Message from the Chairman

“2019 was a milestone in Gmp’s history, as the Company celebrated its 40th anniversary.  Our pioneering focus on a property-owning real estate model, specialising in the office segment and centred on delivering quality, has marked the course we have followed up to the present day.”

“Gmp has started a new strategic plan for the period 2019-2023 that bets on sustainable management and differentiation in the market through our people-centred focus.”

“Gmp’s firm commitment to sustainability encompasses a specific CSR plan for the period 2019-2023, aimed at meeting the United
Nations SDGs.”

“Gmp’s comfortable situation in terms of liquidity, our financial and property-owning solvency and the quality of our buildings and clients, place us in a very strong position.”

Dear shareholders, clients and collaborators,

It is a pleasure to be addressing you for another year, on this occasion, to share the highlights of Gmp’s business in 2019 and its outlook for the future.

In the current context of the health crisis generated by the global coronavirus pandemic, my first message is to wish you well or a speedy recovery, if you or your loved ones are affected by COVID-19. Later, I will refer to the potential impact of this crisis on Gmp.

Last year was a milestone in the history of the Company, as we celebrated our 40th anniversary. It fills all of us at Gmp with pride and satisfaction to celebrate 40 years of business operations and, for this reason, I would like to express our appreciation for the founder of the Company, Francisco Montoro Muñoz. His pioneering focus at the end of the 1970s on property-owning real estate business, specialising in the office segment and centred on delivering quality and customer service, set us firmly on the course we have followed up to the present day. In recent years, many other companies have adopted the REIT regime, with a property-owning business model too, but in Spain back in the early 1980s, this vision was disruptive and laid the foundations for Gmp to become one of the leading real estate companies in Spain in the office sector.

2019 has been another positive year for our Company, with a consolidated net profit that almost reached €200m, 7% above the figure for 2018.

Income from the Company’s property owning business accounted for 83% of the total, with a year-on-year increase of 2%, up to €96.5 m. In parallel, EBITDA rose to €62m, nearly 4% higher than in 2018. These results are particularly positive given that income dropped during the year due to the sale of the Llano Castellano 51 and Barajas 1 buildings, combined with the termination of the Vodafone contract at the Castellana Norte business park. This fall in turnover has been offset by intense commercial activity over the financial year, which has achieved high levels of renewals and new rental contracts covering 57,000 m² and 34,500 m² respectively. This has enabled us to close 2019 with an occupancy rate of 97% and average expiry date for leasing contracts of 4.2 years. Among the new operations, commercialising the 19,300 m² at the iconic building Castellana 81 should be highlighted, which finished the year with only 7% of the surface area available, and the culmination of the commercialisation of Oxxeo, Gmp’s latest development at Las Tablas, which reached 100% occupancy and has garnered a number of awards for its innovative architectural concept.

Despite the favourable evolution of the Company’s core business, the Group’s revenues and EBITDA recorded year-on-year decreases of 7% and 10%, down to €116m and €65m respectively. This is due to the impact of the residential tourism development located to the south of Alicante, where income and EBITDA fell from record highs of €29m and €13m in 2018, to €18m and €4m in 2019.

The key reasons for this drop was the slowdown in the administrative procedures for properties on sale and the delay for a deferred payment on land operations with developers, which has materialised in 2020. Added to this, the adverse weather conditions at different points of the year, particularly in September when the area was hit by a devastating storm, leading to the closure of the golf course, had a negative impact on results for the course and also for restaurant and accommodation business at the resort. It should be highlighted that Las Colinas Golf & Country Club won international recognition in 2019, in both the World Travel Awards and the European Property Awards.

After successfully completing our 2014-2018 strategic plan, Gmp has started rolling out a new plan for the period 2019-2023. It aims to strengthen competitiveness of the Company as a leading property-owning real estate player in the high-end office sector in Madrid, betting on sustainable management based on optimisation of its portfolio and its capital structure, together with differentiation in the market through our people-centred focus.

As regards optimisation of the portfolio, the plan encompasses an ambitious CAPEX programme, rotation of mature or non-strategic assets and selective investment in value added buildings and developments.

The CAPEX programme began to be implemented in 2019, with actions dedicated to improving accessibility, facilities and energy efficiency at our buildings, as well as equipping them with valued added services and spaces for clients.

As regards asset turnover, added to the sale in 2019 of the Llano Castellano 51 and Barajas 1 buildings, at the beginning of 2020 Castellana Norte, the first business park in Las Tablas, developed by Gmp nearly 20 years ago, was sold. These transactions have given the Company a comfortable position in terms of liquidity in order to make new investments, although caution is required as the cycle is potentially approaching a valuation peak and, therefore, is close to a potential revision. For this reason, in 2019 we have been actively looking for value added buildings, with a reasonable price per m² that could perform well under value added management. The shortage of this type of product at the right price, yield contraction and investor appetite in the market, have led the Company to maintain our position on liquidity rather than making acquisitions of expensive assets with a low margin. Investment in new developments over the year has been channelled towards ARQBÓREA, an office building on one of the Company’s historic plots of land in Las Tablas, which is expected to be completed in the final quarter of 2020. Its modern, sustainable and intelligent design highlights usability, flexibility and comfort for users, in a healthy atmosphere.

Optimisation of Gmp’s capital structure has followed the same path as the previous two financial years, with improved financing conditions. After renegotiating in 2018 one of the tranches of the syndicated loan, in December last year the Company renegotiated the majority tranche, reducing its cost, extending the repayment period and increasing coverage at fixed rate. At the close of the financial year, the Group’s net debt amounted to €789m, €23m below the figure for 2018, out of which 80% is at fixed rate, with an average repayment period of 5.8 years and average cost of 1.52%. At the same time, the valuation of the portfolio increased by nearly €100m, up to €2.300 billion and LTV decreased from 38.4% in 2018 to 34.7% in 2019. All this, coupled with good liquidity, places Gmp in a very solid financial position.

As regards the second key aspect of our strategic plan, namely our bet on differentiation, the goal is to strengthen client attraction and retention. In this respect, the plan moves away from a traditional vision that identifies clients as tenant companies towards a new focus that places the emphasis on people and appeals to end users of the buildings. In 2019, Gmp set up Innovation and Development Management to head up two new areas of the Company: the development of New Products and Client Experience. Both work hand in hand to roll out products and services that improve the experience of people at our buildings and address new market trends. The stand-out actions for 2019 include the launch of a client experience plan under the new brand Gmp Experience which optimises the customer journey; consolidation of the Gmp Smart app, a pioneering tool in the sector that gives visibility to clients and generates closer interrelations among end users, as well as between end users and Gmp; and the project to make buildings smarter by equipping spaces with technological functionalities that add value for people.

Finally, the new Strategic Plan reinforces Gmp’s firm commitment to sustainability. It encompasses a specific Corporate Social Responsibility Plan for the period 2019-2023, aimed at meeting the Sustainable Development Goals (SDGs) promoted by the United Nations. Implementation of the plan has led to several important advances, such as converting the majority tranche of the syndicated loan renegotiated at the end of 2019 to a green loan in January 2020, which serves an endorsement of the environmental sustainability of the Company’s buildings. In the area of social action, the Gmp Foundation took part in 24 social projects over the year, directly benefiting around 9,000 people, double the number benefited in 2018. Since its inception just over a decade ago, the Foundation has helped approximately 50,000 people and donated €3.5 m to good causes. In addition, our pioneering focus on the health and wellbeing of people initiated in 2017, through WELL Building Standard certification at Castellana 81, Castellana 77 and Oxxeo, has been extended in 2019 to other buildings, where certification is currently underway.

Our bet on the health and wellbeing of people is particularly relevant in the new context of the global COVID-19 health crisis. In this regard, we have approved a special CAPEX budgetary allocation to combat the spread of the virus at our offices and at Las Colinas Golf & Country Club, which has started to materialise in the immediate form of a comprehensive action plan against the disease. In addition, our human team has been working from home since the start of the pandemic and we have donated funds to healthcare institutions in the Madrid Region to help provide medical supplies to hospitals and health centres. On the other hand, the Gmp Foundation is in direct contact with the organisations that care for people with Down Syndrome and Acquired Brain Injury, compiling their demands and adapting support to the new needs of these groups.

We will continue acting with responsibility and diligence in this area, concentrating on the health and safety of our stakeholders in order to get through this extreme situation.

As regards the outlook for the future, forecasts from international organisations indicate that the health crisis will have a strong impact on the economies of all the countries affected, which is already being felt. The duration of the pandemic and the stimulus measures that governments adopt are going to prove decisive. At present, there are many unknown factors about the behaviour of the virus and the time framework for the development of effective treatments and vaccine. Given this uncertainty, it is essential that companies are able to adapt in order to take the appropriate decisions that enable us to meet these new challenges.

A preliminary assessment of the potential impact of this crisis for Gmp enables us to send out a message of confidence. On the one hand, this situation has occurred at a point when the office market in Madrid is strong, as we closed 2019 with the highest number of contracts in a decade and a vacancy rate of just 9%, in a context of growing rents. On the other, the comfortable situation in terms of liquidity of Gmp, its financial and property-owning solvency, quality and facilities at our buildings which mostly have full occupancy, as well as the solvency of our clients, combined with the average duration of rental contracts, place us in a very strong position to ride out this crisis. Further to this, Gmp is backed by the professionalism, engagement and commitment of our human team and the watchful eye of the Board of Directors in order to deal successfully with any impacts that could arise.

I am convinced that, despite the difficulty and exceptional nature of the problems that we face, collective effort and solidarity of governments, institutions, companies the scientific community and society as a whole, will enable us to get through this successfully and make us stronger, equipped with new skills to address the challenges that the future holds for us.

On behalf of Gmp, I would like to end with a message of gratitude and admiration to all the people that are on the frontline of the fight against COVID-19, thanking them for their dedication and professionalism.

My thanks to everyone for the support and contribution you give to ensure the growth and solid position of Gmp.


Francisco Montoro Alemán