

a

little

bit

longer than

initially

was

expected.

Also,

with

the

situation that we

are

facing

with

the

Ukrainian

conflict,

it's

difficult to predict

completely what

the

final impact

might

be

depending

on

the

final

outcome.

We

focus

on

real

estate

sector

and

that's

slide

8.

Experts

also

agree

of

the

recovery

phase

that

is

being

experienced.

Talking

specifically

about

retail,

the

forecast

for

retail

sales

growth

are

strong

for

both

the

Eurozone

and

Spain

and

the

same

for

the

growth

of

rents

in

shopping

centers

directly

linked

to

them

with

a

forecast

between

[ph]



2021

– 2025 (00:04:34)

of

2.2%

for

Spain.

If

we

go

to

next

slide

9,

we

can

see

some

very

interesting

data.

Much

has

been

said

over

the

years

about

the

declining

trend

of

malls

in

the

United

States.

Many

also

predicted

that

the

same

will

happen

in

Spain.

But

as

can

be

seen

in

the

charts,

the

realities

of

the

two

countries

are

very

different. The

shopping

center

sector

in

the

US

was

already

in

its

maturity

phase

but

in

Spain

we

are

far

from

that

point.

With

0.34

square

meters

per

inhabitant

versus

the

2.35

in

the

US,

that

represent

close

to

7

times.

In

addition, shopping

centers

in

Spain

are

much

more

modern

and

much

more

weighted

with

leisure

and

restaurant

activities

which

cannot

be

done

digitally.

On top

of

that,

the

penetration

of

e-commerce

in

Spain

despite

the

pandemic

still

far

from

the

rates

in

the

US

or

other

European

countries.

As

we

said

before,

the

situation

is

not

comparable

and

the realities

are

clearly

very

different.

I

would

like

also

to

elaborate

on

what

José

Luis

commented

earlier.

2021

has

been

the

year

of

recovery,

thanks

to

the

decisions

taken

and

well-managed

by

our

company.

As

a

result,

we

can

see

not

only

the

occupancy

nationally

suffered,

but

that

we

are

already

seeing

clear

signs

of

improvement.

Our

asset

valuations

are

solid

and

have

already

returned

to

positive

figures.

Our

financial

position

is

excellent,

both

in

terms

of

cash

and

debt.

Our

tenant

relationships

maintain

very

strong

and

is one

of

the

pillars

of

our

strategy

and

[indiscernible]



(00:06:41). And

finally,

I

would

also

like

to

highlight

the

high

levels

of

collections.

[indiscernible]

(00:06:48)

very

proud

of

the

results

have

been

an

excellent

demonstration

of

the

resilience

of

the

people.

In

addition, it's

very

important

to

say

that

having

a

full

refurbished

portfolio,

totally

adapted

to

the

industry

trends

and

also

the

use

of

a

broad

set

of

innovation

tools

allowed

us

during

this

period

to

be

very

selective

in

the

CapEx

investments.

Also,

at

the

corporate

level,

we

focus

our

portfolio

in

shopping

centers

and

retail

parks,

divestment

of

the

supermarkets,

renew

the

[ph]



EMA

(00:07:28) and

improved

the

conditions.

At

a

financial

level,

we

achieved

an

excellent

profile,

both

in

terms

of

cost

and

maturity.

All

these

decisions,

together

with

the

quality of

our

portfolio,

have

allowed

us

to

be

in

a

privileged

situation

in

the

market.

As

we

can

see

in

slide

number

11,

Lar

España

stands

out

from

many

European

competitors

in

most

of

the

key

indicators

for

the

sector.

And

now

it

is

José

Manuel

Llovet,

could

we

turn

and

go

into

more

detail

in

more

operational

milestones

of

the

period?

[José Manuel Llovet]

Thank

you,

Miguel.

Hello,

everyone. My

focus

today on

post

pandemic

performance

and

the

fundamentals

of

Lar

España

portfolio

[indiscernible]



(00:08:14)

European

leading

company

in

the

retail

sector

in

the

coming

years.

As

you

can

see

on

slide

13, today,

thanks

to

the

vaccination

strategy

and

the

gradual

elimination

of

restrictions

in

all

regions,

we

have

100%

of

our

portfolio

open

and

operating.

In

the

following

pages

we will

see

why

Lar

España

has

reacted

stronger

– strongly

and

quicker

and

better

than

others.

Two

main

reasons:

first,

quality

of

the

assets;

and

second,

the

professional

management

that

implemented

the

right

strategy

for

extraordinarily

complex

moment.

In

page

14,

we

can

see

at

a

glance

the

mentioned

quality

of

our

portfolio.

Fully

refurbished

centers,

all

with

[ph]



brilliant (00:09:03),

excellent,

or

very

good

certificate,

technically

full

occupancy,

and

leaders

in

their

area

of

influence.

We acquired

excellent

assets

at

good

prices

that

repositioned,

refurbished,

and

brought

the

best

tenants.

The

quality

of

the

assets

and

the

management

strategy

are

the

results

of

success

and

differentiation

within

the

industry.

I

like very

much

this

slide.

It

is

very

simple

and

everything

is

concentrated

here.

All

these

green

points

are

the

key

of

the

company,

good

performance

and

our

resiliency

in

times

of

pandemic.

It

is

a

unique

portfolio, not

comparable

with

many

others

in

Spain.

Strong,

dominant

centers

are

one

of

the

main

portfolios

of

retail

parks

within

the

continent.

In

page 15,

you

can

see

this

is

a

proof

of

what

I've

been

saying.

The

resiliency

of

our

portfolio,

the

ability

to

recover

both

in

sales

and

visits

once

the

restrictions

have

disappear,

have

been

truly

remarkable.

All

the

sector

of

shopping

centers

and

especially

retail

parks

in

Spain

have

recovered

once

restrictions

were

over.

And

Lar España,

same

as

ever

since

2014,

has

beat

the

market

again.

In

page

16,

let

me,

for

a

second,

recall

what

we

planned

in

March

2020,

and

what

were

our

targets.

First,

[indiscernible]



(00:10:48)

occupancy;

second,

maintain

rents;

third

defend

our

value;

and

fourth,

do

not

judicialized

our

relationship

with

our

tenants.

To achieve

these

targets,

we

met

personally

with

each

of

the

tenants

and

reached

agreements

with

100%

of

the GLA,

more

than

[ph]



1,200

agenda

(00:11:13),

a

huge

effort

of

communication

and

negotiation

never

seen

before.

As

of

December,

94%

of

the

rents

have

been

collected.

More

than

70%

of

the

contracts

expired

beyond

2024.

Eventually,

the

excellent

relationship

with

our

tenants

is

a

must

to

get

high

results.

As

you

can

see

in

this slide,

they

grew

very

significantly

compared

to

2020

and

are

very

close

to

2019

numbers.

Next

page, number

17, we

see

the

leasing

activity.

The

leasing

activity

has

also

improved.

We

have

rotates

27,000

square

meters

within

the

year,

signing

94

deals.

€5.7

million

in

grants

were

negotiated

with

an

increase

of

3.9%.

Effort

ratio

is

fully

controlled,

standing

at

8.4%

below

the

Spanish

and

the

European

averages.

And

all

these,

while

maintaining

high

occupancy

levels

in

the

pandemic

that

during

the

last

quarter

of

2021

even

rise.

In

the

following

page,

number

18,

you

can

see

some

excellent

examples

of

operations

signed

this

year,

which

we

feel

especially

proud.

Names

like

AliExpress,

IKEA, Leroy

Merlin

or

Primaprix,

which

are

– all

of

them

are

leaders

of

their

sectors.

And

just

to

complete

my

part,

in

page

19,

I

could

not

end

my

speech

without

talking

about

one

of

Lar

España

main

growth

drivers,

which

is

innovation

for

increasing

margin.

We

are

now fully

aware

of

the

new

trends

in

the

retail

sectors.

And

we

have

adapted

our

assets

to

offer

solutions

to

our

tenants

that

facilitated

transition

to

the

omni-channel

world.

One

of

the

main

[indiscernible]



(00:13:38)

this

year

is

click

& shop,

which

will

allow consumers

to

shop

online

in

the

stores

of

our

centers. Other

is

pay-per-use

of

the

common

area

for

kiosks

and

promotions

using

online

reservation

and

digital

content.

Our

catalog

of

digital

services

is

very

wide,

and

you

know

that

we

have

been

pioneers

in

these

initiatives,

CRM

of

data

client,

[ph]



feed(00:14:08)

by

loyalty

clubs,

marketing

actions,

digital

services,

online

marketplace,

delivery

services

[indiscernible]



(00:14:15)

et cetera

of

digital

tools.

All of

them

provide

us

with

a

very

important

information

with

the

client,

improve

our

communication

with

them,

and

all

this

for

generating

new

revenues.

And

now,

let

me

turn

– give

the

word

to

Jon

Armentia.

[Jon Armentia Mendaza]

Thank

you, José

Manuel;

and

good

afternoon,

everyone.

Let's

start

by

looking

at

slide

21.

And

I

would

run

you

through

the

highlights

of

the

2021

year.

We

have

had good

results

in

terms

of

both

gross rental

income,

€79.1

million;

and

net

operating

income,

€69.9

million.

Also

noteworthy

is

the

improvement

in

net

profit,

€25.8

million,

which

is

impacting

the

[indiscernible]



(00:15:04)

figures

of

2020 marked

by

the

pandemic.

Gross

asset value

increased

to

€1.4

billion,

with

a

positive

valuation

of

0.9%

compared

to

the previous

valuation

in

June

2021.

EPRA

NTA

per

share

reaches

€10.41.

When

analyzing

the

evolution

of

this

figure,

it's

important

to

take

into

account

the

dividend payout

in

Q2

2021,

€0.31

per

share.

As

José Manuel

commented

earlier,

the

collection

figures

are also

doing

very

well,

reaching

to

levels

around

to

95%.

Our

assets are

performing

better

than

the

Spanish

and

European

markets.

And

at

the

end

of

December,

we

present

an

EPRA

topped-up

yield

of

5.9%

and

an

occupancy

rate

of

96.1%.

WAULT

stands

at

2.7

years,

with

70%

of

their

retail

releases

with

expiration

dates

beyond

2024.

On

the

corporate

side,

we're

going

to

propose

to

the

next

annual

general

meeting,

based

on

2021

results,

the

payment

of

€30 million

in

dividends

or

€0.36

per

share,

[ph]



all

in

terms of (00:16:30) dividend.

This

means

a

7%

dividend

yield

over

market

cap.

Our

refinancing

process

has

been successfully

completed,

thanks

to

the

issuance

of

two

green

bonds

for

a

total amount

of

€700 million,

both

with

an

oversubscription

of

more

than

4

times

the

offer. Thanks to this

refinancing

process,

we

have

significantly

improved

the

average

cost

of

debt

and

the

average

debt

maturity

of

the

company.

Our

cash position

as

of

December

2021

stands

at

€313

million.

And

our

leverage

gross

2021

at

a

level

of

40.7%

with

an

average

cost

of

debt

of

1.9%.

This

figure

decreased

to

1.8%

after

the

repayment

of

the

2015 bond

in

February

2022. In September

2021

and

for

the

seventh consecutive

year,

Lar

España

has

been

awarded

the

EPRA

Gold Award

for

the

quality

of

financial

information

made

available

to

its stakeholders.

Regarding the

information

published

about

ESG,

Lar

España

has

also

obtained

the

highest

distinction

by

EPRA,

achieving

for

the

fourth

consecutive

year

the

Gold

Award.

This

highlights

the

international

recognition

for

information

reported

by

Lar

España

are

made

available

to

its

shareholders.

In relation

to ESG, on

slide

23,

you

will know

how

important

it

is

in

Lar

España.

However,

you

can

find

more

details

of

our

policies

and

achievements

in

our

2021

result

report.

I

would

like

to

mention

some

of

them

here.

Firstly,

I

would like

to

highlight

that

we

have

received

a

BBB

ESG

rating

from

MSCI. We

have

also

registered

our

2020 activity

for

carbon

footprint.

And

once

we

registered

our

2021

activities,

we

expect

to

obtain the

Reduzco seal from

the

Spanish

government.

In

relation

to

BREEAM

certification,

we

have

also

made

great

progress.

In

2021,

we

renewed

eight

certifications

with

a

higher

rating

than

they previously

obtained

in

most

of

them.

Besides,

we

have obtained

a

new

certificate

in

Parque

Abadía

with

very

good

rating.

We

now

have

12

certified

assets,

most

of

them

with

an

excellent

or

very

good

rating.

Our

commitment to

governance

remains

very

strong,

and

we

are

constantly

updating

our

policies

to

adopt

them

to

new

recommendations.

Thanks

to

this,

this

year,

the

company

continues

in

compliance

with

100%

recommendations

of

the

CNMV Good

Governance

Code.

Finally,

I

would

like to

highlight

that

for

the

fourth

consecutive

year,

we

have

participated

in

the

GRESB

Assessment,

achieving

a

score

of

86, which

means a 25%

improvement

compared

to

2020.

In the

slide

24,

we

can

see

that

over

the

last

six

months

of

2021, Lar

España

has

achieved significant

improvements

in

all

its

EPRA

figures.

As

at

December

2021,

EPRA

NTA

reached

to

€870

million

and

EPRA

NTA

per

share

rose

to

€10.41,

undoubtedly

a significant

increase

in

both

figures

during

the

period.

EPRA

earnings

amounts to

€23.9

million

and

EPRA

earnings

per

share

rises

to

€0.28

per

share.

In

terms of

yields, EPRA

net

initial

yield

and

EPRA

topped-up

net

initial

yield

rose

to

5.7%

and

5.9%,

respectively.

As

we

can see

in slide

25,

Lar

España's

debt

profile

after

achieving

bond

issuances

for

a

total

amount

of

€700 million

is

remarkable.

As

of

December

2021,

the

net

financial

debt

amounted

to

€579

million,

with

a

net

loan-to-value

at

40.7%. As

of

today

and

after

the

repayment

of

the

2015 bond

in

February 2022,

and the

average

maturity

and

the

average

cost

of

debt

are

6

years

and

1.8%,

respectively,

with

100%

of

the

debt

at

a

fixed

rate,

unencumbered

and

green.

Now,

let's

turn

to

slide

26

to

go

over

the

P&L.

Our

assets

generated

revenues

of

€76.3

million,

a

lower

amount

than

the

figure

obtained

in

2020, as

we

expected.

The

main

reasons

of

this decrease

are

the

lease

incentives

impact

derived

mainly

from

COVID-19

of

€14.6

million

and

the

temporary

impact

due

to

the

supermarkets

divestment in

February 2021

amounting

to

€3.3

million.

Lar

España presented

a positive

operating

result

amounting

to

€49.4

million.

Now,

focusing

on

the

profit

for

the

year,

it

was

up,

reaching

€25.8

million,

which

is

back in the

right

after

the

negative

figures

of

2020

marked

by

the

pandemic.

In

slide

27,

I

would

like

to

focus

on

explaining

the

[ph]



main

reasons (00:22:21)

that

exist

in

the

revenues

and

the

differences

between

P&L

and

cash

flow.

Considering

the

cash impact

of

the

incentives

on

revenues

instead

of

accounting

impact,

cash

revenues

post

incentives

in

2021

amounted

to

€85.2

million

which

represents

a

21%

annual

increase

versus

2020

and

a 27%

increase

on

a

like-for-like

basis.

Let's

now look

at the

portfolio valuation

in

slide

28.

Lar

España gross

value

rose

to

€1.4

billion.

The

total

portfolio

have

risen

48.8%

versus

acquisition

on

price,

7.5%

since

December

2020,

and

0.9%

since

June

2021

recovering

from

the

pandemic.

It's

important to

point

out

that Lar

España

has

a

resilient

portfolio

of

dominant

shopping

centers

and

retail

parks in attractive catchment

areas

with

assets

1% (sic) [100%] (00:23:26)

owned,

delivering

flexibility,

control

and

full

decision

capacity.

Our

solvent

and

diversified tenant

base

with

a

WAULT

of

2.7

years

and

close

medium years

and

close medium

and long-term

relationships

and

an

active

management

in

tracking

the

latest

trends

in

technology,

omni-channel

strategy

and

customer

knowledge

experience.

On

page 29,

we

can

see

how

the

valuation

of

our

portfolio

has

evolved

during

the

pandemic

and

the

rapid

recovery

of

asset

values.

The

reason

for

this

resilience,

the

high

quality

of

our

shopping

centers and

retail parks, which

are

leaders

in

their

area

of

influence,

modern,

sustainable

and

also

adapted

to the

new

trends.

Reflecting Lar España's

financial

strength,

the

board

is

going

to

propose

to

the

next

Annual

General

Meeting

based

on

2021

results,

the

approval

of

a

dividend

of

€0.36

per

share,

amounting

in

total to €30

million,

a

7%

dividend

yield

over

market

cap. This

dividend

positions us

among

the

leading Spanish-listed

companies

in

terms

of

[ph]



drive

to further

remuneration (00:24:44).

As

you

can

see

on

slide 31,

we're

committed

to

profitability,

always

maintaining

a

prudent

cash

position

with

detailed

liquidity

analysis.

We're

one

of

the

most

profitable

options

in

the

Spanish

stock

market,

both

in

terms

of

dividends

and

share

capital reduction.

And

now,

let

hand

the

presentation

over

to

José

Luis

for

the

closing

remarks.

[José Luis del Valle Doblado]

Thank

you,

Jon.

As

a

result

of

what

has

been

presented

to

you

today,

we

can

conclude

that

our

strong

and

resilient

leadership

in

Spanish

retail

is

what

makes

Lar

España

an

extremely

attractive

company.

The

retail

sector

presents an

opportunity

to

enter

now

at

attractive

values,

with

yields

of

6%

for

prime

shopping

centers.

Our

strong

value

creation

over

the

years

is

not

reflected

in

the

share

price,

particularly

when

the

refurbishment

plan

was

almost

completed

before

the

pandemic.

We

are

now

trading

at

about

a

50%

discount

versus

NTA.

We

have

the

highest

percentage

of

positive

sell-side

recommendations

among

European

peers,

90%

of

them.

And

according

to

them,

we

present

a

potential

revaluation

of

close

to

40%.

We

have an

attractive

dividend

policy,

and

it

has

been

discussed.

Our

proposal

to

the

shareholders'

meeting

represents

a

7%

dividend

yield

over

end-of-year

market

cap.

We

have

achieved

strong

operating

results.

We

have

a

well-balanced

mix

of

tenants

and

solid

relationships

with

the

Tier

1

retailers.

Our

GRI,

on

a

cash

basis,

has

increased

by

over

25%

on

a

like-for-like

basis

versus

2020.

And

70%

of

our

contracts

are

maturing

in

2024

and

beyond.

All

these,

with

the

best-in-class

management

of

assets,

reinforced

by

a

revised

IMA, in

line

with

the

best

practices

and

costs

in

the

sector.

In

summary,

we

have

significant

upside

potential.

As

we

are

leaders

in

a

clearly

recovering

market,

we

have

shown

that

we

are

resilient

through

cycles,

we

have

sound

balance

sheet,

moderate

debt

and

strong

cash

position.

We

are

also

innovative

with

focus

on

omni-channel.

We

are

top

in

class

in

ESG practices

and

truly

committed

to

value

creation

and

shareholder

profitability.

In

summary,

good

portfolio,

good

management,

and

as

a

result,

good

profitability.

Thank

you,

all,

for

attending

your

call.

And

now,

back

to

Hernán.

[San Pedro Hernán Lopez de Uribe]

Thank

you

very

much, José

Luis.

Can

we

remember all

the

people

attending

the

call

the

way

they

have

to

make

questions?

[Operator]

Ladies

and

gentlemen,

we

will

now

start

the

Q&A

session.

[Operator Instructions]



I

now

hand

over

the

call

to

Hernán

San

Pedro.

[San Pedro Hernán Lopez de Uribe]

The

first

question

is

from

buy-side

people

for

Jon

Armentia,

our

CFO

and

Corporate

Director.

Can

you

explain a

little

bit

more

the

level

of net

profit

obtained

during

the

previous

year?

[Jon Armentia Mendaza]

Thank

you, Hernán,

for

the

question.

We

can

see

[indiscernible]



(00:29:15),

we

have

been

able

to

recover

the

net

profit

in

the

company

after 2020

that

we

had.

The

main

difference

when

we

compare

with

2020 has

been

the

performance

of

the

valuation

of

our

portfolio.

While

2020,

we

had

a

decrease

of

4.9%

during

that

year;

in

2021,

we

have

had

a

positive

impact,

increasing

in

0.5%

in

the

market

value

of

our

portfolio.

So,

I

think

that

these

–

the

trends,

the

one

that

explains

things better

the

comparison

of

2021

with

2020.

[San Pedro Hernán Lopez de Uribe]

Thank

you very

much,

Jon.

The

second

question

is

for

you,

too.

A

member

of

sell-side

would

like

to

know,

what

are

the

main

reasons

for

the

results

in

terms

of

valuations?

[Jon Armentia Mendaza]

Well,

in

this

case,

the

increase

that

we

have

had,

the

one

that

I

have said,

0.5%

in

comparison

with

December

2020 and

0.9%

in

comparison

within

2021,

comes

only

because

of

the

increase

of

the

net

operating

income

of

our

assets,

of

our

retail parks

and

shopping

centers.

We

have

not

had

any

kind

of

deal

comparison

during

this

year

in

our

valuations.

So,

100%

coming

from

the

increase

of

the

net

operating

income

of

the

cash

flow

of

our

assets.

[San Pedro Hernán Lopez de Uribe]

Another

question for

you,

Jon,

from

the

same

person,

Look

–

looking

at

page

27.

Do

you

consider

P&L

revenue

and

cash

flow

figures

for

2022

are

going

to

be

the

same,

better,

worst?

[Jon Armentia Mendaza]

Okay.

Thank

you

for

the question.

Well,

what

we

expect

is

that

the

amount

– as

you

know,

when

we

compare

cash

flow

and

P&L,

we

have to

take

into account

that

the

cash

flow

effect

comes

just

in

the

year

that

we give that

lease

– those

lease

incentives to

our

tenants.

But

how

we'll

register

this

in

our

accounting

and

following

IFRS

standard

is

that

impact,

we

divide it

during

the

term

of

the

lease

agreement.

[indiscernible]



(00:31:54)

we

have

presented

these,

the

differences. And

when

we

analyze

the

performance

of 2021,

it's

very

important

to

take

into

account

that

in

terms

of

cash

flow

we

have

improved

significantly

the

picture

versus 2020.

For

2022,

we

don't

expect

to

have

additional

COVID-19

lease

incentives

in

our

portfolio.

But

what

is

true

is

that

as

at

December

2021,

we

have

in

our

balance

sheet

[ph]



€17 million that are

(00:32:30) – will be an impact,

will

be

an

amount

that

will

have

P&L

effect

in

the

coming

year for our

[indiscernible]



(00:32:42)

that

impact

won't

have

any

kind

of

cash

flow

effect

in

our

company.

[San Pedro Hernán Lopez de Uribe]

Okay.

Thank

you

very

much,

Jon.

The

next

one

is

for

our

Chairman, José

Luis

del

Valle.

Please,

can

you

explain

us

a

little

bit

your

vision

about

[indiscernible]



(00:33:07)

shareholders

base after Castellana

Properties

bought

21%

of

[ph]

real

estate (00:33:10)?

[José Luis del Valle Doblado]

Thank

you,

Hernán.

The

entry

of

a

new

shareholder

such

as

Castellana

Properties

could

be

a

sign

of

our

current

undervaluation

in

the

public market,

as

well

as

it

shows

the

support

and

confidence

of

a

relevant

international

investor

in

our

strategy.

What

we

can

tell

all

our

shareholders

is

that

we

will

continue

to

work

in

their

best

interests

to

deliver

our

business

plan

and

the

strategy

that

we

have

communicated

to

the

market

that

we

expect

will

yield

substantial

value

over

time

for

all

our

shareholders.

[San Pedro Hernán Lopez de Uribe]

Thank

you

very

much, José

Luis.

The

next

one

is

for

the

Chairman

and

Vice

President

of

Lar

España,

Chairman

of

Grupo

Lar,

about

can

you

please

comment,

Miguel,

on

the

sale

process

of

the

two

assets

that

you

had,

in

the

past,

held

for

sale?

[Miguel Pereda Espeso]

Well,

I

mean,

it's

part

of

the

strategy

of

the

company,

having

an

active

rotation

strategy

for

assets

that

we

consider

are

more

mature,

but

also

it's

looking

for

the

best

moment

to

proceed

with

this.

So,

as

you

might

seen

in

the

past

two

years,

liquidity

in

the

market

has

been

low

because

of

the

situation

with

COVID.

But

we

will

– I

mean,

we

are

not

in

a

pressure.

Our

financial

situation

is

super

strong.

So,

we

will

look

for

the best

moment

to

implement

investments

and

divestments.

[San Pedro Hernán Lopez de Uribe]

Thank

you

very

much,

Miguel.

The

next

one

is

for

José

Manuel

Llovet.

[José Luis del Valle Doblado]

We

don't

hear

you,

Hernán.

[San Pedro Hernán Lopez de Uribe]

Yeah.

[José Luis del Valle Doblado]

We

don't

hear

you.

[San Pedro Hernán Lopez de Uribe]

Okay.

One moment

because

I

have

lost

the

program

where

I

can

see

all

the

questions.

Only

one

moment.

[José Luis del Valle Doblado]

Okay.

[San Pedro Hernán Lopez de Uribe]

Okay.

The

next

one

is

for José

Manuel

Llovet,

can

you

elaborate

a

little more

your

expectations

about

footfall

and

sales

in

January

and

February?

Can

you

give

us

a

vision

about

what

can

happen

during

2022?

[José Manuel Llovet]

Well, yes,

we

have

already

done

our

business

plan

for

all

the

assets.

We

have

the

strategy

[ph]



for all of them (00:36:17) and we

have

done

the

analysis

on

all

the

clients

surveys

we

used

to

do

yearly

basis.

Of

course,

what

we

see

is

the

recovery

path

is

there.

We

have

seen

in

general, as

I

said

before,

that

as soon

as shopping

centers

were

open,

the

people

came

back,

customer

came

back.

So, we

are

very

confident

on

these

in

the

centers

and

more

in

lifestyle

assets.

So,

we

have

beaten

the

market

again.

We

are

growing.

We

are

in

very

close

numbers

to

2019

and

we

have

to

take

into

account

that

there

are

still

some

activities

that

are

a

little

bit

below,

like

cinemas

or

laser

in

which

we

are

having

–

a

return

has

been

a

little

bit

less

fast

than

in

others.

In

general,

what

we

think

about

2022,

of

course,

last

news

of

the

last

days,

the

unfortunate

news

that

we

are

having

from

Russia

and

Ukraine

is

a

new

question

mark,

and

what's

going

with

the impact.

But

if

we

move

this

apart,

our

perspective

is

quite

positive

in

2022.

We

see

in

Spain

employment

increasing

the

level

of

savings

of

the

people

is

bigger

than

ever.

Consumer

confidence

is

growing.

We

are

now

similar

the

percentage

that

we

had

in

2019,

in

the

second

half of

2019.

We

are

seeing

also

how

the

minimum

salary

is

growing,

so

this

is

going

to

provide

more

purchasing

power

to

the

people.

It

is

true

that

on

the

other

side,

there

is

an

impact

of

the

CPI

growth.

We

have

to

take

this

into

account.

This

is

an

impact

in

first

round

and

also

in

the

second

round

and

what

we

are

seeing

is

that

the

forecast

of

CPI

in

Spanish

is

growing

very

much.

It

is

about

7%.

So

this

is

going

to

be

an

opposite

driver

and

whilst

the

other

getting

through

the

purchasing

power

this

CPI, it is

decreasing

the

same.

In

terms

of

general

activity

in

the

operational

point

of

view,

we

think

that

there

are

not

going

to

be

a

strong

impact

on

tenants

once

the

help

that

we

are

providing

are

over

because

the

[indiscernible]



(00:38:55)

that

the

old

tenants

have

in

our

centers

is

quite

controlled,

as

I

said

before,

below

the

average

in

Spain.

So,

we

do

not

perceive

problems

of

Chapter

11

bankruptcy

in

the

tenants

that

we

have.

And

just

a

quick

view

on

the

investment

market,

we

see

how

in

Europe

it

is

coming

back.

We

are

seeing

transactions

in

many

different

places

around

Europe,

first

focalizing

supermarkets

then

it

was

– and

it has

been retail

parks,

and

now

we

understand

and

we

anticipate

that

we

are

going

to

see

transactions

of

shopping

centers

in

the

coming

months.

So,

the

general

perspective

is

positive.

Of

course,

taking

into

account

what

I

said

before,

the

moment

is

again

complicated

and

we

have

to

see

how

this

problem

evolve

in

the

coming

weeks.

[San Pedro Hernán Lopez de Uribe]

Thank

you

very

much,

José

Manuel.

One

question

more

from

buy

side

people. Given

the

high

discount

in

the

price

NAV,

can

we

expect

another

buyback

program?

I

think

that

José Luis

could

answer

the

question.

[José Luis del Valle Doblado]

Thank

you,

Hernán,

and

thank

you

for

the

question.

At

the

present

time,

we

are

not

contemplating

any

additional

share

buyback

programs,

but

we

will

always

review

the

situation

in

light

of

the

value

creation

and

the

opportunities

that

we

might

have

in

the

market.

[San Pedro Hernán Lopez de Uribe]

Okay.

Thank

you very

much,

José

Luis.

There

are

no

more

questions.

And

please

remember

the

way

they

have

all

the

people

connected

in

order

to

make

questions.

[Operator Instructions]

[San Pedro Hernán Lopez de Uribe]

Okay,

no

more

question.

In

the

name

of

Lar

España

and

our

manager,

Grupo

Lar

[indiscernible]



(00:41:13)

for

attending

the

call.

Please

remember

that

all

the

teams

are

here

to

complete

–

your

complete

disposal.

Please

feel

free

to

contact with

us

for

any

additional

information

you

could

have.

Thank

you very

much

and

good

afternoon.