Interview with the President and CEO

J.J Brugera Clavero
J.J Brugera Clavero
President of Colonial
Pere Viñolas
Pere Viñolas
CEO of Colonial

Colonial closed the year 2016 with very good results in all areas, yet again. What are the main aspects to highlight?

J.J. Brugera

The year 2016 was excellent for the Colonial Group and all of its shareholders.

Our rental revenues increased 17% (+7% like-for-like) to reach €271 million and we obtained occupancy levels of 97% in each of the markets in which we operate: Barcelona, Madrid and Paris

If we compare these figures with the industry average and that of our main competitors, the Colonial Group is positioned as the indisputable leader in the offices sector. This leadership is based on our top quality prime portfolio together with our real estate know-how, accumulated over many years as a leading player in offices.

Currently we manage a prime offices portfolio of more than €8,000 million, an increase of +9% like-for-like compared to the previous year: +10% in Madrid, +8% in Barcelona and +9% in Paris. This increase in value is based on a real estate asset management that permits to maximize returns.

In November 2016, we carried out a bond issue for €600 million with 8 years maturity and a financial cost of 1.45%, a record low. This operation has enabled us to optimize our financial structure, reducing the average financing cost of the Group below 2% and extending the maturity term of our financing.

All of the above has enabled us to obtain a net profit of €274 million in 2016 and to pay a dividend of €48 million to our shareholders.

P. Viñolas

In our Business Plan and, in particular for the year 2016, we set ourselves some challenging objectives and we are very satisfied, as we have exceeded on all metrics.

On an operational level we have signed 93 contracts corresponding to a total surface of more than 116,000 sq m with top quality clients, and more importantly, we have captured rental growth in each of our markets. We have buildings and projects in the most sought-after areas by the majority of companies. These prime products combined with high occupancy levels are key factors in us being able to negotiate high rents. In this respect, in the markets in which we operate, we represent the leading market indicator for growth in rental prices.

Within our acquisition programme, which we began over two years ago, we are fulfilling the established objectives. During the year 2016, under the framework of Project Alpha I we have made committed investments for €580 million. Likewise, in 2017 we began with the investment programme Alpha II, with a committed investment volume of almost €400 million.

All of these acquisitions comply with our requirements for financial discipline and target returns. All of the investments offer a substantial value creation potential based on: (1) real estate transformation of the assets to convert them into top quality prime offices and (2) the ability to identify market segments with solid fundamentals.

All of this progress has enabled us to increase the EPRA net asset value by 18% to reach €7.25/share.

In 2016, the Total Shareholder Return, understood as increase in NAV per share plus the dividend paid in July 2016, reached 20%, positioning it among the highest returns both in the listed sector in Spain as well as in Europe.

 

What is the outlook for the year in progress and the medium term?

J.J. Brugera

We have begun the year 2017 with excellent results which consolidate the positive trend of the operating business, as well as with an improvement in our credit rating by Standard & Poors to reach BBB with a stable outlook, one of the highest ratings in the Spanish real estate sector. In addition, the rating of SFL was changed from BBB with a stable outlook to BBB with a positive outlook.

We are backed by the capital markets, who understand our strategy well and favors more and more value creation through real estate workout.

We continue to be an active investor in the three cities in which we operate and we also analyse asset rotation of properties where we have already completed our work.

P. Viñolas

We are focused on maximising the return for our shareholders, in particular in providing attractive riskadjusted returns.

In this respect, we prioritise value added acquisitions, where we can obtain additional returns on top of the market cycle. Likewise, we believe we are well positioned in the three markets in Europe which feature amongst the most attractive in rental growth for the coming 24 months.

In addition, we currently have a project portfolio of more than 130,000 sq m which will enable us to create unique prime products with an attractive return.

Therefore, based on strong business pillars and strong positioning in attractive markets, we believe we can achieve interesting returns for our shareholders.

J.J. Brugera

We are committed to all of our stakeholders (shareholders, investors, clients, employees, lenders, suppliers and the society in general) and therefore we aspire to the highest standards in Corporate Social Responsibility.

We are the only Spanish company with an EPRA GOLD rating in sustainability reporting and 90% of our property portfolio has energy efficient certificates such as LEED or BREEAM.

The essence of our strategy consists in delivering an attractive return for all our shareholders underpimed by a growth strategy that prioritizes quality and long term sustainable results.

In this respect, we sincerely appreciate the trust placed in us by all of our shareholders who support our vision, management and results. With them, and thanks to them, every day we lay the foundations for the future.