Inmobiliaria Colonial, SOCIMI, SA and Subsidiaries

2019

1H/2019

First half results January-June 2019 29 July 2019

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First half results 2019

Colonial delivers a Total Shareholder Return of 18% The Net Asset Value increased up to €10.52/share (+16%)

Financial Highlights 1H 2019 1H 2018 Var LFL Unique exposure to Prime Operational Highlights EPRA Vacancy 4% EPRA NAV - €/share 10.52 9.11 +16% CBD 2 EPS recurring - €Cts/share 13.5 9.5 +42% 76% Rental Growth +9% Barcelona +13% Gross Rental Income - €m 174 170 +2% +4% Madrid +4% EBITDA recurring - €m 135 131 +4% +4% Paris +11% Recurring Net Profit - €m 69 41 +66% Attributable Net Profit - €m 338 254 33% Release Spread3 +11% Barcelona +52% GAV Group €m 11,798 11,190 +5% +9% Madrid +6% EPRA NAV €m 5,348 4,141 +29% Paris +7%

Double-digit value creation . Total annual Shareholder Return1 of 18% . Net Asset Value of €10.52/share, +16% vs. previous year (+5% in 6 months) . Asset value of €11,798m, + 9% like-for-like year-on-year (+4% like-for-like in 6 months)

Bottom line results are accelerating . Recurring net profit of €13.5Cts per share, +42% . Recurring net earnings of more than €69m, +66% . Net profit of €338m, +33%

Strong income growth . Gross rental income of €174m, + 2% . Like-for-like increase in Gross Rental Income of +4%

Solid operating results . Capturing rental price increases +9% vs ERVs at 12/182 +11% of release spread3 . Solid occupancy levels of 96% . More than 129,000 sqm signed in the first half of 2019 . 27,000 sqm pre-let in the project portfolio

A strengthened balance sheet . S&P rating of BBB+ (highest real estate rating in Spain) . LTV of 37.9% with a liquidity of €2,195m4

(1) Total return = NAV per share increase + dividend paid (2) Signed rents vs. market prices at 31/12/2018 (ERV 12/18) (3) Signed rents on renewals vs. previous rents (4) Cash and undrawn credit lines

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First half results 2019

Highlights

First half results 2019

Total Shareholder Return of +18% relying on real estate value creation

Double-digit value creation for shareholders

Colonial closed the first half of 2019 with an EPRA Net Asset Value of €10.52/share resulting in a year-on- year increase of +16%, which together with the dividend, of €0.20 per share led to a Total Shareholder Return of +18%.

In absolute terms, the EPRA NAV amounts to more than €5,348m (+29% vs. the previous year).

(1) Total return understood as growth in NAV per share + dividends (2) Dividend of 0.20€/share, Goodwill absorption and other effects

The outstanding value creation for the shareholders relies on to an industrial real estate strategy with a high Alpha returns component. The main aspects are the following:

1. Successful management of the project portfolio: Projects completed and rented, important pre- lettings in the project pipeline and in the renovation program

2. Capturing of important rental growth thanks to excellent fundamentals in the CBD, where Colonial has a unique exposure of 76%

3. A compression of prime office yields, due to an increased demand of the investment market on a framework of decreasing interest rates and scarce supply in CBD.

As a consequence of this value creation, Colonial has absorbed the Goodwill of the Axiare acquisition just 12 months after the completion of the merger of both companies.

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First half results 2019

Significant increase in value of the real estate portfolio

The gross asset value of the Colonial Group at the close of the first half of 2019 amounted to €11,798m (€12,390m including transfer costs), with a like-for-like increase of +9% year-on-year (+4% in 6 months).

VARIANCE ANALYSIS VALUE 6 MONTHS - €m GAV VARIANCE

+4,2% (0.2%) 6 months 12 months Like for Like

BARCELONA +8% +19% (27) 11,798 254 +4% 118 105 MADRID 11,348 +4% +9%

PARIS +4% +6%

TOTAL LFL +4% +9%

DISPOSALS (0.2%) (3%)

TOTAL VAR +4% +5% 12/18 Barcelona Madrid Paris Disposals 6/19

The offices portfolio in Barcelona, with an excellent position in the CBD and 22@, has reached year-on- year growth of +19% like-for-like (+8% in 6 months) with important growth in all the assets due to a combination of increases in rental prices and yield compression.

Madrid has increased +9% like-for-like (+4% in 6 months), due to its strong positioning in the urban centre and the CBD in combination with the successful delivery and management of the Discovery, Window and Avenida Bruselas projects in recent months, which have enabled the signing of rental contracts at prices at the high end of the market with top tier clients.

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First half results 2019

The Paris portfolio increased +6% like-for-like year-on-year (+4% like-for-like in the first 6 months of 2019) which is underpinned by a high global appeal of the CBD market in Paris in combination with the successful pre-letting of the Louvre St. Honoré project as well as the Hausmann renovation program.

Significant increase in net recurring profit per share

The Colonial Group closed the first half of 2019 with a recurring net profit of €69m, an increase of +66% compared to the same period of the previous year.

Recurring EPS amounted to €13.5Cts per share, resulting in an increase of +42% versus the same period of the previous year.

This growth is based on a portfolio of CBD assets, enhanced through the execution of the Axiare merger, the acquisition of an additional 22% stake in SFL and the latest disposals carried out on secondary assets.

The recurring net profit increase of +€27m, (+66% vs. the previous year), was driven by (1) an increase in EBITDA of +€8m, (2) reduction in financial expenseof €6m and (3) higher attributable results due to the increase in the SFL stake, from 59% to 82%, which is reflected in the minority interests.

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First half results 2019

Considering the significant growth in value of the portfolio and deducting all the non-recurring expenses, the net profit attributable to the Group amounted to €338m, up + 33% with respect to the same period of the previous year, equivalent to an increase of +€84m.

Strong income growth

Colonial closed the first half of 2019 with €174m in rental income, an increase of +4% in like-for-like terms, compared to the previous year.

Gross Rental Income - €m

EPRA Projects / Acquisitions Like for refurbishments TOTAL +4% (1%) & Disposals like

EPRA Like for like

+4% +5% +7% +16% (1) BCN 6 (1) 174 +2%

170

+5% (8%) (3%) (6%) MADRID

+4% 0% (2%) +2% PARIS

(1%) +24% 0% +23% OTHERS

1H 2018 Like-for-Like Acquisitions & Projects / 1H 2019 Disposals refurbishments

+4% (1%) (1%) +2% TOTAL

This growth in rental income relies on the significant like-for-like increase across the portfolio in all three markets in which the Colonial Group operates.

This high level of like-for-like growth is among the highest in Europe and is mainly due to the capacity of the Colonial Group to capture rental price increases, due to its strong positioning in the CBD. Of note in the first half of 2019 is the Madrid market with an increase of +5% like-for-like.

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First half results 2019

In terms of the breakdown of the contribution of each of the three markets of the Group’s portfolio, the main aspects to highlight are the following:

1. Barcelona +4% like-for-like due to rental price increases across the entire portfolio, highlighting the Diagonal 609 asset, as well as an increase in occupancy in assets such as Park Cugat and Torre BCN.

2. Madrid +5% like-for-like increase driven by the market update of current rental prices on assets such as Sagasta 31 and Egeo. The new leases signed on the Discovery Building also resulted in a significant positive impact.

3. Paris +4% like-for-like. Rental increases rose to €3.3m. This was due to new leases signed in 2018, mainly on Washington Plaza and Cézanne Saint Honoré, with an increase in rents.

In Madrid, it is worth mention the reduction in rental income due to the asset disposals carried out at the end of 2018 and the sale of the Centro Norte hotel in Madrid in 2019. The rotation of the project portfolio, specifically the start of the repositioning of the 83 Marceau, Neuilly and Edouard VII assets in Paris and the Velázquez/, Miguel Ángel and Cedro assets in Madrid, has resulted in a temporary decrease in income.

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First half results 2019

Solid operational fundamentals in all segments

Capturing rental price increases

The Colonial Group’s business has performed excellently, with take-up levels moving at a strong pace, achieving levels close to full occupancy. In the first half of 2019, the Colonial Group has signed 60 rental contracts corresponding to more than 129,000 sqm and annual rents of €43m.

Strong price increases # contracts Surface sqm GRI €m % Var. vs Release ERV 12/181 3 Spread2

Barcelona 19 27,188 €7m +13% +52%

Madrid 19 78,021 €17m +4% +6%

Paris 22 24,136 €19m +11% +7%

TOTAL OFFICES 60 129,345 €43m +9% +11%

(1) Signed rents vs market rents at 31/12/2018 (ERV 12/18) (2) Signed rents in renewals vs previous rents (3) There were two leases with a cap, one in Madrid and the other in Barcelona

Compared with the market rent (ERV) at December 2018, signed rents in the first half of 2019 increased by +9% and the release spread stood at +11%.

In Barcelona, rents were signed +13% above market rent, enhanced by the pre-letting registered for the Pedralbes project. In the Paris portfolio, the increase vs the market rents was +11% and in the Madrid portfolio it was +4%.

Likewise, the release spreads in the first half of 2019 were very high: Barcelona +52%, Madrid +6% and Paris +7%.

Colonial’s total letting activity is spread across the three markets in which the Company operates.

In Spain, in the first half of 2019, 105,209 sqm were signed across 38 contracts.

In the Madrid portfolio, 78,021 sqm were signed across 19 transactions. The largest transaction relates to the renewal of the entire surface area of Santa Hortensia (more than 40,000 sqm) with a multinational technology company, in addition to the renewals of 4,100 sqm in Alfonso XII with an engineering consultancy firm and almost 6,000 sqm with a consultancy firm on the Tucumán asset.

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First half results 2019

In terms of new contracts, noteworthy is the signing in April 2019 of 100% of the project delivered at Avenida Bruselas 38 for the headquarters of MasMovil, an IBEX35 technology company. The company will occupy the building in July, so it is not included in the occupancy ratio as of June 2019.

In the Barcelona office portfolio, more than 27,000 sqm were signed across 19 transactions. Worth noting is the pre-letting of the entire Diagonal 525 project which will house the new global headquarters of Naturgy and the pre-letting signed with Uniqlo on the Pedralbes project.

In the Paris portfolio, more than 24,000 sqm were signed across 22 transactions. In terms of renewals, worth mentioning is the 2,700 sqm of office space in the Louvre Saint Honoré building. In terms of new leases, worth noting is the signing of 2,500 sqm on the Edouard VII building, as well as the signing of almost 12,000 sqm on the 106 Haussmann building, among others.

Likewise, it is important to highlight the pre-letting agreement with a 20-year minimum fixed terms on the Louvre Saint Honoré project in Paris with the Cartier Foundation.

Solid occupancy levels

The total vacancy of the Colonial Group’s portfolio (including all uses: offices, retail and logistics) stood at levels of 4% at the close of the first half of 2019.

EPRA VACANCY(1)

Office & Total Vacancy – Evolution of Colonial's Portfolio

1.4% 1% 1% 1% Total

BARCELONA 6/2018 12/2018 6/2019 5% 4% 4% Vacancy(2)

12% 11% 9.2% 6% 4% 3.8%

Axiare TOTAL Axiare 1% MADRID 1% 2% Colonial 2% 2% 2% Colonial 1% 2% 3% 6/2018 12/2018 6/2019 6/2018 12/2018 6/2019

3% 1% 1.6%

PARIS

6/2018 12/2018 6/2019

(1) EPRA vacancy: financial vacancy according to the calculation recommended by EPRA (1-[Vacant floorspace multiplied by the market rent/operational floorspace at market rent]) (2) Total portfolio including all uses: offices, retail and logistics

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First half results 2019

Particularly noteworthy are the office portfolios in Barcelona and Paris, with vacancy rates of 1.4% and 1.6%, respectively.

The Madrid office portfolio has a vacancy rate of 9%, improving +311 bps compared to the previous year and +129 bps in 6 months.

A 6% vacancy corresponds primarily to assets in the Axiare portfolio located in Arroyo de la Vega and Campo de las Naciones. Especially noteworthy are the recent deliveries of Avenida de Bruselas (100% let, although the occupancy comes into effect in July) and Ribera del Loira (20% occupancy at June). Additionally, the Virto asset had 40% occupancy in June.

The rest of the Madrid portfolio has solid occupancy levels, maintaining a vacancy rate of 3%. The current available GLA represents a supply of maximum quality in attractive market segments, where there is a clear scarcity of Grade A products. Consequently, this offers significant potential for additional rental income to be captured in the coming quarters. In addition, noteworthy is the entry into operation of 1,900 sqm in the Castellana 163 asset, located in the Madrid CBD, which is being successfully repositioned by floors.

Considering the letting of the 100% surface of Avenida de Bruselas 38 asset, which will be effective during July, the vacancy of the Madrid Portfolio will reach 6.9%.

At the end of the first half of 2019, the logistics portfolio of the Colonial Group had a vacancy of 10%, mainly due to the entry into operation of the first phase of the project located in San Fernando de Henares.

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First half results 2019

ESG Strategy

Colonial pursues a clear leadership in ESG, being a fundamental element of its growth strategy in which offering maximum quality in its properties constitutes a main characteristic. This fact is reflected in the high number of energy certificates in the Colonial Group’s property portfolio.

91% of the portfolio in operation has energy certificates LEED or BREEAM. In particular, €1,845m of assets have LEED ratings and €8,837m of assets have BREEAM ratings.

This level of certification is clearly above the sector average. Likewise, the strategic sustainability plan is executing energy efficiency initiatives, focusing on continuous improvement, asset by asset.

The high quality of Colonial’s portfolio is reflected in the high level of certification of its assets. At the beginning of 2019, BREEAM/GRESB recognized the Colonial Group as the leader, number one in Europe, in responsible investment through the “Award for Responsible Real Estate Investment” in the large portfolio category.

Colonial’s European leadership in ESG has enabled the formalization of 2 ESG compliant loans for a total volume of €151m with ING and Caixabank respectively.

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First half results 2019

Co-Working & Digitalization

In the first half of 2019, Utopicus, Colonial’s Coworking subsidiary, achieved the main objectives:

Expansion and positioning of the Utopicus brand

During the first half of 2019, Utopicus opened four new centres in Madrid and Barcelona. The spaces will provide more than 11,500 sqm of surface area for Coworking and the capacity for more than 1,287 new users:

. Gran Vía (Madrid) – Cibeles is the new reference centre of Utopicus in Gran Vía street, the most emblematic street in Madrid. The premise offers more than 5,000 sqm of surface area and the building has offices for up to 100 people, a club, a restaurant, innovation rooms and an auditorium. . Glories (Barcelona), Utopicus, which occupies a part of Colonial’s new building, Parc Glories, is in the best area of 22@ in Barcelona. The space provides a mix of flexible uses with the use of traditional offices and has 2,000 sqm of surface area for 232 workstations. . Clementina (Barcelona), located in the heart of the Barcelona’s neighborhood, Gracia, has 600 sqm and the capacity for 75 workstations in a very dynamic area of the city. . Gala Placidia (Barcelona) was designed for large companies that look for flexible spaces and is located in the traditional Barcelona CBD just a few minutes away from Diagonal. The space with more than 4,000 sqm provides room for more than 500 workstations and areas to carry out events and courses. In addition, there is a spectacular terrace.

Likewise, work continues for the opening of four new centres over the coming months. Once finalised, Utopicus will manage 14 centres with a surface area in operation of 40,000 sqm and the capacity for 4,486 workstations, strengthening its leadership in the segment of flexible office and Coworking spaces in Spain.

Occupancy and optimization of the centres in operation

. In the first half of 2019, efforts were concentrated on the improvement in occupancy and optimization of the centres in operation opened in 2018. A joint commercial campaign between Utopicus and Colonial has been launched with the objective of making the new flexible spaces known by the traditional clients of Colonial to generate new cross-selling impacts.

. In this respect, of note is the good evolution of “The Window”, the new office building developed by Colonial in calle Príncipe de Vergara 112-114. This building combines an Utopicus centre of 4,000 sqm together with the GLA of traditional office space. The obtained results have been a success, increasing the occupancy of the building with higher rental prices than expected.

. It is also important to highlight the centre in Plaza Cataluña opened in May 2018, which after only 12 months in operation has already reached 97% occupancy, with technology companies as the main tenants.

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First half results 2019

A solid capital structure

A strong balance sheet

On 30 June 2019, the Colonial Group had a solid balance sheet with a LTV of 37.9% (135 bps better than at the start of the year) with a Standard & Poors rating of BBB+, the highest rating in the Spanish real estate sector.

The Group has €2,195m of liquidity between cash and undrawn credit lines, with a debt maturity of 5.3 years. It is particularly noteworthy that 64% of the Group’s debt is maturing from 2023 onwards.

In the first half of 2019, Colonial finalized the restructuring of the pending debt coming from Axiare, cancelling bilateral loans in the amount of €162m and refinancing two bilateral loans in the amount of €151m, improving margins and cancelling mortgage securities.

Short-term note issues were initiated under the Euro Commercial Paper (ECP) program registered in December 2018, with issues of €424m in effect at 30 June.

SFL has restructured a syndicate loan improving both margins and maturity. During the first half of the year, SFL also carried out short-term note issues, at the close of the first half of 2019, €354m had been issued.

Solid share price performance

As at the date of publication of this report, Colonial’s shares closed with a revaluation of +25%, beating the EPRA & IBEX35 benchmark indices.

The share price performance reflects the support of the capital markets for the successful execution of the Colonial Group’s growth strategy. Colonial’s share price trading stands out compared to its peers as one of the securities that is trading the closest to its fundamental value.

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Growth drivers

The Colonial Group has an attractive growth profile, based on its strategy of industrial value creation with a high Alpha component in returns. In particular, the value creation is based on the following value drivers:

A. An attractive project pipeline: A portfolio of 12 projects corresponding to more than 211,000 sqm to create prime products that offer strong returns and therefore, future value creation with solid fundamentals.

As at the date of this report, four of the twelve projects (specifically, the Pedralbes Center, Gala Placidia, Diagonal 525 and Louvré Saint Honoré) already have pre-let agreements in favourable terms, significantly increasing the visibility of future cash flow and value creation. The other projects in the portfolio continue to progress and already have very good market prospects, in excellent locations with scarce supply.

B. A strong prime positioning with an asset portfolio to capitalize on the cycle The first half of the year has once again shown the capacity of the Colonial Group’s contract portfolio to capture maximum market rents and obtain significant rental price increases with double digit release spreads. In addition, new renovation programs have been identified, accelerating tenant rotation in the corresponding spaces. In this respect, of note are two buildings in the prime CBD, in particular 106 Haussmann in Paris, Ortega y Gasset in Madrid and the TorreMarenostrum asset in the 22@ technological district in Barcelona. The Haussmann 106 building offers almost 15,000 sqm in the centre of Paris which will be updated in the year 2020, offering a top-quality product. These characteristics have enabled the pre-letting of the entire building in the second half with a 12-year minimum fixed terms lease at a rent above €800/sqm/year, prime reference in Paris.

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C. Discipline in the acquisition and disposal program: Over recent years, Colonial has successfully delivered the organic investment targets announced to the capital markets: asset acquisitions, prioritising off-market transactions and identifying properties with value-added potential in market segments with solid fundamentals. Since 2015, the Colonial Group has carried out significant investments and disposals:

NET INVESTMENTS SINCE 2015 - €m

2015 Alpha I Alpha II Alpha III Alpha IV 1QAlpha 2019 ACQUISITION TARGETS rotation

1. Prioritize value-added opportunities

2. Create high quality offices

3. Maintain investment discipline

Acquisitions Divestments

In this context, at the beginning of 2019, the Colonial Group carried out the Alpha rotation 2019 consisting in the following transactions:

> Disposal of the Hotel Centro Norte, a non-strategic asset at a secondary location in the Northeast of Madrid with a premium of +11% on the appraisal value.

> Acquisition of the remaining 45% of the Torre Marenostrum building from Naturgy, achieving 100% ownership of this unique building located in front of the sea in the 22@ market.

Potential cash flow and future value

The asset portfolio of the Colonial Group (excluding the logistics portfolio available for sale) has the potential to reach an annual income (passing rents) of close to €500m, resulting in an increase of €148m with respect to the current cash flow.

1 Topped-up passing rental income: annualized cash GRI adjusted for the expiration of rent free periods as per EPRA BPR

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Appendices

1. Analysis of the Profit and Loss Account

2. Office markets

3. Business performance

4. Project portfolio

5. ESG strategy

6. Digital strategy & Coworking

7. Portfolio valuation

8. Financial structure

9. EPRA Net Asset Value & Share price performance

10. EPRA ratios & consolidated balance sheet

11. Asset portfolio – location and details

12. Historical series

13. Group structure

14. Glossary and alternative performance measures

15. Contact details and disclaimer

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1. Analysis of the Profit and Loss Account

Analysis of the Profit and Loss Account

The net profit attributable to the Group at June amounted to €338m, an increase of +33% compared to the same period of the previous year.

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Analysis of the Profit and Loss Account

. The Colonial Group’s gross rental income at the close of the first half of 2019 amounted to €174m, +2% higher compared to the same period of the previous year. In like-for-like terms, the increase stood at +4%.

. The Group’s EBITDA stood at €135m, a +4% increase compared to the same period of the previous year.

. At 30 June 2019, the impact on the Consolidated Profit and Loss Account from the revaluation and disposals of property investments rose to €418m. This revaluation, which was registered in France as well as in Spain, is the result of the increase in the appraisal value of the assets.

Due to this value creation, Colonial has absorbed the Goodwill of the Axiare acquisition just 12 months after the completion of the merger of both companies in July 2018.

. The recurring financial cost of the Group amounted to €(45)m, a decrease of 12% compared to the same period of the previous year, mainly due to the Group’s debt refinancing transactions carried out in 2018 and 2019. The net financial cost amounted to €(53)m, which is 6% lower than the same period of the previous year due to the inclusion of capitalised expenses of various loans cancelled during this period.

. Profit before taxes and minority interests at the close of the first half of 2019 amounted to €437m.

. The corporate tax expense amounted to €(21)m and mainly corresponds to the recording in France of taxes associated to non-SIIC companies, in particular, the Parholding Group.

. Finally, after deducting the minority interest of €(78)m, the Profit attributable to the Group amounted to €338m, an increase of +33% compared to the previous year.

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2. Office markets

Rental markets

Take-up in the office market in Barcelona set a new record during the first half of 2019 with 251,000 sqm signed. Of special mention is that out of the 103,450 sq m signed in the second quarter, 16% was taken up by operators of flexible office spaces, showing their interest in the Barcelona market. Likewise, the short-term future supply about to become available stands at a level at which current demand can easily absorb. The vacancy rate remains at an all-time low of 1.9% in the CBD. A lack of prime supply together with solid take-up continue to drive up rents, with prime rents reaching €26.75/sqm/month, an increase of +6% year to date.

During the second quarter of 2019, more than 191,000 sqm were signed in the office market in Madrid, positioning take-up of the first half at 334,500 sqm, an increase of +42% compared to the same period of the previous year. The vacancy rate stood at 9% in Madrid, with a vacancy rate in the CBD at around 6%. At the close of the first half, prime rents continued to grow in Madrid and stood at €35.75/sqm/month, which represents an increase of +4% year to date.

In the offices market in Paris, take-up in the first half of 2019 reached a total of 1,101,000 sqm, in line with the average over recent years. The Coworking market has experienced strong growth in the last three years, proof of this is that, during the first half of 2019, 50% of the transactions of more than 5,000 sqm were led by operators of flexible spaces. Future supply in the coming three years is expected to be 2.2 million sqm, and since it has already been pre-let, it will be insufficient to meet market demand. This situation is highlighted in the CBD, where the vacancy rate stood at 1.6%, an historically low level, continuing to put pressure on prime rents which continue to increase and stand at €830/sqm/year.

Sources: Reports by Jones Lang Lasalle, Cushman & Wakefield, CBRE & Savills

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First half results 2019

Investment market

(1) Market analysts in Spain report gross yields and in France net yields (see definition in the glossary in appendix 6.11)

Following the recent decision of the European Central Bank to maintain the low interest rates in the Eurozone until June 2020, the 10-year sovereign bonds have fallen to minimum records, increasing the spread between prime yields and sovereign bonds at maximum levels.

The investment market in Barcelona continued to show solid fundamentals which led to an increase in investment and which may result in 2019 becoming a record year. The first half of 2019 closed with an investment volume of €620m and a yield of 3.75%. Experts expect a similar investment volume for the second half of 2019.

The cumulative volume in the investment market in Madrid exceeded expectations, reaching an investment volume of close to €1,005m in the first half of 2019, exceeding the annual average of the first half historical series by 41%. The trend of previous years continues in which more than two thirds of the investments were led by international investors. Prime yields remained stable at 3.5%.

The investment market in Paris performed exceptionally in the first half of 2019 with a transaction volume of more than €9,900m, an increase of 5% compared to the record level of the previous year and 88% above the average over the last ten years. This good result is mainly due to the increased volume of large transactions in the prime CBD and the centre of Paris. Foreign investors have remained very active, responsible for close to 32% of the transaction volume during the first half of the year. After stable semesters, the strong investment volume and an increase in prime rents have all led to an additional compression of prime yields to stand at 2.75%.

Sources: Reports by Jones Lang Lasalle, Cushman & Wakefield, CBRE & Savills

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First half results 2019

3. Business performance

Gross rental income and EBITDA of the portfolio

. Gross rental income reached €174m, a +2% year-on-year increase. In like-for-like terms, adjusting for investments, disposals and variations in the project and renovation pipeline and other extraordinary items, the Group’s gross rental income increased by +4% like for like.

In Spain, like-for-like rental income increased by +4%: +4% in the Barcelona portfolio and +5% in the Madrid portfolio. In Madrid, this increase was mainly due to the market update on rents on properties such as Egeo and Sagasta 31. In addition, there was a positive increase in occupancy levels in the Discovery Building. In Barcelona, the positive impact mainly came from an increase in rents across the entire portfolio, highlighting the asset Diagonal, 609 and an increase in occupancy in Park Cugat and Torre BCN.

In Paris, like-for-like rental income rose by +4%, mainly driven by signed leases on the Washington Plaza and Cézanne Saint Honoré assets.

Variance in rents (2019 vs. 2018) Logistic & €m Barcelona Madrid París Total others

Rental revenues 2018R 19.7 46.2 96.1 8.3 170.3

EPRA Like-for-Like (1) 0.6 1.9 3.3 (0.1) 5.7 Projects & refurbishments 1.5 (0.9) (1.8) 0.0 (1.2) Acquisitions & Disposals 1.0 (3.9) 0.0 2.0 (0.9) Indemnities & others 0.0 0.1 0.3 0.0 0.4

Rental revenues 2019R 22.9 43.3 97.9 10.2 174.4 Total variance (%) 16% (6%) 2% 23% 2% Like-for-like variance (%) 4% 5% 4% (1%) 4%

In Madrid, of note is the reduction in rental income due to the sales carried out at the end of 2018 and the sale of the hotel Centro Norte in 2019 in Madrid. The rotation in the project portfolio, specifically the start of the repositioning of the 83 Marceau, Neuilly and Edouard VII buildings in Paris as well as the Velázquez/Padilla, Miguel Angel and Cedro buildings in Madrid have resulted in a temporary reduction in gross rental income.

(1) EPRA like-for-like: Like-for-like calculated according to EPRA recommendations.

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. Rental income breakdown: Most of the the Group's rental income, 82%, is from the office portfolio. Furthermore the Group maintains its high exposure on CBD markets. In consolidated terms, 56% of the rental income (€97.9m) came from the subsidiary in Paris and 44% was generated by properties in Spain. In attributable terms, 52% of the rents were generated in Spain and the rest in France.

CONSOLIDATED GROUP ATTRIBUTABLE

Revenues - by use Revenues - by area Revenues - by market Revenues - by market

Offices CBD Spain Spain 82% 71% 44% 52%

Prime CBD Barcelona Barcelona Offices CBD Madrid Madrid Retail BD Others Others Logistic Logistic Logistic Logistic Others France Others France Paris 48% París 56%

. At the end of the first half of 2019, EBITDA rents reached €157m. .

Property portfolio

EPRA Like-for-like 1 June cumulative - €m 2019 2018 Var. % €m %

Rental revenues - Barcelona 23 20 16% 0.6 4% Rental revenues - Madrid 43 46 (6%) 1.9 5%

Rental revenues - Paris 98 96 2% 3.3 4% Rental revenues - Logistic & others 10 8 23% (0.1) (1%) Rental revenues 174 170 2% 5.7 4%

EBITDA rents Barcelona 21 18 16% 0.6 4% EBITDA rents Madrid 35 38 (9%) 1.3 4%

EBITDA rents Paris 93 90 2% 3.6 4% EBITDA rents Logistic & others 9 7 18% (0.7) (10%) EBITDA rents 157 154 2% 4.8 4%

EBITDA rents/Rental revenues - Barcelona 91% 91% (0.2 pp)

EBITDA rents/Rental revenues - Madrid 80% 82% (2.3 pp)

EBITDA rents/Rental revenues - Paris 95% 94% 0.4 pp

EBITDA rents/Rental revenues - Logistic & others 86% 90% (3.8 pp) pp = percentages points

The accounting standard requires to register certain property taxes at its accrual time in which implies that the EBITDA ratio/income from the portfolio is artificially low and progressively corrects during the financial period.

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Portfolio letting performance

. Breakdown of the current portfolio by floor area: At the close of the first half of 2019, the Colonial Group’s portfolio totalled 2,278,491 sqm (1,711,703 sqm above ground), primarily related to office buildings, which comprised 1,649,821 sqm. At the close of the first half of 2019, 81% of the office portfolio was in operation and the rest corresponded to an attractive portfolio of projects and refurbishments as well as the land plots of Parc Central in Barcelona and Puerto de Somport in Las Tablas, Madrid.

Offices Surface - by condition Offices Surface - by area Offices Surface - by market

CBD France Spain 81% 52% 23% 77%

In operation Prime CBD Projects Barcelona CBD Madrid 19% BD Paris Others

. Signed leases - Offices: During the first half of 2019, the Colonial Group signed leases for 129,345 sqm of offices. 81% (105,209 sqm) were signed in Barcelona and Madrid and the rest (24,136 sqm) were signed in Paris.

New lettings: Out of the total office letting activity, 44% (57,207 sqm) related to new leases, spread over the three markets in which the group operates.

Renewals: Lease renewals relating to 72,137 sqm were completed, of which 56,691 sqm were renewed in Madrid.

56% 25%

Renewals & Revisions New46% Lettings 44%

19%

Spain France 81%

Release spreads stood at +11%, highlighting Barcelona with +52% and Madrid with +6%. In Paris, the release spreads stood at +7%.

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The letting activity was focused on the offices potfolio. In addition, two rental contracts were signed in the logistics portfolio, corresponding to more than 22,000 sqm.

In Spain, in the first half of 2019, 105,209 sqm were signed across 38 contracts.

In the Madrid portfolio, 78,021 sqm were signed across 19 transactions. The largest transaction relates to the renewal of the entire surface area of Santa Hortensia (more than 40,000 sqm) with a multinational technology company. In addition the following contracts have been renewed: more than 4,100 sqm in Alfonso XII with an engineering consultancy firm and almost 6,000 sqm with a consultancy firm on the Tucumán asset.

In terms of new contracts, noteworthy is the signing in April 2019 of 100% of the project delivered at Avenida Bruselas for the headquarters of MasMovil, an IBEX35 technology company. The company will occupy the building in July, so it is not included in the occupancy ratio for June. It is also worth mentioning the new rentals at Ribera del Loira of more than 2,000 sqm and almost 3,100 sqm at Virto.

In the office portfolio of Barcelona, more than 27,000 sqm were signed across 19 transactions. Worth noting is the pre-letting of the entire Diagonal 525 project which will house the new global headquarters of Naturgy. Also worth highlighting is the pre-letting signed with Uniqlo on the Pedralbes project. In the 22@ district, more than 3,700 sqm were signed on the Diagonal 197 and Illacuna buildings.

In the Paris portfolio, more than 24,000 sqm were signed across 22 transactions. In terms of renewals, worth highlighting is the 2,700 sqm of office space in the Louvre Saint Honoré building. In terms of new leases, worth noting is the signing of 2,500 sqm on the Edouard VII building, as well as the signing of almost 12,000 sqm on the 106 Haussmann building, among others.

Likewise, it is important to highlight the pre-letting agreement with a 20-year minimum fixed term on the Louvre Saint Honoré project in Paris with the Cartier Foundation.

The transactions described above were closed with rental prices at the high end of the market.

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A portfolio with solid occupancy levels

. At the end of the first half of 2019, the Colonial Group’s total EPRA vacancy(2) stood at 4%(2).

EPRA VACANCY(1)

Office & Total Vacancy – Evolution of Colonial's Portfolio

1.4% 1% 1% 1% Total

BARCELONA 6/2018 12/2018 6/2019 5% 4% 4% Vacancy(2)

12% 11% 9.2% 6% 4% 3.8%

Axiare TOTAL Axiare 1% MADRID 1% 2% Colonial 2% 2% 2% Colonial 1% 2% 3% 6/2018 12/2018 6/2019 6/2018 12/2018 6/2019

3% 1% 1.6%

PARIS

6/2018 12/2018 6/2019

(1) Financial vacancy: financial vacancy according to the calculation recommended by EPRA (vacant surfaces multiplied by the market prices/surfaces in operation at market prices). (2) Total portfolio including all uses: offices, retail and logistics

Particularly noteworthy are the office portfolios in Barcelona with a vacancy rate of 1.4% and Paris with a vacancy rate of 1.6%, respectively.

The Madrid office portfolio has a vacancy rate of 9%, improving 129 bps since the beginning of the year (+311bp YoY).

The rest of the Madrid portfolio maintains solid occupancy level maintaining vacancy rates of 3%. The current available GLA represents a supply of maximum quality in attractive market segments, where there is a clear scarcity of Grade A products. Consequently, this offers significant potential for additional rental income to be captured in the coming quarters.In addition, noteworthy is the entry into operation of 1,900 sqm in the Castellana 163 asset, located in the Madrid CBD, which is being successfully repositioned by floors.

Considering the new letting of the 100% surface of Avenida de Bruselas 38 asset, which will be effective during July, the vacancy of the Madrid Portfolio will reach 6.9%.

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Commercial lease expiry and reversionary potential

Commercial lease expiry: The following graphs show the contractual rent roll for the coming years in the office portfolios in Spain and France. The first graph shows the commercial lease expiry dates if the tenants choose to end the contract at the first possible date (break option or end of contract).

Commercial lease expiry dates in economic terms (1) - First Potential Exit (2) (% passing rent of surfaces to be leased) Spain France

Barcelona Madrid 36% 29%

18% 16% 16% 18% 15% 16% 9% 11% 13% 10% 11% 10% 9% 9% 6% FIRST POTENTIAL EXIT 13% 10% 9% 6% 1% 4% 4% 2H 2019 2020 2021 2022 2023 >2023 2H 2019 2020 2021 2022 2023 >2023

(1) % = surface to rent x current rents / current rental revenues (2) Renewal dates based on first potential exit of the current contracts

In this context, in the next 18 months, there could be in the Spanish portfolio a 47% of office contracts renewals, which will enable the company to capture the rental growth cycle with one of the best products available in the market.

In France, the contract structure is longer term, in line with the behavior of the players in that market.

The second graph shows the rent roll of the portfolio if the tenants remain until the contract expires. The contract structure in Spain is more short-term than in France.

Commercial lease expiry dates in economic terms - Expiry date (3) (% passing rent of surfaces to be leased) Spain France 45% 62% Barcelona Madrid

32% 21%

13% 11% 14%

EXPIRY DATE 9% 7% 8% 9% 9% 2% 6% 6% 13% 4% 6% 10% 2% 1% 2% 3% 2% 2H 2019 2020 2021 2022 2023 >2023 2H 2019 2020 2021 2022 2023 >2023 (1) % = surface to rent x current rents / current rental revenues (3) Renewal dates based on the expiry date of the current contracts

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. Reversionary Potential of the rental portfolio

The Colonial Group’s contract portfolio has a significant reversionary potential. This reversionary potential is the result of comparing the rental prices of the current contracts (contracts with current occupancy and current rents) with the rental price that would result from letting the total surface at the market prices estimated by independent appraisers at 30 June 2019 (not including the potential rents from the projects and significant refurbishments underway).

At the close of the first half of 2019, the static reversionary potential(2) of the rental revenues of the offices portfolio in operation (considering current rental prices without future impacts from a recovery in the cycle) stood at +29% in Barcelona, +24% in Madrid and +7% in Paris.

Specifically, the static reversionary potential(2) in the current portfolio would result in approximately €53m of additional annual rental income.

Reversionary potential-rental income

Volume effect Price effect

(13,0%)

4€m 53€m €33m €50m

€3m €16m Spain €13m

France

Spain France OFFICES Spain + France TOTALTOTAL OFFICES Logistic & others TOTAL OFFICES PORTFOLIOPORTFOLIO

(2) Excluding future rental growth due to cycle recovery (3) Reversionary potential: maximum potential of the surfaces portfolio in operation

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4. Project portfolio

Project portfolio

. At the release date of this report, Colonial has an office and commercial property portfolio of over 211,000 sqm to create top quality properties, offering high returns and a future value uplift with solid fundamentals. Four of the twelve projects (specifically, the Pedralbes Center, Gala Placidia, Diagonal 525 and Louvré Saint Honoré) already have pre-let agreements in favourable terms, significantly increasing the visibility of future cash flow and value creation. The other projects in the portfolio continue to progress and already have very good market prospects. They are in excellent locations where there is little new offering.

. In Barcelona, the Gala Placidia and Pedralbes Centre projects are being delivered. The Pedralbes Centre project has enabled the space to be reorganized, increasing the GLA by +27%, optimizing management costs and enabling a bet for large commercial units. This new approach attracted the interest of different top tier tenants including UNIQLO, a global fashion company that has signed a pre- letting agreement for the main space at attractive market rents.

In turn, Gala Placidia has already entered into operation. This asset, which has been pre-let by Utopicus, the operator of flexible spaces of the Colonial Group, is quickly becoming occupied by international companies looking for space flexibility given its location in the CBD and the community offering and services of Utopicus

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Likewise, Diagonal 525 has been pre-let by Naturgy in which it will locate its new global corporate headquarters. Currently Colonial has completed the project design and is tendering the works which will begin at the beginning of 2020. The Plaza Europa project continues as planned, the architects’ design is completed and the work permit has been obtained.

. In Madrid, the projects at Miguel Àngel 23 and Velázquez are progressing as planned and the buildings have been fully vacated, facilitating the start of the refurbishment works. The commercial teams of Colonial have received interest for large spaces in both buildings.

At Castellana 163 work has been completed on the entrances and the façade. The tenant rotation has been accelerated to refurbish the spaces as they become vacant. It is worth mentioning that 3,600 sqm have been pre-let to Utopicus who will dedicate the building to flexible spaces, enabling a significant increase in value in the short and medium term.

The design for the Méndez Álvaro Campus project continues to progress to create the new reference building in the south of the Castellana.

. In the Paris portfolio, the three current Flagship projects continue progressing: Biome, 83 Marceau and Louvre St. Honoré.

In Biome, an iconic building is planned of more than 24,500 sqm in the Central-Western area of Paris with natural light, efficient floors of 1,400 sqm to 3,500 sqm and a green area surrounding the building. After receiving the work permit in May 2018, the work began in June 2018 and remains on course.

The project at 83 Marceau will offer one of the best located buildings in Paris – a one-minute walk from the Place de L’Étoîle, in one of the most contemporarily designed buildings, providing light to all floors, thanks to the new design of the central atrium. Likewise, it is worth mentioning the façade which will be covered with the same stone as the Arc de Triomphe located a few metres away. The refurbishment works started in May/June 2019 together with the start of the commercialization process.

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Finally, of special mention is the project in the Louvre Sainte Honoré building in which a commercial space of 16,000 sqm will be developed on the floors below ground, the ground floor and the first floor of the building with top-quality finishes and technical specifications, expected to be finished in 2023. A pre-let agreement has been signed for this space, at top market prices with a minimum fixed term duration of 20 years, with the Richemont group, a French company specializing in luxury items.

Renovation Program

. In addition to the project portfolio, the Colonial Group is currently carrying out a renovation program on 5 assets in its portfolio, with the aim of increasing the rents and value of these assets. This renovation program is mainly focused on the adaptation of communal areas and updating the facilities, requiring an adjusted investment.

. In Barcelona, repositioning work has begun on the Torre Marenostrum asset in the prime 22@ district, making it a multi-user asset and combining traditional office spaces with Coworking spaces, managed by a company of the group, Utopius,

. In Madrid, in the first half of 2019, adaptation work began on the communal areas and interior atrium of the Cedro building. This renovation will update the building, refurbishing almost all of the building following the departure of the tenant. Likewise, at Ortega y Gasset 100 the space freed-up in May this year is being refurbished. It is worth mentioning that proposals have already been received to occupy this building.

. In Paris, the work permit has been obtained for the renovation project of 12,000 sqm at Haussmann 106 and work will begin in January 2020 following the departure of the current tenant. In May this year, a pre-let agreement for this space was signed for a rent above €800/sqm/year, prime benchmark in Paris and the space will be occupied as of the first quarter of 2021.

. In addition, it is worth mentioning that the Colonial Group has a plot of land of more than 14,000 sqm in the sub-market of 22@ in Barcelona and a plot of land of 22,000 sqm in Puerto de Somport (Las Tablas, Madrid), on which it can carry out future projects.

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Potential of the project portfolio and renovation program

. The project portfolio as well as the new acquisitions will result in additional annual rents of approximately €106m.

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5. ESG1 Strategy – Environmental, Social and Corporate Governance

. Colonial pursues the clear leadership in ESG, being a fundamental key in its growth strategy in which offering maximum quality in its portfolio constitutes a main characteristic. This fact is reflected in the high number of certifications in the Colonial Group’s property portfolio.

. 91% of the portfolio has energy certificates LEED and BREEAM. In particular, €1,845m of the assets have LEED ratings and €8,837m of the assets have BREEAM ratings.

. This level of certification is clearly above the sector average. The strategic sustainability plan carries out improvements in energy efficiency, betting on continuous improvement asset by asset.

. In addition to the strategy on environmental sustainability, Colonial opts for the highest standards in Corporate Governance and a clear ambition in social aspects and attraction of talent. In this respect, Colonial has adhered to the 10 principles of the United Nations Global Compact referring to Human Rights, Employment Rights, the Environment and the fight against corruption, ensuring that these principles form part of its strategy and culture.

. Colonial has an ESG Committee made up of members of the Board of Directors of the Company to carry out a future Business Plan strategy in this field.

. Accordingly, Colonial has achieved important advances in corporate ratings that evaluate all of the non- financial-ESG aspects.

(1) ESG = Environmental, Social and Governance

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. The high quality of Colonial’s portfolio is reflected in the high level of certification of its assets. In March 2019, BREAAM/GRESB recognized the Colonial Group as the leader, number one in Europe, in responsible investment through the “Award for Responsible Real Estate Investment” in the large portfolio category.

. Colonial’s European leadership in relation to sustainability in its sector has enabled Colonial to obtain the first sustainable loan to be granted to a Spanish company in the real estate sector. Granted by ING, the loan is for an amount of €76m, maturing in December 2023. The granting of the loan is linked to the sustainability strategy of the company and the interest will vary in accordance with the rating that Colonial obtains in relation to ESG (environmental, social and corporate governance) from the sustainability agency GRESB.

. In May 2019, Colonial signed a second sustainable loan with Caixabank in the amount of €75m, maturing in July 2024. The conditions of this type of loan are linked to the recognition of the good impact of the sustainability strategy of the company, by indices carried out by independent entities.

. The Window Building has received the 2018 Innovation Prize awarded by the Spanish Association of Offices (AEO). This building constitutes an innovative operation due to the unique architectural solution, representative of an urban fabric complex and high, demanding municipal standards. The building provides an architectural solution which very effectively resolves this equation of urban incognitos, while also possessing an adequate level of efficiency and high-quality equipment in its facilities. The Window Building is a clear example of an innovative real estate operation in response to complex urban surroundings and standards.

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6. Digital Strategy & Coworking

During the first half 2019, Utopicus fulfilled the main objectives established:

1- Expansion of the number of centres and reinforcement of the Utopicus brand as leader in Spain

2- Occupancy and optimization of the centres in operation

Expansion and positioning of the Utopicus brand

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Occupancy and optimization of the centres in operation

. In the first half of 2019, efforts were also concentrated on the improvement in occupancy and optimization of the centres in operation opened in 2018. For example, a joint commercial campaign between Utopicus and Colonial has been launched with the objective of making the new flexible spaces known to the traditional clients of Colonial to generate new cross-sales.

. In this respect, of note is the good evolution of “The Window”, the new office building developed by Colonial in calle Príncipe de Vergara 122. This building combines an Utopicus centre of 4,000 sqm together with the GLA of traditional office space. The obtained results were successful, increasing the occupancy of the building with higher rental income than expected.

. It is also important to highlight the centre in Plaza Cataluña opened in May 2018, which after only 12 months in operation has already reached 94% occupancy, with technology companies as the main tenants.

Center City Status Entry in operation Surface Users MAX Occupancy 1 1 Duque de Rivas Madrid In operation 2010 976 123 55% 2 Colegiata Madrid In operation 2010 1,222 111 71% 3 Conde Casal Madrid In operation 2017 1,089 148 68% 4 Plaça Catalunya Barcelona In operation 2018 1,400 197 94% 5 Orense Madrid In operation 2018 1,827 239 67% 6 Principe Vergara Madrid In operation 2018 3,852 500 71% 7 Clementina Barcelona In operation 1Q 2019 600 75 56% 8 Gran Via Madrid In operation 1Q 2019 4,990 465 47% 9 Parc Glories Barcelona In operation 1Q 2019 2,002 195 64% 10 Gala Placídia Barcelona In operation 1H 2019 4,000 532 46% 11 Castellana,163 Madrid Project 2H 2019 3,660 448 n/a 12 Jose Abascal, 56 Madrid Project 2H 2019 2,351 278 n/a 13 Habana Madrid Project 2H 2020 5,791 762 n/a 14 Torre Marenostrum Barcelona Project 1H 2020 3,856 413 n/a Total 37,616 4,486

1 Commercial Occupancy as of 30/06/19

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7. Portfolio valuation

. At the end of the first half of 2019, the assets of the Colonial Group were appraised at €11,798m (€12,390m including transfer costs).

. The assets in Spain and France have been appraised by Jones Lang LaSalle, Cushman & Wakefield and CB Richard Ellis. The appraisal figures are updated half-yearly, following the best market practices, in compliance with the Regulation Standards of the Royal Institution of Chartered Surveyors (RICS) comprised in the Red Book valuation manual.

. The market valuations defined by the RICS are internationally recognized by advisors and accountants of investors and corporations that own real estate assets, as well as The European Group of Valuers (TEGoVA) and the International Valuation Standards Committee (IVSC). The appraisers’ fees are determined by the volume for the specific workout of each assignment. Gross Asset Values - Excluding transfer costs Jun 19 vs Dec 18 Jun 19 vs Jun 18 Asset valuation (€m) 30-jun-19 30-dec-18 30-jun-18 Total LfL (1) Total LfL (1)

Barcelona 1,268 1,175 973 8% 8% 30% 18% Madrid 2,460 2,511 2,760 (2%) 4% (11%) 9% París 6,484 6,256 6,242 4% 4% 4% 6%

Portfolio in operation (2) 10,211 9,942 9,974 3% 4% 2% 8%

Projects 1,099 925 762 19% 5% 44% 13%

Logistics & others 488 480 454 2% 2% 7% 7%

Colonial group 11,798 11,348 11,190 4% 4% 5% 9%

Spain 4,975 4,779 4,781 4% 5% 4% 12% France 6,823 6,570 6,409 4% 4% 6% 6%

Gross Asset Values - Including transfer costs

Colonial group 12,390 11,915 11,730 4% 4% 6% 9%

Spain 5,115 4,910 4,919 4% 5% 4% 12% France 7,276 7,005 6,811 4% 4% 7% 7% (1) Portfolio in comparable terms (2) Portfolio in operation: current rental portfolio as well as new entries into operation of completed projects

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. The Colonial Group’s Gross Asset Value at the close of the first half of 2019 amounted to €11,798m, a like-for-like year-on-year increase of +9% (+4% in 6 months). Including the impact of the sales carried out, the year-on-year increase was +5% (+4% in 6 months).

This increase in value is a consequence of the rental price increases and the compression of yields throughout the portfolio, complemented by the increases in value obtained through the successful execution of projects.

By segment, the Barcelona and Madrid portfolios reached a like-for-like year-on-year growth of +19% and +9%, respectively. It is important to specifically highlight the strong revaluation of +8% in the last 6 months in Barcelona.

The Paris portfolio increased +6% like-for-like year-on-year (+4% like-for-like in the first 6 months of 2019) clearly establishing a benchmark for growth in the Paris market.

In general terms, the increase in gross asset value is a consequence of three factors:

1. Rental price increases captured in recent quarters by the Colonial Group’s portfolio in the three markets 2. The Group’s industrial approach that enables superior value creation through portfolio repositioning and Prime Factory projects 3. A growing interest by investors in prime assets, driving down yields, especially in the Paris CBD market, which is one of the core markets that attracts more investors on a global level

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. The breakdown of the valuation of the Group’s rental portfolio by use, market and type of product is shown below:

. Regarding the valuation of the portfolio in operation, the main value parameters are as follows:

When comparing the valuation parameters of Colonial's appraisal values with market data, the following must be taken into consideration:

1. In Spain, consultants publish gross yields in their market reports (Gross yield = gross rent/value excluding transfer costs).

2. In France, consultants publish net yields in their market reports (Net yield = net rent/value including transfer costs).

(*) In Barcelona the sqm for the calculation of the capital value correspond to the surface above ground of all the assets in Barcelona, excluding the Parc Central, Plaza Europa Gala Placídia and Pedralbes Centre projects and the surface area of non-core retail assets. In Madrid, the sqm correspond to the surface above ground of all assets in Madrid, excluding the Méndez Álvaro complexes, the Puerto Somport 10-18, Sagasta 27, Miguel Ángel 23, Velázquez Padilla, Cedro y Castellana 163 projects, as well as the surface area of non-core retail assets. In France, the sqm correspond to the surface above ground of the entire portfolio, excluding the Emile Zola & Iéna project and including certain rentable surfaces below ground in the portfolio not corresponding to parking units.

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. The appraisal certificate is as follows:

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8. Financial structure

In the first half of 2019, Colonial finalized the restructuring of the pending debt coming from Axiare, cancelling various bilateral loans in the amount of €162m and refinancing two bilateral loans in the amount of €151m, improving margins and cancelling mortgage securities. The refinanced loans are sustainable loans as their margin will vary according to the rating that Colonial obtains with respect to ESG (environmental, social and corporate governance) from the sustainability agency, GRESB.

Short-term note issues were initiated under the ECP program registered in December 2018, with issues of €424m in effect as of 30 June 2019.

SFL has restructured a syndicate loan of €390m that has resulted in an improvement both in terms of margins as well as maturity. During the first half of the year, SFL also carried out short-term note issues being €354m the notes in effect as of June.

The main debt figures of the Group are as follows:

Colonial Group - €m 12/18 6/19 Var.

Gross financial debt 4,748 5,030 6% Net financial debt 4,680 4,700 0,4%

Total liquidity (1) 1,793 2,195 22% % debt fixed or hedged 97% 85% (12%) Average maturity of the debt (years)(2) 5.9 5.3 (0.6) Cost of current debt 1.77% 1.58% (20 p.b.) Rating Colonial (Moody's) BBB+ BBB+

Baa2 Baa2 Rating Colonial (S&P's) Negative Stable Rating SFL (S&Ps) BBB+ BBB+ - LtV Group (including transfer costs) 39.3% 37.9% (135 p.b.)

(1) Cash & Undrawn balances (2) Average maturity based on available debt

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The net financial debt of the Group at 30 June 2019 stood at €4,700m, the breakdown of which is as follows:

December 2018 June 2019 Var

Average €m Colonial SFL TOTAL Colonial SFL TOTAL TOTAL Cost maturity(2)

Sindicate loan 70 0 70 0 0 0 (70) - 4,6

Mortatge debt 314 201 515 76 200 276 (239) 1,33% 3,4

Bonds Colonial 2,600 - 2,600 2,600 - 2,600 0 2,05% 6,3

Bonds SFL - 1,200 1,200 - 1,200 1,200 0 1,83% 4,1

Issuances notes - 263 263 424 354 778 516 -0,20% 0,2

Other debt 50 50 100 125 50 175 75 1,02% 4,1

Gross debt 3,034 1,714 4,748 3,225 1,804 5,030 282 5,3

Cash (43) (25) (68) (287) (43) (330) (261)

Net Debt 2,991 1,688 4,680 2,938 1,761 4,700 20

Total liquidity (1) 848 945 1,793 1,162 1,033 2,195 401

Cost of debt - Spot (%) 1.95% 1.46% 1.77% 1.69% 1.37% 1.58% -20 p.b. 1,58% 5,3

(1) Cash & Undrawn balances (2) Average maturity calculated based on available balances

At the close of the first half of 2019, the Group’s gross debt amounted to €5,030m (compared to €5,378m at 30 June 2018) with a net debt of €4,700m (compared to €4,633m at 30 June 2018).

In terms of the maturity schedule, it is particularly noteworthy that 64% of the Group’s debt will mature as of 20231.

3,800.0

3,300.0

2,800.0

2,300.0

1,800.0

1,300.0

800.0

300.0

2,019 2,020 2,021 2,022 2,023 >2023 (200.0)

(1) Without considering tactical short term issuances notes

Financial results

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. The main figures of the financial result of the Group are shown in the following table:

. The debt refinancing operations of the Group carried out in 2018 and in the first quarter of 2019 have resulted in a reduction in the recurring financial result of more than 11% with respect to the same period of the previous year (or of more than 15% taking into account the financial result of the month of January 2018 of Axiare, not included in the consolidated data of Colonial as the takeover bid materialized with effect from 1 February 2018). The beformentioned improvement is the result of the debt restructuring that the Group has carried out the latest months, mainly: - Transactions of bond buy-back in Colonial and SFL and new issuances, improving interest rates and maturity - Cancellation of pending debt coming from Axiare - Implementation of short-term note issues program of Colonial and SFL amounting €1,000m

. The spot financial cost of the drawn debt at the close of the first half of 2019 amounted to 1.58% compared to 1.90% from the same period of the previous year (1.77% at December 2018). Including formalization costs, accrued over the life of the debt, the financial cost amounts to 1.70%.

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9. EPRA Net Asset Value & Share price performance

EPRA Net Asset Value (NAV)

Colonial closed the first half of 2019 with an EPRA Net Asset Value of €10.52/share resulting in a year-on- year increase in value of +16%, which together with the paid dividend of €0.20/share led to a Total Shareholder Return of 18% year-on-year

In absolute terms, the EPRA NAV amounted to more than €5,348m (+29% year-on-year).

(1) Total return understood as growth in NAV per share + dividends paid (2) Dividend of 0.20€/share, Goodwill absorption and other effects (3) The EPRA Net Asset Value (EPRA NAV) is calculated based on the Group’s consolidated equity and adjustments of specific items following EPRA recommendations.

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Calculation of the EPRA NAV: Following the EPRA recommendations and starting from the consolidated equity of €5,047m, the following adjustments were carried out:

1. Revaluation of investment assets: corresponding to latent capital gains (not accounted for on the balance sheet) of specific assets registered at acquisition cost, mainly own use assets. 2. Revaluation of other investments: register at fair value of several investments of the Group registered in the balance sheet at acquisition cost, mainly treasury shares 3. Adjustment of deferred taxes: adjustment of the amount of deferred taxes associated with the revaluation of the property assets (+€244m), registered on the balance sheet 4. Market value of financial instruments: adjustment of the market value (mark to market) of derivative instruments

At 30 June 2019, the EPRA NNNAV(*) amounted to €4,831m, which corresponds to €9.51/share

For its calculation, the following items have been adjusted in the EPRA NAV: the fair market value of the financial instruments, the market value of the debt, and the taxes that would be accrued in case of the disposal of the assets at their market value.

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Share price performance As at the date of publication of this report, Colonial’s shares closed at €10.13 per share with a revaluation of +25%, a figure above the benchmark indices (EPRA & IBEX35). With respect to its main competitors, Colonial is positioned at the top tier of the sector.

There are currently 19 analysts, both national and international, covering the company. It is worth highlighting the reports issued by Banco Sabadell, with a target price of €11.1/share, as well as Goldman Sachs with a target price of €11.3/share.

Target Price Institution Analyst Date Recommendation actual 1 Goldman Sachs Jonathan Kownator 24/07/2019 Buy 11,30 2 Banco Santander José Francisco Cravo 12/07/2019 Buy 10,60 3 Green Street Advisors Peter Papadakos 01/07/2019 Neutral Restricted 4 Alpha Value Laura Parisot 27/06/2019 Sell 10,10 5 ING Jaap Kuin 26/06/2019 Neutral 10,80 6 Renta4Banco Pablo Fernández 24/06/2019 Neutral 10,80 7 Banco Sabadell Ignacio Romero 20/06/2019 Buy 11,10 8 JB Capital Daniel Gandoy 20/06/2019 Neutral 10,40 9 BPI Flora Trindade 03/06/2019 Neutral 10,50 10 Barclays Celine Huynh 24/05/2019 Buy 10,60 11 Kepler Cheuvreux Mariano Miguel 24/05/2019 Neutral 10,40 12 Bankinter Jesús Amador 10/05/2019 Sell 7,80 13 Kempen & Co Max Mimmo 10/05/2019 Buy 10,90 14 Alantra Equities Fernando Abril-Martorell García 10/05/2019 Neutral 10,30 15 Mirabaud Ignacio Méndez 10/05/2019 Sell 8,14 16 JP Morgan Neil Green 09/05/2019 Buy 10,30 17 Morgan Stanley Bart Gysens 09/05/2019 Buy 11,00 18 Intermoney Valores Guillermo Barrio 09/05/2019 Neutral 9,50 19 Citi Aaron Guy 17/12/2018 Neutral 8,90

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Company shareholder structure

Colonial’s shareholder structure is as follows:

Shareholder structure at 3/07/2019 (*)

2 Free Float 58% 0.1%

16%

Grupo Finaccess1

20% Qatar Investment Authority Aguila LTD (Santo Domingo)

6% Free Float Treasury shares

(*) According to reports in the CNMV and notifications received by the company (1) Through Hofinac BV, Finaccess Capital, S.A. de C.V. and Finaccess Capital Inversores, S.L. (2) Free float: shareholders with minority stakes and without representation on the Board of Directors

Board of Directors

Name of Director Executive Nominations & Audit & Control Skills & Expertise Committee Remunerations Committee Committee

Former CEO and Chairman in Real Estate, Banking and Juan José Brugera Clavero Chairman Chairman Industrial sectors

Pere Viñolas Serra Chief Executive Officer Member Former CEO in Real Estate and financial sectors

Sheikh Ali Jassim M. J. Al-Thani Director International Trade, Finance and Real Estate sectors

Adnane Moussanif Director Member Member Real Estate transactions in Europe and America

Aguila LTD Juan Carlos García Cañizares Director Member Member International Investment Banking experience (Santo Domingo)

Carlos Fernández González Director Member Former CEO and Chairman of Modelo Group

Javier López Casado Director

S. Desazars de Montgailhard Independent Director Private banking and finance

Independent Coordinator Carlos Fernández-Lerga Garralda Member Chairman Member Doctor in Law with positions in EU organizations Director

Javier Iglesias de Ussel Ordís Independent Director Member Chairman Foreign trade and international marketing

Luis Maluquer Trepat Independent Director Member Member Consulting, legal advice, arbitration and mediation procedures

A. Bolado Valle Independent Director

A. Peralta Moreno Independent Director

Francisco Palá Laguna Secretary - Non-Director Secretary Secretary Secretary Finance and capital markets law in Spain

Nuria Oferil Coll Vice-secretary - Non-Director Vice-secretary Vice-secretary Vice-secretary Law with specialization in Real Estate and Town Planning

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10. EPRA Ratios & Consolidated Balance Sheet

EPRA Ratios

1) EPRA Earnings

EPRA Earnings - €m 1H 2019 1H 2018

Earnings per IFRS Income statement 338 254

Earnings per IFRS Income statement - €/share 0.665 0.583

Adjustments to calculate EPRA Earnings, exclude: (i) Changes in value of investment properties, development properties held for investment (419) (325) and other interests

(ii) Profits or losses on disposal of investment, development properties held for investment 1 (1) and other interests

(iii) Profits or losses on sales of trading properties including impairment changes in respect 0 0 of trading properties

(iv) Tax on profits or losses on disposals 0 0

(v) Negative goodwill / goodwill impairment 62 26

(vi) Changes in fair value of financial instruments and associated close-out costs 8 6

(vii) Acquisition costs on share deals and non controlling joint venture interests 2 0

(viii) Deferred tax in respect of EPRA adjustments 16 4

(ix) Adjustments (i) to (viii) above in respect of joint ventures (unless already included under 0 0 proportional consolidation (x) Minority interests in respect of the above 59 72 EPRA Earnings 67 36

Company specific adjustments: (a) Extraordinary provisions & expenses 2 (0) (b) Non recurring financial result 0 0 (c) Tax credits 0 7 (d) Minority interests in respect of the above (0) (1) Company specific adjusted EPRA Earnings 69 41 Average Nº of shares (m) 508.1 435.3 Company adjusted EPRA Earnings per Share (EPS) - €/share 0.135 0.095

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2) EPRA NAV

3) EPRA NNNAV

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4) EPRA Net initial Yield & Topped-up Net Initial Yield

5) EPRA Vacancy Rate

Annualized figures

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Consolidated balance sheet

€m 1H 2019 2018

ASSETS

Consolidated goodwill 0 62

Property investments 11,203 11,083

Other non-current assets 101 80

Non-current assets 11,304 11,225

Inventory 47 47

Debtors and other receivables 123 100

Other current assets 345 89

Assets available for sale 348 26

Current assets 862 262

TOTAL ASSETS 12,166 11,487

LIABILITIES

Equity 5,047 4,811

Minority interests 1,313 1,290 Net equity 6,360 6,102

Bond issues and other non-current issues 3,779 3,777

Non-current financial debt 511 724 Deferred tax 379 362

Other non-current liabilities 82 81

Non-current liabilities 4,751 4,943

Bond issues and other current issues 802 284 Current financial debt 6 9

Creditors and other payables 84 107 Other current liabilities 162 42

Current liabilities 1,055 442

TOTAL EQUITY & LIABILITIES 12,166 11,487

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11. Asset portfolio - Details

Barcelona

Note: In order to facilitate the analysis of the portfolio, part of the office buildings have been specified to be dedicated to retail/commercial use (generally on the ground floors). The assets in the Barcelona rental portfolio are 100% owned by Colonial, with the exception of the plot of land at Plaza Europa 34 which is held through a joint venture with Inmo, S.L. The assets in the Madrid rental portfolio and the rest of Spain are 100% owned by Colonial.

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Madrid

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Logistics & others

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France

Colonial has 81.7% of the share capital of SFL. SFL has 100% ownership of the totality of its rental portfolio with the exception of Washington Plaza of which it owns 66%, as well as the assets of Champs Élysées 90, Galerie Champs Élysées 82-88 and Haussmann 104-110 of which it owns 50%.

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12. Historical series

Offices historical series breakdown1

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 2019

Barcelona Physical Offices Occupancy (%) 97% 100% 99% 94% 95% 91% 78% 78% 79% 80% 77% 89% 97% 99% 99% 99% Rental revenues (€m) 55 53 56 60 51 49 39 32 31 28 28 27 30 35 41 23 Net Rental Income (€m) 53 51 55 58 49 47 37 28 27 25 23 23 28 34 39 21 NRI / Rental revenues (%) 95% 96% 97% 97% 96% 97% 93% 88% 89% 89% 85% 85% 92% 96% 94% 91%

Madrid Physical Offices Occupancy (%) 93% 98% 99% 99% 94% 89% 88% 90% 75% 80% 89% 95% 97% 94% 87% 89% Rental revenues (€m) 37 44 68 70 56 50 47 45 44 35 32 35 43 52 94 43 Net Rental Income (€m) 34 42 66 66 52 46 42 41 40 30 28 31 38 46 83 35 NRI / Rental revenues (%) 93% 94% 96% 95% 92% 92% 90% 90% 90% 86% 85% 88% 88% 88% 88% 80%

Paris Physical Offices Occupancy (%) 97% 96% 98% 99% 98% 94% 87% 92% 94% 80% 85% 95% 97% 96% 98% 98% Rental revenues (€m) 157 153 162 170 182 183 175 152 150 149 152 169 198 196 194 98 Net Rental Income (€m) 147 145 153 162 171 173 162 141 138 137 139 155 188 185 183 93 NRI / Rental revenues (%) 94% 95% 95% 95% 94% 94% 93% 93% 92% 92% 92% 92% 95% 94% 94% 95%

(1) Does not include logistics and others

Evolution of physical office occupancy

Office Occupancy(1) – Evolution of Colonial's Portfolio

PHYSICAL OCCUPANCY - SURFACE

98% 97% 96% 97% 96% 94% 94% 93% 92% 87% 84% 84%

TOTAL 83% 80%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 19

99% 99% 99% 99% 97% 94% 95% 91% 89%

78% 78% 79% 80% 77%

BARCELONA 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 19

99% 99% 97% 94% 94% 95% 89% 90% 89% 88% 89% 88% 80% 75%

MADRID

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 19

99% 98% 98% 98% 98% 97% 96% 94% 95% 92% 94% 87% 85% 80%

PARIS

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H 19

(1) Occupied surfaces /Surfaces in operation

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13. Group Structure

The Colonial Group Structure

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Shareholder structure and Board of Directors of SFL

SFL - Shareholder structure at 30/06/2018

5% 0% 13%

Colonial

Crédit Agricole Group

82% Free Float

Autocartera

Board of Directors SFL

Name of Director Executive Nominations & Audit & Control Independent Committee Remunerations Committee Directors Committee Committee

Juan José Brugera Clavero Chairman Chairman

Vice-Chairman - Pere Viñolas Serra Member Member Director

Carlos Fernández-Lerga Garralda Director Chairman

Carmina Ganyet Cirera Director Member Member

Angels Arderiu Ibars Director

Carlos Krohmer Director

Luis Maluquer Trepat Director

Nuria Oferill Coll Director

Ali Bin Jassim Al Thani Director

Jean-Jacques Duchamp Director Member Member

Chantal du Rivau Director

Arielle Malard de Rothschild Independent Director Member Member Member

Anthony Wyand Independent Director Chairman Member

Alexandra Rocca Independent Director Member

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14. Glossary & Alternative Performance Measures

Glossary

Earnings per share (EPS) Profit from the year attributable to the shareholders divided by the basic number of shares

BD Business District

Market capitalisation The value of the company's capital obtained from its stock market value. It is obtained by multiplying the market value of its shares by the number of shares in circulation

CBD Central Business District (prime business area)

Property company Company with rental property assets

Portfolio (surface area) in operation Property/surfaces with the capacity to generate rents at the closing date of the report

EBIT Calculated as the operating profit plus variance in fair value of property assets as well as variance in fair value of other assets and provisions.

EBITDA Operating result before net revaluations, disposals of assets, depreciations, provisions, interests, taxes and exceptional items. .

EPRA European Public Real Estate Association: Association of listed European property companies that sets best market practices for the sector

Free float The part of share capital that is freely traded on the stock market and not controlled in any stable way by shareholders

GAV excl. transfer costs Gross Asset Value of the portfolio according to external appraisers of the Group, after deducting transfer costs

GAV incl. transfer costs Gross Asset Value of the portfolio according to external appraisers of the Group, before deducting transfer costs

GAV Parent Company Gross Asset Value of directly-held assets + NAV of the 55% stake in the Torre Marenostrum SPV + Value JV Plaza Europa + NAV of 81.7% stake in SFL. + NAV stake in Axiare value of the portfolio

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Holding A company whose portfolio contains shares from a certain number of corporate subsidiaries.

IFRS International Financial Reporting Standards.

JV Joint Venture (association between two or more companies).

Like-for-like valuation Data that can be compared between one period and another (excluding investments and disposals).

LTV Loan to Value (Net financial debt/GAV of the business).

EPRA Like-for-like rents Data that can be compared between one period and another, excluding the following: 1) investments and disposals, 2) changes in the project and refurbishment portfolio, and 3) other extraordinary items, for example, indemnities from tenants in case of anticipated leave. Calculation based on EPRA Best Practices guidelines.

EPRA NAV EPRA Net Asset Value (EPRA NAV) is calculated based on the consolidated equity of the company and adjusting some items following the EPRA recommendations.

EPRA NNNAV The EPRA NNNAV is calculated adjusting the following items in the EPRA NAV: the fair market value of the financial instruments, the fair market value of the debt, the taxes that would be accrued with the sale of the assets at their market value applying tax benefits for reinvestments and the tax credit on balance, considering a going concern assumption.

EPRA Cost Ratio Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.

Physical Occupancy Percentage: occupied square metres of the portfolio at the closing date of the report/surfaces in operation of the portfolio

Financial Occupancy Financial occupancy according to the calculation recommended by the EPRA (occupied surface areas multiplied by the market rental prices/surfaces in operation at market rental prices).

4 EPRA Vacancy Vacant surface multiplied by the market rental prices/surfaces in operation at market rental prices. Calculation based on EPRA Best Practices guidelines.

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Reversionary potential This is the result of comparing the rental revenues from current contracts (contracts with current occupancy and current rents in place) with the rental revenues that would result from 100% occupancy at market prices, estimated by independent appraisers. Projects and refurbishments are excluded.

Projects underway Property under development at the closing date of the report

RICS Royal Institution of Chartered Surveyors

SFL Société Foncière Lyonnaisse

Take-up Materialized demand in the rental market, defined as new contracts signed

TMN SPV of Colonial (55%) and Naturgy (45%) related to the Torre Marenostrum building

Valuation Yield Capitalization rate applied by the independent appraisers in the valuation

Yield on cost Market rent 100% occupied/Market value at the start of the project net of impairment of value + invested capital expenditure.

Yield occupancy 100% Passing rents + vacant spaces rented at the market prices/market value

EPRA net initial yield (NIY) Annualised rental income based on passing rents as at the balance sheet date, reduced by the non-recoverable expenses, divided by the market value, including transfer costs (estimated purchasing costs)

EPRA Topped-Up Net Initial Yield EPRA Net Initial Yield adjusted in respect of the expiration of rent- free periods

Gross Yield Gross rents/market value excluding transfer costs

Net Yield Net rents/market value including transfer costs

€m In millions of euros

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Alternative performance measures

Alternative performance Method of calculation Definition/Relevance measure

EBIT Calculated as the “Operating profit” plus Indicates the Group’s capacity to generate (Earnings before interest and taxes) “Changes in the value of property profits, only taking into consideration its investments” and the “Profit/(loss) due to economic activity, less the effect of debt and changes in the value of assets” taxes.

EBITDA Calculated as the “Operating profit” adjusted Indicates the Group’s capacity to generate by “Depreciation/Amortization” and “Net profits only taking into account its economic (Earnings Before Interest, Taxes, changes in provisions” activity, eliminating allocations to Depreciation and Amortization) depreciation/amortization, and the effect of debt and taxes.

Gross financial debt Calculated as the total of all items under Relevant figure for analysing the financial “Bank borrowings and other and other situation. financial liabilities” and “Issues of debentures and similar securities”, excluding “Interest . (accrued), “Origination fees” and “Other financial liabilities” from the consolidated statement of financial position.

EPRA1 NAV Calculated based on the Company’s capital Standard analysis ratio in the real estate (EPRA Net Asset Value) and reserves, adjusting certain items in sector and recommended by EPRA. accordance with EPRA recommendations.

EPRA1 NNNAV Calculated adjusting the following items in Standard analysis ratio in the real estate (EPRA triple net asset value) the EPRA NAV: the market value of financial sector recommended by EPRA instruments, the market value of financial debt, the taxes that would be accrued with the sale of the assets at their market value, applying the tax benefits for reinvestments and the tax credit recognized in the balance sheet, considering a going concern assumption

Market value excluding transaction Measurement of the totality of the Group’s Standard analysis ratio in the real estate costs or Gross Asset Value (GAV) asset portfolio carried out by independent sector. excluding Transfer costs appraisers of the Group, less transaction or transfer costs.

Market value including transaction Measurement of the totality of the Group’s Standard analysis ratio in the real estate costs or GAV including Transfer asset portfolio carried out by external sector. costs appraisers of the Group, before deducting the transaction or transfer costs.

(1) EPRA (European Public Real Estate Association) or European Association of listed property companies which recommend the standards of best practices to be followed in the real estate sector. The method of calculation of these APMs is carried out following the indications established by EPRA.

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Alternative Performance Method of calculation Definition/Significance Measures

Like-for-like rental income Amount of the rental income included in the It enables a homogeneous comparison of the item “Revenues” comparable between two evolution of rental income of an asset or periods. To obtain the calculation, the income group of assets. from investments or disposals carried out in both periods are excluded, as well as the income deriving from assets included in the projects and refurbishments portfolio and other atypical adjustments (for example, penalties for early termination of rental contracts).

Like-for-like measurement Market measurement (valuation) amount, It enables a homogenous comparison of the excluding transaction costs, or market evolution of the market valuation of the valuation, including transaction costs, portfolio. comparable between two periods. To obtain the calculation, the rental income coming from investments or disposals carried out between both periods is excluded.

Loan to Value, Group or LTV Group Calculated as the result of dividing the gross It enables the analysis of the ratio between financial debt (reduced by the amount in the the net financial debt and the valuation of the item “Cash and cash equivalents”) by the Group’s asset portfolio. market valuation including the transaction costs of the Group’s asset portfolio plus the treasury shares of the Parent Company at Nav value.

LTV Holding or LTV Colonial Calculated as the result of dividing the gross It enables the analysis of the ratio between financial debt (less the amount in the item the net financial debt and the valuation of the “Cash and cash equivalents”) of the Parent parent company’s asset portfolio. Company and 100% owned subsidiary companies by the market valuation, including transaction costs, of the parent company’s asset portfolio and the EPRA NAV of all financial stakes in subsidiary companies.

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15. Contact Details & Disclaimer

Contact details

Investor Relations

Tel. +34 93 404 7898 [email protected]

Shareholders Office

Tel. +34 93 404 7910 [email protected]

Colonial Website www.inmocolonial.com

Capital Market registry data – Stock market

Bloomberg: COL.SM ISIN Code: ES0139140042 Indices: MSCI, EPRA (FTSE EPRA/NAREIT Developed Europe y FTSE EPRA/NAREIT Developed Eurozone), IBEX35, Global Property Index 250 (GPR 250 Index) & EUROSTOXX 600.

About Colonial

Inmobiliaria Colonial, SOCIMI, S.A.

Barcelona office Avenida Diagonal, 532 08006 Barcelona

Madrid office Pº de la Castellana, 52 28046 Madrid

Paris office 42, rue Washington 75008 Paris

Colonial is a Spanish listed REIT company (SOCIMI), leader in the European Prime office market with presence in the main business areas of Barcelona, Madrid and Paris with a prime office portfolio of more than two million sqm of GLA and assets under management with a value of more than €11bn.

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Disclaimer

The delivery of this document implies the acceptance, commitment and guarantee to have read and agreed to comply with the contents of this disclaimer.

The information contained in this presentation (“Presentation”) has been prepared by Inmobiliaria Colonial, SOCIMI S.A. (the “Company”) and has not been independently verified and will not be updated. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein and nothing in this Presentation is, or shall be relied upon as, a promise or representation. None of the Company nor any of its employees, officers, directors, advisers, representatives, agents or affiliates shall have any liability whatsoever (in negligence or otherwise, whether direct or indirect, in contract, tort or otherwise) for any loss howsoever arising from any use of this Presentation or its contents or otherwise arising in connection with this Presentation.

This Presentation is for information purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the Company’s publicly available information and, if applicable, the oral briefing provided by the Company. The information and opinions in this presentation are provided as at the date hereof and subject to change without notice. It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the Company’s financial or trading position or prospects.

This Presentation does not constitute investment, legal, accounting, regulatory, taxation or other advice and does not take into account your investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. You are solely responsible for forming your own opinions and conclusions on such matters and for making your own independent assessment of the Company. You are solely responsible for seeking independent professional advice in relation to the Company. No responsibility or liability is accepted by any person for any of the information or for any action taken by you or any of your officers, employees, agents or associates on the basis of such information.

This Presentation contains financial information regarding the businesses and assets of the Company. Such financial information may not have been audited, reviewed or verified by any independent accounting firm. The inclusion of such financial information in this Presentation or any related presentation should not be regarded as a representation or warranty by the Company, its affiliates, advisors or representatives or any other person as to the accuracy or completeness of such information’s portrayal of the financial condition or results of operations by the Company and should not be relied upon when making an investment decision. Certain financial and statistical information in this document has been subject to rounding off adjustments. Accordingly, the sum of certain data may not conform to the expressed total.

Certain statements in this Presentation may be forward-looking. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These include, among other factors, changing economic, business or other market conditions, changing political conditions and the prospects for growth anticipated by the Company’s management. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Any forward-looking statements contained in this Presentation and based upon past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The market and industry data and forecasts that may be included in this Presentation were obtained from internal surveys, estimates, experts and studies, where appropriate as well as external market research, publicly available information and industry publications. The Company, it affiliates, directors, officers, advisors and employees have not independently verified the accuracy of any such market and industry data and forecasts and make no representations or warranties in relation thereto. Such data and forecasts are included herein for information purposes only. Accordingly, undue reliance should not be placed on any of the industry or market data contained in this Presentation.

The distribution of this Presentation in other jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions.

NEITHER THIS DOCUMENT NOR ANY OF THE INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFER OF PURCHASE, SALE OR EXCHANGE, NOR A REQUEST FOR AN OFFER OF PURCHASE, SALE OR EXCHANGE OF SECURITIES, OR ANY ADVICE OR RECOMMENDATION WITH RESPECT TO SUCH SECURITIES.

29 July 2019 65 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b Inmobiliaria Colonial, SOCIMI, S.A. and its subsidiaries

Report on limited review of condensed interim consolidated financial statements and Interim consolidated directors' Report for the six months period ended at 30 June 2019 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b pwc

This version of our report is a free translation of the original, which will be prepared in Spanish. A ll possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of our report takes precedence over this translation.

REPORT ON LIMITED REVIEW OF CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

To the shareholders of Inmobiliaria Colonial, SOCIMI, S.A.:

Introduction

We have performed a limited review of the accompanying condensed interim consolidated financial statements (hereinafter, the interim financial statements) of Inmobiliaria Colonial, SOCIMI, S.A. , S.A. (hereinafter, "the parent company") and its subsidiaries (hereinafter, "the group"), which comprise the statement of financial position as at June 30, 2019, and the abridged income statement, comprehensive income statement, statement of changes in equity, cash flow statement and related notes, all condensed and consolidated, for the six months period then ended. The parent company's directors are responsible for the preparation of these interim financial statements in accordance with the requirbements of International Accounting Standard (IAS) 34, "Interim Financial Reporting", as adopted by the European Union, for the preparation of condensed interim financial information, as provided in Article 12 of Royal Decree 1362/2007. Our responsibility is to express a conclusion on these interim financial statements based on our limited review.

Scope of Review

We conducted our limited review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A limited review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A limited review is substantially less in scope than an audit conducted in accordance with legislation governing the audit practice in Spain and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion on these interim financial statements.

Conclusion

Based on our limited review, that cannot be considered as an audit, nothing has come to our attention that causes us to believe that the accompanying interim financial statements for the six months period ended June 30, 2019 have not been prepared, in all material respects, in accordance with the requirements of International Accounting Standard (IAS) 34, "Interim Financial Reporting", as adopted by the European Union, for the preparation of condensed interim financial statements, as provided in Article 12 of Royal Decree 1362/2007.

Emphasis of Matter

We draw attention to Note 2, in which it is mentioned that these interim financial statements do not include all the information required of complete consolidated financial statements prepared in accordance with International Financial Reporting Standards, as adopted by the European Union, therefore the accompanying interim financial statements should be read together with the consolidated annual accounts of the group for the year ended December 31, 2018. Our conclusion is not modified in respect of this matter.

PricewaterhouseCoopers Auditores, S.L., Torre PwC, P0 de la Castellana 259 B, 28046 Madrid, Espana Tel.: +34 915 684 400 / +34 902 021111, Fax: +34 915 685 400, www.pwc.es 1

R. M. Madrid , hoja 87.250-1, folio 75, tome 9.267, libro 8.054, secci6n 3' lnscrita en el R.O.A.C. con el numero S0242 - CI F: B-79 031290 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b pwc

Other Matters

Interim consolidated directors ' Report

The accompanying interim consolidated directors' Report for the six months period ended June 30, 2019 contains the explanations which the parent company's directors consider appropriate regarding the principal events of this period and their impact on the interim financial statements presented, of which it does not form part, as well as the information required under the provisions of Article 15 of Royal Decree 1362/2007. We have verified that the accounting information contained in this directors' Report is in agreement with that of the interim financial statements for the six months period ended June 30, 2019. Our work is limited to checking the interim consolidated directors' Report in accordance with the scope mentioned in this paragraph and does not include a review of information other than that obtained from Inmobiliaria Colonial, SOCIMI, S.A. and its subsidiaries, accounting records.

Preparation of this review report

This report has been prepared at the request of the Board of Directors of the Parent Company in relation to the publication of the half-yearly financial report required by Article 119 of Royal Legislative Decree 4/ 2015 of 23 October, approving the revised text of the Securities Market Law developed by the Royal Decree 1362/2007, of 19 October.

PricewaterhouseCoopers Auditores, S.L. (So242)

Original in Spanish signed by Jose M Sole Farre (05565)

26 July 2019

2 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b

Inmobiliaria Colonial, SOCIMI, S.A. and Subsidiaries

Condensed Consolidated Interim Financial Statements and Consolidated Interim Management Report for the six-month period ended 30 June 2019

Translation of Condensed Consolidated Interim Financial Statements and Consolidated Interim Directors’ Report originally issued in Spanish. In the event of discrepancy, the Spanish version prevails.

WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b Translation of Condensed Consolidated Interim Financial Statements and Consolidated Interim Directors’ Report originally issued in Spanish. In the event of discrepancy, the Spanish version prevails.

INMOBILIARIA COLONIAL, SOCIMI, S.A. AND SUBSIDIARIES (COLONIAL GROUP)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2019 (Thousands of Euros)

ASSET Note 30 June 2019 31 December 2018 LIABILITIES AND EQUITY Note 30 June 2019 31 December 2018

Goodwill 4 - 62,225 Share capital 1,270,287 1,270,287 Intangible assets 5,041 3,759 Issue premium 1,513,749 1,578,439 Material property 5 63,210 43,332 Reserves of the Parent 226,400 215,990 Investment properties 6 11,203,011 11,083,133 Reserves in consolidated companies 1,696,814 1,223,497 Non-current financial assets 31,518 32,454 Valuation adjustments recognised in equity - financial instruments (2,063) (2,078) Non-current deferred tax assets 1,077 411 Other equity instruments 7,112 6,017 NON-CURRENT ASSETS 11,303,857 11,225,314 Treasury shares (2,798) (5,606) Income for the financial year 337,669 524,763 Equity attributable to shareholders of the Parent 5,047,170 4,811,309 Non-controlling interests 1,312,785 1,290,486 EQUITY 9 6,359,955 6,101,795

Bank borrowings and other financial liabilities 10 511,284 723,928 Bonds and similar securities issued 10 3,779,146 3,776,866 Non-current deferred tax liabilities 13 389,750 374,882 Non-current provisions 1,487 1,380 Inventories 46,872 46,587 Other non-current liabilities 69,789 66,333 Trade and other receivables 7 122,655 99,972 NON-CURRENT LIABILITIES 4,751,456 4,943,389 Current financial assets 90 1,300 Tax assets 14,809 19,757 Bank borrowings and other financial liabilities 10 6,217 9,100 Cash and cash equivalents 10 329,785 68,293 Bonds and similar securities issued 10 802,458 284,242 CURRENT ASSETS 514,211 235,909 Trade and other payables 12 209,858 114,779 Tax liabilities 26,359 16,349 Assets classified as held for sale 8 347,891 26,091 Current provisions 9,656 17,660 CURRENT LIABILITIES 1,054,548 442,130 TOTAL ASSETS 12,165,959 11,487,314 TOTAL LIABILITIES AND EQUITY 12,165,959 11,487,314

Notes 1 to 18 to the financial statements are an integral part of the abridged consolidated statement of financial position for the six-month period ended 30 June 2019.

2 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b Translation of Condensed Consolidated Interim Financial Statements and Consolidated Interim Directors’ Report originally issued in Spanish. In the event of discrepancy, the Spanish version prevails.

INMOBILIARIA COLONIAL, SOCIMI, S.A. AND SUBSIDIARIES (COLONIAL GROUP) CONSOLIDATED ABRIDGED INCOME STATEMENT AND COMPREHENSIVE INCOME STATEMENT FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019 (Thousands of Euros)

Income statement Note June 2019 June 2018

Net turnover amount 14-a 175,865 170,719 Other revenue 3,274 1,349 Personnel expenses (14,800) (13,384) Other operating expenses (31,932) (32,474) Depreciation and amortisation charge (3,298) (1,452) Net change in provisions 4,982 4,025 Net gain/(loss) on sales of assets 14-b (986) 713

Operating profit 133,105 129,496

Changes in fair value of investment property 14-c 418,509 324,210 Losses due to impairment of assets 14-c (61,685) (25,141)

Finance income 14-d 3,276 3,653 Finance costs 14-d (56,346) (59,783) Impairment of financial assets 14-d - (241) Loss before tax 436,859 372,194

Income tax expense (20,829) (15,780) Consolidated net profit 416,030 356,414

Net profit for the year attributable to the Parent 337,669 253,912 Net profit attributable to non-controlling interests 9 78,361 102,502

Basic earnings per share (€) 3 0.67 0.59 Diluted earnings per share (€) 3 0.67 0.59

Statement of comprehensive income

Consolidated net profit 416,030 356,414

Other components of comprehensive income recognised directly in equity (1,707) (60,761) Gains on hedging instruments 10 and 11 (1,925) (2,250) Gains/(losses) on available-for-sale financial assets 8 - (58,461) Tax effect on prior years' profit or loss 10 and 11 218 (50)

Transfers to comprehensive income 2,166 (64) Gains on hedging instruments 9 2,713 (86) Tax effect on prior years' profit or loss (547) 22 Consolidated comprehensive income 416,489 295,589

Comprehensive profit/(loss) for the year attributable to the Parent 338,292 193,371 Comprehensive profit/(loss) attributable to non-controlling interests 78,197 102,218

Comprehensive basic earnings per share (euros) 0.67 0.45 Comprehensive diluted earnings per share (euros) 0.67 0.45

Notes 1 to 18 to the financial statements are an integral part of the condensed consolidated statement of comprehensive income. for the six-month period ended 30 June 2019.

3 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b Translation of Condensed Consolidated Interim Financial Statements and Consolidated Interim Directors’ Report originally issued in Spanish. In the event of discrepancy, the Spanish version prevails.

INMOBILIARIA COLONIAL, SOCIMI, S.A. AND SUBSIDIARIES (COLONIAL GROUP)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019 (Thousands of Euros)

Valuation adjustments Valuation recognised in adjustments on Equity Reserves of Reserves in equity - available-for- attributable to Share Issue the Parent consolidated financial sale financial Other equity Treasury Profit for the shareholders Non-controlling Note capital premium Company companies instruments assets instruments shares year of the Parent interests Total Balance at 31 December 2017 9 1,088,293 1,126,248 245,118 406,366 (559) 70,415 4,686 (31,262) 682,523 3,591,828 2,087,870 5,679,698

Total recognised income and expense for the period - - - - (1,519) (54,777) - - 524,763 468,467 153,359 621,826

Transactions with shareholders: Share capital increase 181,994 463,517 (1,149) ------644,362 - 644,362 Treasury share portfolio - - 7,332 - - - - 22,754 - 30,086 - 30,086 Distribution of 2017 profit/(loss) - (11,326) (33,798) 650,026 - - - - (682,523) (77,621) (52,273) (129,894) Share-based payment transactions - - (1,513) - - - 1,667 2,902 - 3,056 358 3,414 Changes in the scope of consolidation - - - 151,426 - - - - - 151,426 (899,425) (747,999) Other changes - - - 15,679 - (15,638) (336) - - (295) 597 302

Balance at 31 December 2018 9 1,270,287 1,578,439 215,990 1,223,497 (2,078) - 6,017 (5,606) 524,763 4,811,309 1,290,486 6,101,795

Change in accounting policy (Note 1-b) - - - (887) - - - - - (887) (104) (991)

Balance at 31 December 2018 adjusted 1,270,287 1,578,439 215,990 1,222,610 (2,078) - 6,017 (5,606) 524,763 4,810,422 1,290,382 6,100,804

Total recognised income and expense for the period - - - - 623 - - - 337,669 338,292 78,197 416,489

Transactions with shareholders: Treasury share portfolio ------(14) - (14) - (14) Distribution of 2018 loss - (64,690) (569) 488,455 - - - - (524,763) (101,567) (30,744) (132,311) Share-based payment transactions - - (1,131) - - - 990 2,822 - 2,681 186 2,867 Changes in the scope of consolidation - - 12,110 (13,301) (608) - - - - (1,799) (26,265) (28,064) Other changes - - - (950) - - 105 - - (845) 1,029 184

Balance at 30 June 2019 9 1,270,287 1,513,749 226,400 1,696,814 (2,063) - 7,112 (2,798) 337,669 5,047,170 1,312,785 6,359,955

Notes 1 to 18 to the financial statements are an integral part of the condensed consolidated statement of changes in equity for the six-month period ended 30 June 2019.

4 WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b Translation of Condensed Consolidated Interim Financial Statements and Consolidated Interim Directors’ Report originally issued in Spanish. In the event of discrepancy, the Spanish version prevails.

INMOBILIARIA COLONIAL, SOCIMI, S.A. AND SUBSIDIARIES (COLONIAL GROUP) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019 (Thousands of euros)

Note June 2019 June 2018 CASH FLOWS IN CONTINUING OPERATIONS 1. CASH FLOWS FROM OPERATING ACTIVITIES Profit/(loss) from operations 133,105 129,496 Adjustments to profit Depreciation and amortisation (+) 3,298 1,452 Net change in provisions (+/-) (4,982) (4,025) Others 1,857 1,458 Gains/(losses) on sale of investment property (+/-) 986 (713) Adjusted profit 134,264 127,668

Taxes paid (-) 8,963 8,754

Interest received (+) 858 -

Increase/(decrease) in current assets and liabilities Inventories (+/-) (285) - Increase/(decrease) in receivables (+/-) (9,481) 17,388 Increase/(decrease) in payables (+/-) (5,523) (78,897) Increase/(decrease) in other assets and liabilities (+/-) 1,162 2,497 Total net cash flows from/(used in) operating activities 129,958 77,410 2. CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Investments in (-) Intangible assets (2,620) (1,091) Property, plant and equipment 5 (6,767) (622) investment property 6 (47,329) (83,272) Non-current financial assets and others 2 (28,094) (69,123) Business combinations - (843,149) Cash and cash equivalents acquired in a business combination - 160,157 (84,810) (837,100) Divestments in (+) investment property 6 11,850 36,881 11,850 36,881 Total net cash flows in investing activities (72,960) (800,219) 3. CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES Dividends paid (-) 9 (30,744) (115,162) Repayment of bank borrowings (-) 10 (309,771) (618,313) Interest paid (+/-) (40,585) (55,589) Cancellation of financial derivatives (-) 14-d (6,008) (1,452) Treasury share transactions (+/-) 9 (14) (39) (387,122) (790,555) New bank borrowings obtained (+) 10 75,000 - New bondholder borrowings obtained (+) 10 515,600 1,150,000 Other proceeds/(payments) for current financial assets and other (+/-) 1,016 4,020 591,616 1,154,020 Total net cash flows from/(used in) financing activities 204,494 363,465 4. NET INCREASE / DECREASE IN CASH AND CASH EQUIVALENTS Net cash flow for the period in continuing activities 261,492 (359,344) Cash and cash equivalents at beginning of period 10 68,293 1,104,601 Cash and cash equivalents at end of the financial year 10 329,785 745,257

Notes 1 to 18 to the financial statements are an integral part of the condensed consolidated statement of cash flows for the six-month period ended 30 June 2019.

Inmobiliaria Colonial, SOCIMI, S.A. and Subsidiaries

Explanatory notes to the Condensed Consolidated Interim Financial Statements for the six-month period ended 30 June 2019

1. Introduction, basis of presentation of the condensed consolidated interim financial statements and other information

a) Introduction

Inmobiliaria Colonial, S.A., is a public limited company incorporated in Spain, for an indefinite period, on 8 November 1956. Its registered offices are at Paseo de la Castellana, 52, Madrid.

On 29 June 2017, the shareholders at the Parent's Annual General Meeting resolved to adopt the SOCIMI (hereinafter, REIT) tax regime and to make the corresponding bylaw amendments to bring the company's bylaws into line with the requirements stipulated in this regime, which includes changing the corporate name to Inmobiliaria Colonial, SOCIMI, S.A.

On 30 June 2017, the Parent submitted a request to the tax authorities to be included in the REIT tax regime, applicable as of 1 January 2017.

The Parent’s corporate purpose, as set out in its bylaws, is as follows:

▪ the acquisition and development of urban properties for lease;

▪ the ownership of interests in the share capital of listed real estate investment companies (REITs) or other non-resident entities in Spain with the same corporate purpose, which are subject to a regime similar to that established for REITs in relation to the obligatory profit distribution policy stipulated by law or the bylaws;

▪ the ownership of interests in the share capital of other resident or non-resident entities in Spain, the main corporate purpose of which is the acquisition of urban properties earmarked for lease, which are subject to the regime established for REITs in relation to the obligatory profit distribution policy stipulated by law or the bylaws and meet the investment requirements stipulated for these companies; and

▪ the ownership of shares or equity interests in collective real estate investment undertakings governed by Law 35/2003, of 4 November, on collective investment undertakings, or any law that may replace it in the future.

In addition to the economic activity relating to the main corporate purpose, the Parent may also carry on any other ancillary activities, i.e., those that generate income, which in total represents less than 20% of the Parent’s income in each tax period, or those that may be considered ancillary activities under the legislation applicable at any time, including, in any case, the management, refurbishment and operation of properties and the performance of all manner of studies, reports, appraisals, valuations and surveys; and in general, the provision of real estate consulting and advisory services, property asset management, development and marketing services, and technical assistance through contracts with other public or private companies or entities.

Activities that by law are attributable exclusively to special purpose vehicles are expressly excluded from its corporate purpose.

All activities included in the corporate purpose will be carried out as authorised by current legislation at any given time, expressly excluding its own activities that are exclusively granted by prevailing legislation to individuals or legal entities other than this Parent.

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The Parent may also carry out the aforementioned activities, in full or in part, indirectly through ownership interests in other companies with an identical or similar corporate purpose.

Inmobiliaria Colonial, SOCIMI, S.A. and Subsidiaries (“the Group”) carry out their activities in Spain (mainly in Barcelona and Madrid) and in France (Paris) through the group of which it is the parent Société Foncière Lyonnaise, S.A. (hereinafter, the “SFL subgroup” or “SFL” for the subsidiary).

Inmobiliaria Colonial, SOCIMI, S.A. is listed on the Spanish electronic trading system and Stock Exchange and has been included in the benchmark stock market index IBEX-35 since June 2017.

Standard & Poor’s Rating Credit Market Services Europe Limited has maintained the Parent’s and subsidiary SFL's "BBB+" long-term credit rating and an A-2 short-term credit rating, both with a stable outlook. In addition, the Parent obtained a "Baa2" credit rating with a negative outlook from Moody’s, which has improved during the year to a stable outlook.

Given its business activity, the Group has no environmental expenses, assets, provisions or contingencies that might be significant with respect to its equity, financial position or performance. Therefore, no specific disclosures relating to environmental issues are included in these notes. However, the Group does apply a proactive environmental policy in relation to urban development, construction, maintenance and the preservation of its property portfolio.

The consolidated financial statements of the Group for 2018 were approved at the General Shareholders' Meeting of the Company held on 14 June 2019. b) Basis of presentation of the condensed consolidated interim financial statements

In accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, all companies governed by the laws of a Member State of the European Union and whose securities are traded on a regulated market in any European Union country must file consolidated financial statements for periods beginning on or after 1 January 2005 in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union.

The Group’s 2018 consolidated financial statements were prepared by the Parent’s directors in accordance with the International Financial Reporting Standards as adopted by the European Union, applying the consolidation, accounting and measurement principles, policies and bases set forth in Note 4 to said consolidated financial statements in order to present a true and fair view of the Group’s consolidated equity and consolidated financial position at 31 December 2018 and the consolidated results of its operations, changes in consolidated equity and the consolidated cash flows in the year then ended.

These condensed consolidated interim financial statements for the six month-period ended 30 June 2019 are presented in accordance with IAS 34 Interim Financial Reporting, and were authorised for issue by the Parent’s directors on 25 July 2019 in accordance with Article 12 of Spanish Royal Decree 1362/2007.

In accordance with IAS 34, the interim financial report is intended to provide an update on the latest complete set of the Group’s annual consolidated financial statements, focusing on new activities, events and circumstances that took place during the six months and not duplicating information previously reported in the 2018 consolidated financial statements. Accordingly, for a proper understanding of the information included in these condensed consolidated interim financial statements, they must be read in conjunction with the Group's consolidated financial statements for 2018.

The accounting policies and methods used in preparing these condensed consolidated interim financial statements are the same as those applied in the consolidated financial statements for 2018.

However, since the accounting policies and measurement bases used in preparing the Group's consolidated interim financial statements for the six-month period ended 30 June 2019 may differ from those used by certain Group entities, the required adjustments and reclassifications were made on consolidation to unify such policies and bases and to make them compliant with IFRS and with the accounting policies and standards followed by the Parent.

WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b

The SFL Group, included in the scope of consolidation, was the subject of a limited review at 30 June 2019 on a shared basis between the Group's auditor, Deloitte & Associés and PriceWaterhouseCoopers Audit.

Standards and interpretations effective this year

New accounting standards became effective during the six-month period ended 30 June 2019, and were applied accordingly in preparing these condensed consolidated interim financial statements. These new standards are as follows:

- IFRS 16, "Leases"

- IFRS 9 (Amendment) “Prepayment component with negative compensation”

- IFRIC 23 "Uncertainty over income tax treatments"

- IAS 28 (Amendment) “Long-term interests in associates and joint ventures”

- IAS 19 (Amendment) “Plan amendment, curtailment or settlement”.

- Annual improvements to IFRSs. 2015-2017 Cycle: The amendments affect IFRS 3, IFRS 11, IAS 12 and IAS 23 and apply to annual periods beginning on or after 1 January 2019, all of which are subject to adoption by the EU. The main amendments refer to

o IFRS 3 "Business combinations": An investment previously held in a joint venture is measured again when control over the business is obtained.

o IFRS 11 "Joint arrangements": An investment previously held in a joint venture is not measured again when joint control over the business is obtained.

o IAS 12 "Income taxes": All tax consequences relating to the payment of dividends are recognised in the same manner.

o IAS 23 "Borrowing costs": Any specific loan originally obtained to develop a qualifying asset is considered part of general borrowings when the asset is ready for use or sale.

These standards have been taken into account with effect from 1 January 2019 and their impact has been reflected in these condensed consolidated interim financial statements, which have not been significant except for:

IFRS 16, "Leases"

The impacts for Colonial Group, associated with operating lease agreements from its subsidiary Utopicus, were as follows:

- The Group has adopted IFRS 16 retroactively from 1 January 2019, although it has not restated the comparative figures for 2018, as permitted under the specific transitional provisions of the standard. Reclassifications and adjustments arising from the new lease rules are therefore recognised in the initial condensed consolidated statement of financial position at 1 January 2019.

- With the adoption of IFRS 16, the group recognised lease liabilities in relation to leases that had previously been classified as operating leases under the principles of IAS 17 - Leases. These liabilities were measured at the current value of the remaining lease payments, discounted using the lessee's incremental borrowing rate at 1 January 2019. The weighted average incremental borrowing rate of the lessee applied to the lease liabilities on 1 January 2019 was 5.158%.

WorldReginfo - 4e3833ca-a1ca-4e22-860d-ff323152a42b

The new valuations of the lease liabilities were recognised as adjustments to the corresponding right- of-use assets immediately after the initial effective date.

Thousands of euros 1 January 2019

Operating lease commitments presented at 31 December 2018 22,591 Discounted using the lessee's incremental borrowing rate on the initial application date 17,914 Lease liability recognised at 1 January 2019 17,914 Which are: Current lease liabilities 2,298 Non-current lease liabilities 15,616 17,914

Right-of-use assets associated with property leases were valued on a retroactive basis as if the rules had always been applied. Recognised right-of-use assets relate to the following types of assets:

Thousands of Euros 30 June 2019 1 January 2019

Properties 13,621 16,593 Total right-of-use assets 13,621 16,593

The change in accounting policy affected the following items in the condensed consolidated statement of financial position as of 1 January 2019:

▪ Property, plant and equipment - Right-of-use assets - increase of 16,593 thousand euros (Note 5).

▪ Non-current deferred tax assets - increase of 330 thousand euros.

▪ Bank borrowings and other financial liabilities - Lease liabilities - increase of 17,914 thousand euros (Note 10).

The net impact on consolidated reserves and non-controlling interests at 1 January 2019 was a decrease of 887 thousand euros and 104 thousand euros, respectively.

Earnings per share for the six months ended 30 June 2019 have not changed significantly as a result of the adoption of IFRS 16.

In applying IFRS 16 for the first time, the Group has used the following practical solutions permitted by the standard:

▪ the use of a single discount rate for a portfolio of leases with reasonably similar characteristics,

▪ reliance on whether leases are previously recognised as onerous,

▪ accounting for operating leases with a remaining lease term of less than 12 months at 1 January 2019 as short-term leases,

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▪ the exclusion of initial direct costs from the measurement of the right-of-use asset on the date of initial application, and

▪ hindsight to determine the lease term when the contract contains options to extend or terminate the lease.

The Group has chosen not to reassess whether a contract is, or contains, a lease on the date of initial application. Instead, for contracts signed before the transition date, the Group relies on its assessment under IAS 17 and IFRIC4 - Determining Whether an Arrangement Contains a Lease.

The subsidiary rents several offices. Rental contracts are normally entered into for fixed terms of 4 to 10 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Lease agreements do not impose covenants, but leased assets cannot be used as collateral for loans.

Until 2018, rentals of property, plant and equipment were classified as operating leases. Payments made under operating leases (net of any incentive received from the lessor) were charged to income on a straight-line basis over the term of the lease.

Since 1 January 2019, leases have been recognised as a right-of-use asset and the corresponding liability on the date on which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and the financial cost. The financial cost is charged to income during the term of the lease so as to produce a constant periodic interest rate on the remaining balance of the liability for each year. The right-of-use asset is depreciated over the useful life of the asset or the shorter of the two lease terms on a straight-line basis.

Assets and liabilities arising from a lease are initially measured at current value. Lease liabilities include the net current value of the following lease payments:

▪ fixed payments (including essentially fixed payments), less any lease incentive receivable,

▪ variable lease payments that depend on an index or rate,

▪ the amounts expected to be paid by the lessee as guaranteed residual values,

▪ the exercise price of a purchase option if the lessee is reasonably certain that they will exercise that option, and

▪ lease termination penalty payments, if the term of the lease reflects the lessee's exercising of that option.

Lease payments are discounted using the interest rate included in the lease. If that rate cannot be determined, the incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic backdrop with similar terms and conditions.

Right-of-use assets are measured at cost that includes the following:

▪ the amount of the initial valuation of the lease liability,

▪ any lease payment made on or before the start date less any lease incentive received,

▪ any initial direct costs, and

▪ restoration costs.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense. Short-term leases are leases with a lease term of 12 months or less.

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Standards and interpretations issued but not yet in force

At the date of signing of these condensed consolidated interim financial statements, the following standards, amendments and interpretations had been published by the IASB but had not become effective, either because they came into effect after the date of the condensed consolidated interim financial statements or because they had yet to be endorsed by the European Union:

- IFRS 10 (Amendment) and IAS 28 (Amendment) “Sale or contribution of assets between an investor and its associate or joint venture”.

- IFRS 17 "Insurance contracts".

- IFRS 3 (Amendment) "Definition of a business".

- IAS 1 (Amendment) and IAS 8 (Amendment) "Definition of material".

As indicated in Note 2 b) to the consolidated financial statements for the year ended 31 December 2018, the application of new standards, amendments and interpretations will be considered by the Group once they have been ratified and approved, where appropriate, by the European Union.

The Parent has in any case reviewed the potential impacts of the future application of these standards and, as indicated in the 2018 financial statements, considers that they will not have a significant effect on the Group's consolidated financial statements. c) Responsibility for the information and use of estimates

The information contained in these condensed consolidated interim financial statements for the first six months of 2019 is the responsibility of the Parent's directors, who have verified that the different controls established to ensure the quality of the financial and accounting information prepared have been effective.

The consolidated results and determination of consolidated equity are a product of the accounting policies and principles, measurement bases and estimates followed by the Parent’s directors in the preparation of the condensed consolidated interim financial statements. The main accounting policies and measurement bases applied are described in Note 4 to the 2018 consolidated financial statements, notwithstanding the stipulations of Note 1-b above, "Standards and interpretations effective in the current year".

In the condensed consolidated interim financial statements, estimates were occasionally made by the Management of the Parent and of the consolidated companies to quantify certain assets, liabilities, income, expenses and commitments reported herein. These estimates, made on the basis of the best information available, relate basically to:

- The market value of investment property (Note 6). The market value was obtained from the appraisals periodically made by independent experts. These appraisals were prepared at 30 June 2019, applying the methods described in Note 6.

- The measurement and impairment of goodwill (Note 4).

- Measurement of non-current assets held for sale (Note 8) and property, plant and equipment for own use.

- Estimate of the necessary provisions for impairment losses of accounts receivable.

- The recoverability of tax credits in respect of tax loss carryforwards and deferred tax assets recognised in the condensed consolidated statement of financial position (Note 13).

- The market value of certain financial assets, including derivative financial instruments.

- Evaluation of lawsuits, obligations and contingent assets and liabilities at year-end.

Although the estimates described were made on the basis of the best available information available to date concerning the facts analysed, in the light of future events it might be necessary to change these estimates

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(upwards or downwards). In accordance with IAS 8, any changes to accounting estimates would be made prospectively, with the effects of the changes recognised in the consolidated statement of comprehensive income.

During the six-month period ended 30 June 2019, there were no significant changes in the estimates made at the end of 2018.

d) Contingent assets and liabilities

Note 16 of the Group's consolidated financial statements for the year ended 31 December 2018 provides information on guarantee commitments to third parties and contingent liabilities at that date. During the first six months of 2019, there were no substantial changes to what was stated therein.

e) Basis of comparison

The information contained in these condensed consolidated interim financial statements for the first six months of 2019 is presented for comparative purposes with the information relating to the six-month period ended 30 June 2018 for the consolidated statement of comprehensive income and the consolidated statement of cash flows, and is compared with the information relating to 2018 year-end for the consolidated statement of financial position and for the consolidated statement of changes in equity.

f) Seasonal nature of the Group’s operations

In view of the activities of Group companies, Group transactions are not significantly cyclical or seasonal. Therefore, no specific disclosures are provided in these explanatory notes to the condensed consolidated financial statements for the six-month period ended 30 June 2019.

g) Materiality

In deciding how to disclose items of the financial statements or other issues, in accordance with IAS 34, the Group assessed materiality in relation to the condensed consolidated half-yearly financial statements.

h) Events after the reporting period

There have been no significant subsequent events.

2. Changes in Group composition

The Appendix to the consolidated financial statements for the year ended 31 December 2018 provides information on consolidated Group companies at that date.

In 2018 the following changes were made to the scope of consolidation, as described in Note 2-f to the consolidated financial statements for the year ended 31 December 2018:

- On 16 January 2018, the Parent acquired 100% of the share capital of the Spanish company LE Offices Egeo, S.A.U. (hereinafter “Egeo”), the owner of an office building located in Madrid. The acquisition price was 49,098 thousand euros, plus associated acquisition costs. In addition, in 2018, the loan held by Egeo with a financial institution for 30,182 thousand euros, including interest, was cancelled early.

- Voluntary takeover bid to acquire shares of Axiare Patrimonio SOCIMI, S.A.

On 28 December 2017, the Spanish National Securities Market Commission authorised the voluntary takeover bid to acquire shares of Axiare Patrimonio SOCIMI, S.A. submitted by the Parent on 24 November 2017, as it considered that its terms were in line with applicable laws and that the contents of the explanatory prospectus were sufficient.

On 2 February 2018, the Spanish National Securities Market Commission published the result of the takeover bid, which was accepted for 45,912,569 shares, representing 81.55% of the shares targeted by the takeover bid and 58.07% of the share capital of Axiare Patrimonio SOCIMI, S.A., which entailed the payment of 842,955 thousand euros.

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Merger by absorption between Inmobiliaria Colonial, SOCIMI, S.A. (acquiring company) and Axiare Patrimonio SOCIMI, S.A. (absorbed company)-

On 4 July 2018, the merger deed executed on 2 July 2018 between Inmobiliaria Colonial, SOCIMI, S.A. and Axiare Patrimonio SOCIMI, S.A. was registered in the Madrid Commercial Register. In this respect, to meet the exchange of the merger, the Parent issued 19,273,622 new ordinary shares of 2.50 euros nominal value each of the same class and series as those currently in circulation, representing 4.43% of the share capital of Colonial prior to the merger, to be delivered to Axiare's shareholders in accordance with the exchange rules and procedures established for this purpose. The total amount of the increase amounted to 157,909 thousand euros, of which 48,184 thousand euros are related to share capital and 109,725 thousand euros to share premium. The new shares were admitted to trading on 9 July 2018.

- On 20 March 2018, Utopicus increased its share capital by 4 thousand euros, corresponding to 3,638 shares with a nominal value of 1 euro each, plus a share premium, which was subscribed and paid in full by the Parent.

- On 7 May 2018, the Parent acquired 100% of Peñalvento from the subsidiary Agisa for 20,755 thousand euros.

- On 16 November 2018 the Parent acquired from Qatar Holding, LLC and DIC Holding, LLC 10,323,982 shares of the subsidiary SFL through (i) the contribution to the Parent of 7,136,507 shares of the subsidiary as consideration for the subscription of 53,523,803 new shares of the Company, (ii) the exchange of 400,000 shares of the subsidiary SFL for 3,000,000 shares of the Parent held as treasury shares, and (iii) the sale to the Parent of 2,787,475 shares of the subsidiary SFL for 203,486 thousand euros.

- On 29 November the Parent acquired 281,022 shares of the subsidiary SFL for 18,969 thousand euros.

- In addition, the Parent acquired 168,000 shares of the subsidiary SFL, through the exchange of 315,000 shares of the Parent held as treasury shares and 8,442 thousand euros.

The following changes also took place in the scope of consolidation during the first six months of 2019:

- On 18 February 2019, the participating loan granted by the Parent to the subsidiary Utopicus, amounting to 4,999 thousand euros, was capitalised. With this capitalisation, the Parent increased its shareholding in the subsidiary Utopicus to 89.48%.

- On 30 April 2019, the Parent acquired the remaining 45% of the share capital of the subsidiary Torre Marenostrum, S.L. for 28,530 thousand euros, including the costs associated with the acquisition.

- In addition, the Parent absorbed the subsidiaries Colonial Invest, S.L.U., Hofinac Real Estate, S.L.U., Fincas y Representaciones, S.A.U., Colonial Arturo Soria, S.L.U., LE Offices Egeo, S.A.U., Axiare Properties, S.L.U., Axiare Investigación, Desarrollo e Innovación, S.L.U., Venusaur, S.L.U. and Chameleon (Cedro), S.L.U. On 17 April 2019, the mergers were registered with the Madrid Commercial Register.

- At the date of preparation of these interim financial statements, the Parent had not yet registered the merger by absorption of the subsidiaries Danieltown Spain, S.L.U., Moorage inversiones 2014, S.L.U., Almacenes generales internacionales, S.A.U., Soller, S.A.U. and Axiare Investments, S.L.U. It is expected that this entry in the Madrid Commercial Register will be carried out soon.

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3. Earnings per share from ordinary activities

Basic earnings per share are calculated by dividing earnings for the year attributable to shareholders of the Parent (after tax and non-controlling interests) by the weighted average number of shares outstanding during that year.

Diluted earnings per share are calculated in a manner similar to basic earnings per share, except that the weighted average number of shares outstanding is adjusted to take into account the potential dilutive effect of the convertible bonds outstanding at year-end. At 30 June 2019 there were no bonds pending conversion to shares in the Parent.

Thousands of Euros 30 June 30 June 2019 2018

Net profit for the year attributable to the Parent: 337,669 253,912 - from continuing operations 337,669 253,912

No. of shares No. of shares

Average number of ordinary shares (in thousands) 507,511 430,952 Weighted average number of ordinary shares - diluted (in thousands) 507,511 430,952

Euros Euros

Basic and diluted earnings per share: 0.67 0.59 - from continuing operations 0.67 0.59

4. Goodwill

The movement in this heading of non-current assets of the condensed consolidated statement of financial position is as follows:

Thousands of Euros Goodwill Balance at 31 December 2017 - Business combinations 176,529 Impairment of goodwill (114,304) Balance at 31 December 2018 62,225 Impairment of goodwill (Note 14-c) (62,225) Balance at 30 June 2019 -

The goodwill recognised related to the business combination with Axiare Patrimonio SOCIMI, S.A. and subsidiaries (Note 2-a).

At 30 June 2019, the amount of goodwill in line with the revaluation of investment property arising from the business combination with Axiare was reduced.

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5. Material property

The movement in this heading of non-current assets of the condensed consolidated statement of financial position is as follows:

Thousands of Euros Other property, Properties for Right-of-use plant and Total own use assets (Note 1-b) equipment Balance at 31 December 2017 33,769 - 5,600 39,369 Acquisition cost 42,697 - 12,814 55,511 Accumulated depreciation (4,000) - (7,214) (11,214) Accumulated impairment (4,928) - - (4,928) Additions 2,947 - 977 3,924 Additions to the scope of consolidation 131 - 505 636 Depreciation charge (575) - (1,063) (1,638) Withdrawals (270) - (330) (600) Transfers - - 11 11 Impairment (Note 18-f) 1,630 - - 1,630 Balance at 31 December 2018 37,632 - 5,700 43,332 Acquisition cost 44,789 - 13,553 58,342 Accumulated depreciation (3,859) - (7,853) (11,712) Accumulated impairment (3,298) - - (3,298)

Balance at 31 December 2018 adjusted 37,632 16,593 5,700 59,925 Acquisition cost 44,789 18,544 13,553 76,886 Accumulated depreciation (3,859) (1,951) (7,853) (13,663) Accumulated impairment (3,298) - - (3,298) Additions 5,136 (2,096) 1,654 4,694 Depreciation charge (472) (876) (613) (1,961) Withdrawals - - (112) (112) Transfers 14 - (14) - Impairment (Note 14-c) 664 - - 664 Balance at 30 June 2019 42,974 13,621 6,615 63,210 Acquisition cost 49,925 16,448 15,079 81,452 Accumulated depreciation (4,317) (2,827) (8,464) (15,608) Accumulated impairment (2,634) - - (2,634)

At 30 June 2019 and 2018, it became evident that a reversal of the impairment of assets (Note 14-c) amounting to 664 thousand euros and 521 thousand euros, respectively, had to be recognised, evidenced by the valuations carried out by independent experts.

Lastly, assets amounting to 94 thousand euros were derecognised due to being replaced in the first half of 2019 (Note 14-c).

The negative additions to right-of-use Assets relate mainly to the impact of the sub-lease signed by the subsidiary Utopicus, amounting to 2,096 thousand euros.

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6. Investment properties

The movement in this heading of non-current assets of the condensed consolidated statement of financial position is as follows:

Thousands of Euros Property, plant and equipment in investment property Total the course of construction Balance at 31 December 2017 8,545,388 247,008 8,792,396 Additions 106,450 127,148 233,598 Additions to the scope of consolidation 1,700,094 110,616 1,810,710 Withdrawals (358,466) (24,368) (382,834) Transfers (147,292) 74,603 (72,689) Change in fair value 651,382 50,570 701,952 Balance at 31 December 2018 10,497,556 585,577 11,083,133 Additions 21,814 27,927 49,741 Withdrawals (481) - (481) Transfers (Note 8) (575,659) 237,526 (338,133) Changes in fair value (Note 14-c) 398,421 10,330 408,751 Balance at 30 June 2019 10,341,651 861,360 11,203,011

The additions in the first half of 2019 relate to development or renovation projects in buildings of the SFL subgroup amounting to 18,972 thousand euros and in buildings of the other Group companies amounting to 30,769 thousand euros, including 2,418 thousand euros of capitalised borrowing costs.

On 7 June 2019, the Parent disposed of an asset located in Madrid amounting to 500 thousand euros, giving rise to a net loss of 41 thousand euros, taking into account the indirect costs of the sale. Furthermore, assets amounting to 27 thousand euros were derecognised.

At 30 June 2019, the Group has pledged assets as collateral for mortgage loan with a carrying amount of 1,182,776 thousand euros to secure debts amounting to 275,900 thousand euros (Note 10-g). At 31 December 2018, the corresponding balances were 1,826,491 thousand euros and 515,642 thousand euros, respectively.

Transfers in the first half of 2019 relate to the carrying amount of 12 assets for which the Parent's directors estimate that their value will be recovered through a sale rather than through continued use (Note 8).

In accordance with IAS 40, the Group calculates the fair value of its investment property on a regular basis. This fair value is determined based on the valuations made on a six-monthly basis by independent experts (Jones Lang LaSalle and CB Richard Ellis Valuation in Spain, and Jones Lang LaSalle and Cushman & Wakefield in France) so that, at the close every six months, the fair value reflects the prevailing market conditions for the investment property. The valuation reports prepared by independent experts contain only the standard warnings and/or disclaimers concerning the scope of the findings of the appraisals carried out, referring basically to the comprehensiveness and accuracy of the information provided by the Group.

The "Changes in Value of Investment Property" heading in the condensed consolidated comprehensive income statement includes the revaluation gains on investment property for the six-month period ended 30 June 2019 amounting to 408,751 thousand euros (Note 14-c).

The sensitivity of valuations to a change of one quarter of a point in yields would have the following impact on the valuations used by the Group at 30 June 2019 and 31 December 2018 to determine the value of its investment property:

Thousands of Euros Decrease of Increase of Sensitivity of valuations to a change of one quarter of one quarter of one quarter of a point in yields Valuation a point a point

June 2019 11,797,638 816,426 (703,900) December 2018 11,348,133 776,117 (671,522)

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7. Trade and other receivables

The detail of heading of current assets of the condensed consolidated statement of financial position is as follows:

Thousands of Euros 30 June 31 December 2019 2018

Trade receivables for sales and services 36,035 15,027 Accrual of lease incentives 87,763 88,061 Other receivables 85,652 85,704 Other current assets 3,251 1,277 Impairment of receivables - - Trade receivables from sales and services (4,573) (4,624) - Other receivables (85,473) (85,473) Total trade and other receivables 122,655 99,972

(a) Trade receivables from sales and services

This mainly includes the amounts receivable from customers, fundamentally from the Group's rentals business in France, that are billed monthly, quarterly or yearly with no significant overdue amounts.

(b) Accrual of lease incentives

This includes the amount of the incentives in the operating lease agreements (grace periods, etc.) that the Group offers its customers, which are recognised in the consolidated statement of comprehensive income during the minimum operating lease term. Of this amount, 67,261 thousand euros were charged to the statement of comprehensive income over a period of more than one year (68,014 thousand euros at 31 December 2018).

8. Assets classified as held for sale

The movement in this heading of assets of the condensed consolidated statement of financial position is as follows:

Thousands of Euros Balance at 31 December 2017 - Transfers 26,091 Balance at 31 December 2018 26,091 Withdrawals (26,091) Transfers (Note 6) 338,133 Changes in fair value (Note 14-c) 9,758 Balance at 30 June 2019 347,891

On 31 January, the Parent disposed of an asset located in Madrid amounting to 27,500 thousand euros, giving rise to a net loss of 945 thousand euros, taking into account the indirect costs of the sale.

Transfers in the first half of 2019 relate to the carrying amount of 12 investment properties (Note 6) for which the Parent's directors estimate that their value will be recovered through a sale rather than through continued use.

“Changes in value of investment property” in the condensed consolidated comprehensive income statement includes the profit from the revaluation of the investment property reclassified to "Assets Classified as Held for Sale" for the six-month periods ended 30 June 2019 amounting to 9,758 thousand euros (Note 14-c).

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9. Equity

a) Share capital

At both 30 June 2019 and 31 December 2018, the share capital is represented by 508,114,781 fully subscribed and paid shares of 2.5 euros par value each.

Based on the pertinent notifications regarding the number of company shares to the Spanish National Securities Market Commission (CNMV), the shareholders owning significant direct or indirect interests in the Parent at 30 June 2019 and 31 December 2018 were as follows:

June 2019 December 2018 Number of Number of shares % ownership shares % ownership

Name or corporate name of the shareholder: Qatar Investment Authority 80,892,169 15.92% 80,892,169 15.92% Finaccess Group 80,028,647 15.75% 80,028,647 15.75% Inmo S.L. 29,002,980 5.71% 20,011,190 3.94% Aguila Ltd. 28,800,183 5.67% 28,800,183 5.67% DIC Holding, LLC 21,782,588 4.29% 21,782,588 4.29% BlackRock Inc * 15,343,358 3.02% 15,256,886 3.00% Deutsche Bank A.G. * 8,135,390 1.60% 8,135,390 1.60%

* Does not include certain financial instruments linked to shares in the Parent.

At both 30 June 2019 and 31 December 2018, Blackrock Inc. and Deutsche Bank AG formally obtained with third parties financial instruments associated with the Parent's shares that, in the event the instruments are exercised, could vary its shareholding in the share capital of Colonial. The Parent has no knowledge of other significant equity interests.

The General Shareholders' Meeting held on 24 May 2018 resolved to authorise the Board of Directors to issue, on behalf of the Parent and on one or more occasions and for a maximum period of 5 years, bonds convertible into new shares of the Parent or other similar securities that may give the right, directly or indirectly, to subscribe for shares of the Parent, with the express power to exclude preferential subscription right of the shareholders up to a maximum of 20% of the share capital, and to increase the capital by the amount necessary to meet the conversion. The total maximum amount of the issue or issues of the securities that may be performed under this authorisation may not exceed a combined amount of 500,000 thousand euros or its equivalent in another currency.

Additionally, on 14 June 2019, the Parent's General Shareholders' Meeting resolved to authorise the Board of Directors, in accordance with Article 297.1 b) of the Spanish Companies Act, to increase the share capital through monetary contributions by up to half the amount of the share capital, within a maximum period of five years, on one or more occasions and at the time and by the amount it deems appropriate. Within the maximum amount indicated, the Board of Directors is empowered to exclude the preferential subscription right up to a maximum of 20% of the share capital.

b) Share premium

At 31 December 2018, the share premium amounted to 1,578,439 thousand euros.

At 30 June 2019, the amount of the share premium was reduced by 64,690 thousand euros as a result of the dividend distribution resolution approved by the General Shareholders' Meeting on 14 June 2019. At 30 June 2019, the issue premium amounted to 1,513,749 thousand euros.

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c) Legal reserve

Under the Consolidated Text of the Spanish Corporate Enterprises Act, 10% of profit for each year must be transferred to the legal reserve until its balance is at least 20% of the share capital.

The legal reserve can be used to increase capital provided that the remaining reserve balance does not fall below 10% of the increased share capital amount. the legal reserve may only be used to set off losses until it exceeds 20% of the share capital and provided there are insufficient available reserves.

At 30 June 2019, taking into account the allocation to the legal reserve included in the distribution of the Parent's profit for 2018, for 3,631 thousand euros, approved at the General Shareholders' Meeting held on 14 June 2019, the legal reserve amounted to 45,980 thousand euros (42,349 thousand euros at 31 December 2018). d) Other reserves of the Parent

The resolutions approved by the shareholders at the General Shareholders' Meeting of 14 June 2019 included the distribution of profit for 2018, which included the appropriation of 3,631 thousand euros to the legal reserve and the distribution of 32,677 thousand euros in dividends, complemented with 4,200 thousand euros of distributable reserves. In addition, the Parent distributed dividends charged to the share premium amounting to 64,690 thousand euros.

During the first six months of 2019, the income generated from the delivery of treasury shares to the beneficiaries of the long-term incentives plan, calculated as the difference between the carrying amount of the shares delivered and the amount of the obligation assumed by the Parent, which amounted to losses of 1,131 thousand euros for the first half of 2019 (losses of 1,513 thousand euros in the first half of 2018) was also registered in the Parent's reserves.

In the first half of 2019 and 2018, there were no gains on transactions involving the Parent's own securities other than those referred to in the preceding paragraph.

At 30 June 2019, the Parent held 169,439 thousand euros of restricted reserves. e) Valuation adjustments recognised in other consolidated comprehensive income - financial instruments

This heading of the consolidated statement of financial position includes the sum of gains and losses arising from changes in the fair value of financial derivatives designated as cash flow hedges (Note 11).

The changes in this heading are as follows:

Thousands of Euros 31 December 30 June 2019 2018

Opening balance (2,078) (559) Changes in the fair value of hedges in the period (1,522) (3,890) Changes in the scope of consolidation (Note 2) (608) - Transfer to the statement of comprehensive income 2,145 2,371 Closing balance (2,063) (2,078)

In the first half of 2019, the Parent cancelled various hedging instruments and reclassified to the income statement the amounts recognised directly in the Parent's equity, which amounted to 2,145 thousand euros attributable.

In 2018, as a result of the business combination with Axiare Patrimonio SOCIMI, S.A., the Group incorporated the financial instruments derived from this and its subsidiaries (Note 11). The item "Changes in the fair value of hedges during the year" included the impact of changes in the value of these instruments since the takeover date. After that date, the Parent cancelled various financial derivatives from that company. The heading "Transfer to the statement of comprehensive income" includes the amount recognised in equity reclassified to the statement of comprehensive income as a result of these cancellations.

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f) Treasury shares of the Parent

At 30 June 2019 and 31 December 2018, the number of the Parent's treasury shares and their acquisition cost were as follows:

30 June 2019 31 December 2018 Thousands of Thousands of No. of shares Euros No. of shares Euros

Opening balance 543,260 3,748 4,279,940 29,421 Buyback plan 16 October 2017 - 3 - 41 Delivery of incentives plan shares (493,894) (2,822) (421,813) (2,902) Other acquisitions - - 133 - Other disposals - - (3,315,000) (22,812) Closing balance 49,366 929 543,260 3,748

Deliveries of Parent shares deriving from the long-term Incentives Plan -

Every year, the Parent settles the obligations to comply with the previous year's plan through the delivery of shares to the beneficiaries of the Remuneration Plan, once it has assessed the degree of attainment of the indicators included therein.

Other disposals -

On 16 November 2018, the Company exchanged 3,000,000 shares of treasury stock for 400,000 shares of the subsidiary SFL. During the month of December 2018, 315,000 shares of the Parent were exchanged for 42,000 additional shares of the subsidiary SFL. g) Liquidity contracts

The Parent enters into liquidity contracts to enhance the liquidity of its transactions and the regularity of its quoted share price.

At 30 June 2019 and 31 December 2018, the number of the Parent's treasury shares included in the liquidity contract and their acquisition cost were as follows:

30 June 2019 31 December 2018 Thousands of Thousands of No. of shares Euros No. of shares Euros

Opening balance 229,500 1,858 229,500 1,841 Liquidity contract dated 11 July 2017 - 11 - 17 Closing balance 229,500 1,869 229,500 1,858

Liquidity contract dated 11 July 2017 -

On 11 July 2017, the Parent entered into a liquidity contract to enhance the liquidity of its transactions and the regularity of its quoted share price as provided for under CNMV Circular 1/2017 of 26 April. The contract was valid for 12 months. The contract is currently suspended.

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h) Non-controlling interests

The movement in this heading of the condensed consolidated statement of financial position is as follows:

Thousands of Euros Torre Inmocol Marenostrum, SFL Torre Utopicus Axiare Total S.L. subgroup Europa, S.A. subgroup subgroup Balance at 31 December 2017 24,351 2,052,456 11,037 26 - 2,087,870 Income for the financial year 2,831 147,971 563 (478) 2,459 153,346 Dividends and other (619) (50,711) - 12 - (51,318) Changes in the scope of consolidation (2,459) (Note 2) - (897,611) - 645 (899,425) Financial instruments 13 - - - - 13 Balance at 31 December 2018 26,576 1,252,105 11,600 205 - 1,290,486 Income for the financial year 314 78,195 128 (276) - 78,361 Dividends and other - (30,528) 999 (104) - (29,633) Changes in the scope of consolidation - 461 - (Note 2) (26,726) - (26,265) Financial instruments (164) - - - - (164) Balance at 30 June 2019 - 1,299,772 12,727 286 - 1,312,785

The breakdown of the items included in "Dividends and other" at 30 June 2019 and at 31 December 2018, is as follows:

Thousands of Euros 30 June of 31 December

2019 2018

Dividend paid by the SFL subgroup to non-controlling interests (22,445) (44,089) Dividend paid by Washington Plaza to non-controlling interests (8,299) (6,921) Dividend paid by Torre Marenostrum to non-controlling interests - (618) Others 1,111 310 Total (29,633) (51,318)

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10. Bank borrowings and other financial liabilities

The breakdown of “Bank borrowings and other financial liabilities” at 30 June 2019 and 31 December 2018 by maturities is as follows:

30 June 2019

Thousands of Euros Current Non-current Less than More than 5 Total non- Total 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 1 year years current

Bank borrowings: Loans 2,168 52,157 2,133 193,972 75,700 125,000 448,962 451,130 Interest 970 ------970 Debt arrangement expenses (2,297) (2,281) (2,017) (1,348) (755) (6) (6,407) (8,704) Total bank borrowings 841 49,876 116 192,624 74,945 124,994 442,555 443,396 Other financial liabilities: Current accounts - 52,246 - - - - 52,246 52,246 Interest on current accounts 38 ------38 Derivative financial instruments 677 - - - 3,498 - 3,498 4,175 Lease liabilities (Note 1-b) 2,169 2,041 1,936 1,850 1,764 5,394 12,985 15,154 Other financial liabilities 2,492 ------2,492 Total other financial liabilities 5,376 54,287 1,936 1,850 5,262 5,394 68,729 74,105 Total bank borrowings and 6,217 104,163 2,052 194,474 80,207 130,388 511,284 517,501 other financial liabilities Bonds and similar securities issued: Bond issue - - 350,000 850,000 - 2,600,000 3,800,000 3,800,000 Promissory notes 778,100 ------778,100 Interest 28,934 ------28,934 Arrangement expenses (4,576) (4,567) (4,388) (4,029) (3,478) (4,392) (20,854) (25,430) Total bonds and similar securities issued 802,458 (4,567) 345,612 845,971 (3,478) 2,595,608 3,779,146 4,581,604 Total at 30 June 2019 808,675 99,596 347,664 1,040,445 76,729 2,725,996 4,290,430 5,099,105

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31 December 2018

Thousands of Euros Current Non-current Less than More than 5 Total non- Total 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years 1 year years current

Bank borrowings: Loans 7,494 10,721 62,186 268,265 90,282 176,955 608,409 615,903 Syndicated loans - - - 20,000 50,000 - 70,000 70,000 Interest 1,313 ------1,313 Debt arrangement expenses (2,711) (2,645) (2,472) (1,761) (1,237) (1,830) (9,945) (12,656) Total bank borrowings 6,096 8,076 59,714 286,504 139,045 175,125 668,464 674,560 Other financial liabilities: Current accounts - 52,246 - - - - 52,246 52,246 Interest on current accounts 40 ------40

Derivative financial instruments 473 - - 2,098 899 221 3,218 3,691 (Note 15) Other financial liabilities 2,491 ------2,491 Total other financial liabilities 3,004 52,246 - 2,098 899 221 55,464 58,468

Total bank borrowings and 9,100 60,322 59,714 288,602 139,944 175,346 723,928 733,028 other financial liabilities Bonds and similar securities issued: Bond issues - - 350,000 350,000 500,000 2,600,000 3,800,000 3,800,000 Promissory notes 262,500 ------262,500 Interest 26,310 ------26,310 Arrangement expenses (4,568) (4,576) (4,542) (4,220) (3,672) (6,124) (23,134) (27,702) Total bonds and similar securities issued 284,242 (4,576) 345,458 345,780 496,328 2,593,876 3,776,866 4,061,108 Total at 31 December 2018 293,342 55,746 405,172 634,382 636,272 2,769,222 4,500,794 4,794,136

The changes in net financial debt in the first half of 2019, which arose from cash flows and other, are detailed in the table below:

Thousands of Euros 31 30 June December Cash flows 2019 2018

Loans 615,903 (164,773) 451,130 Syndicated loans 70,000 (70,000) - Bond issues 3,800,000 - 3,800,000 Promissory notes 262,500 515,600 778,100 Gross financial debt (gross nominal debt) 4,748,403 280,827 5,029,230

Cash and cash equivalents (68,293) (261,492) (329,785)

Net financial debt 4,680,110 19,335 4,699,445

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a) Issues of the Parent’s straight bonds -

The breakdown of the issues of straight bonds made by the Parent is as follows:

(Thousands of Euros) Fixed-rate coupon Amount 31 payable of the 30 June December Issue Duration Maturity annually issue 2019 2018

05/06/2015 8 years 05/06/2023 2.728% 500,000 500,000 500,000 28/10/2016 8 years 28/10/2024 1.450% 600,000 600,000 600,000 10/11/2016 10 years 10/11/2026 1.875% 50,000 50,000 50,000 28/11/2017 8 years 28/11/2025 1.625% 500,000 500,000 500,000 28/11/2017 12 years 28/11/2029 2.500% 300,000 300,000 300,000 17/04/2018 8 years 17/04/2026 2.000% 650,000 650,000 650,000

Total issues 2,600,000 2,600,000 All of the bonds are admitted for trading on the Irish Stock Exchange's main securities market.

At 30 June 2019 and 31 December 2018, the fair value of the bonds issued by the Parent was 2,782,531 thousand euros and 2,557,454 thousand euros respectively.

Compliance with financial ratios –

These straight bonds establish the obligation, at 30 June and 31 December of each year, to meet a financial ratio, whereby the value of the non-guaranteed asset of the Colonial Group in the consolidated statement of financial position at each of these dates must at least be equal to the financial debt not guaranteed. This ratio is met at 30 June 2019. b) Issue of SFL straight bonds -

The breakdown of non-convertible straight bonds issued by SFL is as follows:

(Thousands of Euros) Fixed-rate coupon Amount payable of the 30 June 31 December Issue Duration Maturity annually issue 2019 2018

20/11/2014 7 years 26/11/2021 1.875% 500,000 350,000 350,000 16/11/2015 7 years 16/11/2022 2.250% 500,000 350,000 350,000 29/05/2018 7 years 29/05/2025 1.500% 500,000 500,000 500,000

Total issues 1,200,000 1,200,000

The bonds are unsubordinated obligations, all of which rank pari passu. They are traded on the Euronext Paris exchange.

At 30 June 2019 and 31 December 2018, the fair value of the bonds issued SFL was 1,266,247 thousand euros and 1,222,330 thousand euros respectively. c) Issuance of promissory notes by the Parent

In December 2018, the Parent registered a commercial paper programme (European Commercial Paper) for a maximum limit of 300,000 thousand euros with a short-term maturity, extendable to 500,000 thousand euros. In the first half of 2019 the limit was increased from the initial 300,000 thousand euros to the expected 500,000 thousand euros.

At 30 June 2019, current issues amounted to 424,000 thousand euros, whereas at 31 December 2018 no issue had been made.

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d) Issuance of SFL promissory notes

In September 2018, the subsidiary SFL registered a short-term promissory note (NEU CP) issuance programme for a maximum amount of 500,000 thousand euros. At 30 June 2019 and 31 December 2018, the current issuances amounted to 354,100 thousand euros and 262,500 thousand euros respectively. e) Syndicated financing of the Parent -

The breakdown of the Parent's syndicated debt is provided below:

30 June 2019 31 December 2018 Thousands of Euros Maturity Nominal Nominal amount amount drawn drawn Limit down Limit down

Credit facility December 2023 500,000 - 500,000 50,000 Credit facility March 2022 375,000 - 375,000 20,000 Total syndicated financing of the Parent 875,000 - 875,000 70,000

The variable interest rate is referenced to the EURIBOR plus a spread.

Compliance with financial ratios –

The credits are subject to compliance with the following financial ratios on a quarterly basis:

Ratios

Loan-to-value ratio <= 55% Interest coverage ratio >= 2x Secured Mortgage debt / Value of property assets ≤15% (25% for the new syndicated loan) Secured other debt / Value of non-property assets ≤15% (25% for the new syndicated loan) Value of the consolidated assets ≥ 4.5 billion euros

At 30 June 2019, the Parent complied with all the financial ratios. f) SFL syndicated loan

The breakdown of SFL’s syndicated loan is shown in the following table:

30 June 2019 31 December 2018 Thousands of Euros Maturity Nominal Nominal amount amount drawn drawn Limit down Limit down

Credit facility June 2024 390,000 - 250,000 - Total SFL syndicated loan 390,000 - 250,000 -

During the month of June 2019, SFL novated the credit facility, increasing the limit and improving the margin and maturity.

The variable interest rate is referenced to the EURIBOR plus a spread.

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Compliance with financial ratios -

SFL syndicated loans must meet the following financial ratios every six months:

Ratios

Loan-to-Value Ratio<= 50% Interest coverage ratio >= 2 Secured debt/equity value <= 20% Appraisal value of unmortgaged properties >= 2 billion euros Gross financial debt subsidiaries / Gross consolidated financial debt < 25%

At 30 June 2019, SFL complied with the financial ratios stipulated in the respective financing agreements. g) Mortgage-backed loans

The Group holds the following mortgage-backed loans:

Thousands of Euros

30 June 2019 31 December 2018 Market Market Mortgage value of Mortgage value of debt collateral debt collateral

Investment property (Note 6) 275,900 1,188,529 515,642 1,828,786 Total 275,900 1,188,529 515,642 1,828,786

In the first half of 2019, the Parent cancelled 205,782 thousand euros of mortgage debt arising from the business combination with Axiare. In addition, the subsidiary Torre Marenostrum has cancelled its mortgage debt with a financial institution, which amounted to 31,772 thousand euros at the time of cancellation.

After these cancellations a bilateral loan for 75,700 thousand was maintained from the business combination with Axiare. It is a variable rate loan linked to EURIBOR plus an additional margin. This loan has the nature of a "sustainable loan" since its margin will vary according to the rating that the Parent obtains regarding ESG (environment, social and corporate governance) from the GRESB Sustainability Organisation. A financial derivative has been arranged to cover 75% of the outstanding notional amount of this loan at 30 June 2019 (Note 11).

The remaining mortgage debts, amounting to a total of 200,200 thousand euros, corresponds to subsidiaries of the SFL subgroup.

Compliance with financial ratios -

The Group's mortgage-backed loans are subject to compliance with various financial ratios (LTV and Debt Service Coverage Ratio, whose thresholds vary according to the assets financed). At 30 June 2019 and 31 December 2018, the Group complied with the financial ratios required in its mortgage loan agreements.

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h) Other loans

The Group has bilateral loans not secured by a mortgage guarantee, that were subject to compliance with various ratios. The following table lists the total limits and balances drawn down:

30 June 2019 31 December 2018 Thousands of Euros Society Maturity Nominal Nominal amount amount drawn drawn Limit down Limit down

Other loans: BECM SFL July 2023 150,000 - 150,000 - Banco Sabadell SFL June 2020 - - 70,000 - BNP Paribas SFL May 2021 150,000 50,000 150,000 50,000 CADIF SFL June 2023 175,000 - 175,000 - Banque Postale SFL June 2024 75,000 - 75,000 - Société Générale SFL October 2023 100,000 - 100,000 - Bankinter Colonial July 2024 50,000 50,000 50,000 50,000 CaixaBank Colonial July 2024 75,000 75,000 - - Total other loans 775,000 175,000 770,000 100,000

This loan with CaixaBank has the condition of a "sustainable loan" since its margin will vary according to the rating that the Parent obtains on ESG (environment, social and corporate governance) from the GRESB Sustainability Agency.

Compliance with financial ratios

The loans corresponding to the Parent are subject to compliance with the following financial ratios on a quarterly basis:

Ratios

Loan-to-value ratio <= 55% Interest coverage ratio >= 2x Secured mortgage debt / Value of property assets <=15% Secured non-mortgage debt / Value of non-property assets <=15% Value of the consolidated assets ≥ 4.5 billion euros

The loans corresponding to the subsidiary SFL are subject the following financial ratios on a half-yearly basis:

Ratios

Loan-to-Value Ratio<= 50% Interest coverage ratio >= 2 Secured debt/equity value <= 20% Appraisal value of unmortgaged properties >= 2 million euros Gross financial debt subsidiaries / Gross consolidated financial debt < 25%

At 30 June 2019, SFL complied with the financial ratios stipulated in the respective financing agreements.

Lastly, at 30 June 2019, the companies of the Utopicus subgroup had four loans drawn down for a total of 230 thousand euros (261 thousand euros at 31 December 2018). These loans are not subject to compliance with any ratio.

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i) Lines of credit

At 30 June 2019 and 31 December 2018 the Group did not have any drawn-down lines of credit.

j) Other financial liabilities - Current accounts

At 30 June 2019 and 31 December 2018, the subsidiary SCI Washington had a current account amounting to 52,246 thousand euros. This current account accrues an additional spread on the three-month Euribor.

k) Guarantees given

Additionally, the Parent Company has guarantees granted to government agencies, customers and suppliers. In relation to those detailed in the financial statements for the year ended 31 December 2018, a bank guarantee amounting to 7,125 thousand euros was cancelled to secure the deferred price in the purchase and sale of a property. The amount of the account payable was recognised under "Trade and Other Payables" (Note 12).

l) Cash and cash equivalents -

At 30 June 2019 and 31 December 2018, amounts of 2018 thousand euros and 329,785 thousand euros and 68,293 thousand euros, respectively, were recognised under “Cash and cash equivalents”, of which 1,777 thousand euros, respectively, were either restricted or pledged as of both dates.

m) Capital management: policy and targets

The basic risks to which the Group is exposed and the risk management policies are detailed in the financial statements for the year ended 31 December 2018, and are reproduced in the management report which forms part of these interim financial statements.

11. Derivative financial instruments

The following table itemises the financial derivatives and their fair value as of 30 June 2019 and 31 December 2018:

Nominal value Fair value – (thousands of Asset / Derivative financial instrument Society Counterparty Interest rate Maturity euros) (Liability)

Swap SFL CA-CIB 0.23% 2022 100,000 (2,252) CAP SFL CADIF 0.25% 2022 100,000 85 Swap Colonial DB 0.43% 2023 57,000 (1,923) Total at 30 June 2019 257,000 (4,090)

Nominal value Fair value – (thousands of Asset / Derivative financial instrument Society Counterparty Interest rate Maturity euros) (Liability)

Swap SFL CA-CIB 0.23% 2022 100,000 (1,041) CAP SFL CADIF 0.25% 2022 100,000 591 Swap Colonial Santander 0.25% 2022 18,000 (205) Swap Colonial ING 0.95% 2022 18,650 (823) Swap Colonial DB 0.27% 2022 18,650 (230) Swap Venusaur DB 0.43% 2023 57,000 (899) Vanilla swap Torre Marenostrum CaixaBank 0.94% 2032 26,197 (493) Total at 31 December 2018 338,497 (3,100)

With the business combination between the Parent and Axiare Patrimonio SOCIMI, S.A., registered in 2018, the Parent has integrated the derivative financial instrument contracts of the acquired subsidiary. The nominal amount of the aforementioned derivatives amounted to 394,249 thousand euros.

During the first half of 2019, the Parent cancelled four financial derivatives, generating a financial expense of 1,560 thousand euros, which was recognised under "Finance Costs" in the condensed consolidated comprehensive income statement (Note 14-d). Also, during the first half of 2018, and after the date of the business combination,

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1 financial instrument was cancelled, generating a financial expense of 1,452 thousand euros, which was recognised under "Finance Costs" in the condensed consolidated comprehensive income statement (Note 14-d).

The impact on the consolidated income statement for the accounting of financial derivatives for the six-month period ended 30 June 2019 and 2018 amounted to 3,345 thousand euros and 2,451 thousand euros, respectively, of net finance costs.

a) Hedge accounting -

At 30 June 2019, the Parent applies hedge accounting to all of its financial derivatives.

At 30 June 2019, the accumulated impact on other consolidated comprehensive income as a result of hedge accounting was a balance receivable of 2,063 thousand, net of the tax effect and consolidation adjustments. (2,078 thousand euros at 31 December 2018).

b) Fair value of financial derivatives -

The fair value of the derivative financial instruments was calculated by discounting estimated future cash flows based on an interest rate curve and on assigned volatility at 30 June 2019, using the appropriate discount rates established by an independent expert.

12. Trade and other payables

"Trade and Other Payables" in the consolidated condensed statement of financial position includes the dividend approved by the shareholders at the Annual General Meeting held on 14 June, amounting to 101,567 thousand euros, which was paid in July 2019.

In the first half of 2019, the deferred payments arising from the acquisition of a property in Barcelona amounting to 14,500 thousand euros were paid and the bank guarantees deposited as security for the deferred payment were cancelled (Note 10-k).

13. Tax situation

The detail of the "Non-Current Deferred Tax Liabilities" heading on the non-current liability side of the condensed consolidated statement of financial position is as follows:

Thousands of Euros

June 2019 December 2018

Deferred tax liabilities 379,472 361,514 Non-current tax liabilities 10,278 13,368 389,750 374,882

Deferred tax liabilities –

The breakdown of deferred tax liabilities and the changes therein are provided below:

Thousands of Euros Deferred tax liabilities 31 December 2018 Increase Derecognitions 30 June 2019

Asset revaluations 356,069 18,052 - 374,121 Asset revaluations (Spain) 151,007 4,302 - 155,309 Asset revaluations-France- 205,062 13,750 - 218,812 Deferral for reinvestment 4,970 - (94) 4,876 Others 475 - - 475 361,514 18,052 (94) 379,472

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Additionally, there are 10,278 thousand euros of non-current taxes (13,368 thousand euros at 31 December 2018) relating to the exit tax borne by the subsidiary SFL arising from the option for the SIIC regime of two of its properties (see Note 4-m to the notes to the consolidated financial statements of the Group for 2018).

Asset revaluations (Spain)

This line item includes the deferred taxes associated with the Group's investment property located in Spain that would be accrued if these assets were transferred at the fair value at which they are recognised, using the effective rate that would be applicable to each of the companies taking into account applicable legislation and any unrecognised tax credits.

Following the adoption of the REIT tax regime, the changes in the deferred taxes recognised from 2017 correspond mainly to the properties owned by the companies that did not choose to operate under this regime, i.e., Torre Marenostrum, S.L. and Inmocol Torre Europa, S.A., and to certain adjustments arising from corporate transactions.

In this regard, until 31 December 2016, the deferred taxes associated with the investment property of the Colonial Group companies, which in turn formed part of the tax group, were recorded at an effective rate of 18.75% (tax rate of 25% with a limit on the offsetting of tax losses of 25%). Consequently, in calculating its deferred tax liabilities, the Group considers applying the deferred tax asset of 44,726 thousand euros arising from the tax losses (the difference between the 25% tax rate and the effective settlement rate applied of 18.75%).

Asset revaluations (France)

"Asset revaluations (France)" records the amount of the deferred taxes associated with the Group's investment property located in France, which would accrue if those assets are sold. It should be noted that practically all the assets in France are subject to the SIIC regime (see Note 4-m to the notes to the 2018 consolidated financial statements) and, therefore, will not generate any additional tax when they are transferred. Only the assets of the companies forming part of the Parholding subgroup fall outside of that tax regime at 30 June 2019.

14. Income and expense

a) Revenue

Revenue comprises basically rental income from the Group’s rental properties which are concentrated in the cities of Barcelona, Madrid and Paris. Revenue for the six-month periods ended 30 June 2019 and 2018 stood at 175,865 thousand euros and 170,719 thousand euros, respectively. The breakdown by geographic segment is as follows:

Thousands of Euros Rental segment June 2019 June 2018

Spain* 77,956 74,653 France 97,909 96,066 175,865 170,719 * Includes coworking customer revenues of 2,101 thousand euros and 417 thousand euros at 30 June 2019 and 2018, respectively.

Revenue in the first half of 2019 and 2018 includes the effect of deferring grace periods and rent reset clauses throughout the term elapsing between the start of the lease agreement and the first option for renewing it. It also includes the accrual of the amounts received as entrance fees, which are amounts invoiced to lessees to reserve a unique space. As of 30 June 2019, the impact of the accruals has been a decrease in turnover of 298 thousand euros (228 thousand euros for the same period in 2018).

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b) Net gain/(loss) on sales of assets

The breakdown of the Group's net gains/(losses) on sales of assets (Notes 6 and 8), and their geographical distribution, is detailed as follows:

Thousands of Euros Spain France Total June 2019 June 2018 June 2019 June 2018 June 2019 June 2018

Sale price 28,000 37,130 - - 28,000 37,130 Asset derecognition (26,545) (37,071) - - (26,545) (37,071) Derecognition grace periods - (209) - - - (209) Indirect costs and other (2,441) 863 - - (2,441) 863 Net gain/(loss) on sales of assets (986) 713 - - (986) 713

c) Impairment charges and net gains/(losses) on assets

The breakdown of “Changes in fair value of investment properties” in the condensed consolidated comprehensive income statement, by types, is as follows:

Thousands of Euros June 2019 June 2018

Changes in value on statement of financial position Investment property (Note 6) 408,751 324,210 Current assets classified as held for sale (Note 8) 9,758 -

Changes in fair value of investment property 418,509 324,210 - Spain 184,043 165,031 - France 234,466 159,179

The breakdown of the impairment charges recognised under “Impairment charges and net gains/(losses) on assets” in the condensed consolidated comprehensive income statement is as follows:

Thousands of Euros

June 2019 June 2018

Derecognitions of replaced assets (124) - Impairment of goodwill (Note 4) (62,225) (25,662) Impairment of properties for own use and property, plant and equipment 664 521 Impairment charges and net gains/(losses) on assets (61,685) (25,141) - Spain (61,682) (25,141) - France (3) -

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d) Finance income and costs

The breakdown of financial loss by type, is as follows:

Thousands of Euros June June 2019 2018

Finance income: Revenue from equity investments - 35 Interest and similar income 858 838 Income from financial derivatives - 5 Capitalised finance costs (Note 6) 2,418 2,775 Total finance income 3,276 3,653

Finance costs: Finance and similar expenses (48,033) (57,327) Expenses for the cancellation of financial instruments (4,448) - Financial derivative expense (1,785) (1,004) Expense for cancelling financial derivatives (Note 11) (1,560) (1,452) Total finance costs (56,346) (59,783)

Impairment of financial assets - (241)

Total financial loss (53,070) (56,371)

15. Segment reporting

All the Group's activities are carried out in Spain and France. The information, by segments, for the first six months of 2019 and 2018 is as follows:

Segment reporting, first six months of 2019

Thousands of Euros equity Corporate Total Total Group Barcelona Madrid Paris Remaining Unit Equity Revenue 23,299 50,877 99,189 3,679 177,044 2,095 179,139 Revenue 23,299 50,851 97,909 3,679 175,738 127 175,865 Other revenue - 26 1,280 - 1,306 1,968 3,274 Operating profit /(loss) 20,710 37,535 93,907 3,320 155,472 (22,367) 133,105 Change in fair value of investment property 88,630 92,288 234,466 3,125 418,509 - 418,509 Impairment charges and net gains/(losses) - - - - - (61,685) (61,685) assets and due to impairment Net finance income/(expense) - - - - - (53,070) (53,070) Loss before tax - - - - - 436,859 436,859 Consolidated net profit - - - - - 416,030 416,030 Net profit/(loss) attributable to Non-controlling interests - - - - - (78,361) (78,361) Net profit/(loss) attributable to shareholders of the Company - - - - - 337,669 337,669

There were no significant inter-segment transactions in the six-month period ended 30 June 2019.

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Segment reporting, first six months of 2018

Thousands of Euros equity Corporate Total Total Group Barcelona Madrid Paris Remaining Unit Equity Revenue 19,730 51,800 96,650 3,153 171,333 735 172,068 Revenue 19,718 51,696 96,066 3,153 170,633 86 170,719 Other revenue 12 104 584 - 700 649 1,349 Operating profit /(loss) 17,869 43,170 90,640 2,835 154,514 (25,018) 129,496 Change in fair value of investment property 81,708 86,593 159,179 (3,270) 324,210 - 324,210 Impairment charges and net gains/(losses) assets and due to impairment - - - - - (25,141) (25,141) Net finance income/(expense) - - - - - (56,371) (56,371) Loss before tax - - - - - 372,194 372,194 Consolidated net profit - - - - - 356,414 356,414 Net profit/(loss) attributable to Non-controlling interests - - - - - (102,502) (102,502) Net profit/(loss) attributable to shareholders of the Company - - - - - 253,912 253,912

There were no significant inter-segment transactions in the six-month period ended 30 June 2018.

None of the Group’s customers represented more than 10% of the income from ordinary activities.

16. Related-party transactions and balances

At 30 June 2019 and 31 December 2018 the Group did not have any balances outstanding with related parties and associates. The following transactions with related parties were carried out in 2019 and 2018:

Thousands of Euros June 2019 June 2018 Lease income Lease income Gas Natural Fenosa, S.D.G. (*) 1,508 2,645 Total 1,508 2,645 (*) Gas Natural, SDG, S.A. was the shareholder of the Parent in the subsidiary Torre Marenostrum, S.L. On 30 April 2019, the Parent acquired the shareholding held in the subsidiary by Gas Natural, SDG, S.A. (Note 2).

17. Director and senior management compensation and other benefits

a) Composition of the Board of Directors The Parent’s Board of Directors is composed of 10 men and 3 women at 30 June 2019, with its composition being as follows:

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Director Position Type of director

Juan José Brugera Clavero Chairman Executive

Pedro Viñolas Serra Chief Executive Officer Executive

Carlos Fernández González Director Proprietary

Javier López Casado Director Proprietary

Sheikh Ali Jassim M. J. Al-Thani Director Proprietary

Adnane Mousannif Director Proprietary

Juan Carlos García Cañizares Director Proprietary

Carlos Fernández-Lerga Garralda Lead Director Independent

Javier Iglesias de Ussel Ordís Director Independent

Luis Maluquer Trepat Director Independent

Ms Silvia-Mónica Alonso-Castrillo Allain Director Independent

Ms Ana Bolado Valle Director Independent

Ms Ana Peralta Moreno Director Independent

On 24 January 2019, Ms Ana Sainz de Vicuña tendered her resignation as a Director. On 14 May 2019, the General Shareholders' Meeting appointed the new Independent Directors Ms Ana Bolado Valle and Ms Ana Peralta Moreno. b) Remuneration of Board members Remuneration received in the first half of 2019 and 2018 by the current members of the Parent's Board of Directors, classified by item, was as follows:

30 June 2019

Thousands of Euros Inmobiliaria Colonial, Other group Total SOCIMI, S.A. companies

Compensation accrued by executive directors (*): 2,727 75 2,802

Attendance fees: 268 27 295 Directors' attendance fees 268 27 295

Attendance fees of Executive Directors - 22 22

Fixed remuneration: 394 41 435 Directors' remuneration 267 41 308 Additional remuneration of the Audit and Control Committee 52 - 52 Additional remuneration for the Nomination and Remuneration 75 - 75

Fixed remuneration of Executive Directors - 35 35 Total 3,389 200 3,589

Remuneration for Executive Directors (*): 2,727 132 2,859 (*) Does not include the amount corresponding to expenses accrued in relation to the long-term incentive plan.

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30 June 2018

Thousands of Euros Inmobiliaria Colonial, Other group Total SOCIMI, S.A. companies

Compensation accrued by executive directors (*): 1,234 75 1,309

Attendance fees: 342 38 380 Directors' attendance fees 342 38 380

Attendance fees of Executive Directors - 19 -

Fixed remuneration: 381 50 431 Directors' remuneration 243 50 293 Additional remuneration of the Audit and Control Committee 63 - 63 Additional remuneration for the Nomination and Remuneration 75 - 75

Fixed remuneration of Executive Directors - 35 35 Total 1,957 217 2,174

Remuneration for Executive Directors (*): 1,234 129 1,363 (*) Does not include the amount corresponding to expenses accrued in relation to the long-term incentive plan.

In the first half of 2019, members of the Board of Directors of the Parent accrued remuneration of 662 thousand euros (723 thousand euros during the first half of 2018) in relation to fixed compensation and per diem allowances for membership on the Board. Additionally, certain non-executive directors of the Parent received 68 thousand euros from SFL for their role as directors of that company (€88 thousand for 2018).

The monetary remuneration of executive directors in the first half of 2019 for all items received from the Parent amounted to 2,727 thousand euros and they also received 2,109 thousand euros in remuneration in kind under the long-term share delivery plan (1,234 thousand euros and 1,828 thousand euros in the first half of 2018, respectively). Executive directors of the Parent also received 129 thousand euros from SFL for their role as directors of that company (129 thousand euros in the first half of 2018).

At 30 June 2019 and 2018, the Parent had taken out civil liability insurance policies covering all the Directors, senior management and employees of the Parent, which include, for both years, the civil liability annual insurance premium for damage caused by acts or omissions amounting to 300 thousand euros and 393 thousand euros, respectively.

The General Shareholders' Meeting held on 28 June 2016 approved the granting of a defined-contribution scheme for executive directors covering retirement and, when applicable, disability and death, with overall annual contributions of 182 thousand euros and 180 thousand euros in 2019 and 2018, respectively. At 30 June 2019, the Parent had recognised 91 thousand euros for this item under "Staff costs" in the condensed consolidated comprehensive income statement (in the first half of 2018 it recognised 90 thousand euros arising from this agreement).

In addition to the matters indicated in the preceding paragraph, the Group has not granted any loans and has not taken out any pension plans or life insurance for former or serving members of the Board of Directors of the Parent.

At 30 June 2019 and 2018, two members of the Board of Directors had signed golden parachute clauses in the event of certain cases of termination or change of control, all of which were approved at the General Shareholders’ Meeting.

In the first half of 2019 and 2018, there were no finalisations, modifications or early terminations of contracts outside of the normal business activities between the Parent and the members of the Board of Directors or any other person acting on their behalf.

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c) Remuneration of senior management

The Parent’s senior management team comprises senior executives and other persons responsible for the management of the Parent Company and reporting to the CEO. The senior management team was made up of two men and two women at 30 June 2019 and 2018.

Monetary compensation earned by senior management in the first half of 2019 amounted to 1,070 thousand euros. Furthermore, they received 1,657 thousand euros corresponding to the long-term incentives plan (730 thousand euros and 1,436 thousand euros, respectively, in the same period of 2018).

On 27 July 2016, the Board of Directors approved the granting to a member of senior management of a defined- contribution scheme covering retirement and, where appropriate, disability and death, with annual contributions of 62 thousand euros in both 2019 and 2018. At 30 June 2019 and 2018, the Parent recognised 32 thousand euros and 31 thousand euros, respectively, in this connection under "Staff Costs" in the consolidated statement of comprehensive income.

At 30 June 2019 and 2018, one member of senior management had signed a golden parachute clause, in the event of termination under certain circumstances or a change of control.

18. Average headcount

The Group headcount, and the average headcount by job category and gender, is as follows:

Number of employees Average first half Average first half June 2019 June 2018 results 2019 results 2018 Men Women Men Women Men Women Men Women

General and area managers 13 7 16 7 13 7 17 7 Technical graduates and middle managers 35 40 38 41 35 41 37 41 Administrative 30 82 20 63 28 79 18 61 Others 6 1 5 1 6 1 5 2 Total 84 130 79 112 82 128 77 111

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Inmobiliaria Colonial, SOCIMI, S.A. and Subsidiaries

Consolidated Management Report for the six-month period of 2019

1. Company situation

State of the rental market

Barcelona

Madrid

Paris

Source: Reports by Jones Lang Lasalle, Cushman & Wakefield, CBRE and Savills

Organisational structure and functioning

Colonial is a benchmark REIT in the high-quality office market in Europe and has been a member of the IBEX 35, the benchmark Spanish stock market index, since the end of June 2017.

The company has a stock market capitalisation of approximately 5,000 million euros with a free float of around 60%, and manages an asset volume of more than 11,800 million euros.

The Company's strategy focuses on creating an industrial value through the creation of prime high-quality products, through the repositioning and transformation of real estate assets.

In particular, its strategy is based on the following:

- A business model focused on the transformation and creation of high-quality offices in prime locations, mainly central business districts (CBD).

- Maximum commitment to the creation of offices that meet the most demanding market requirements, with particular emphasis on efficiency and sustainability.

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- A pan-European strategy, diversified in the Madrid, Barcelona and Paris office markets.

- An investment strategy combining core acquisitions and prime factory acquisitions with value added components.

- A clear industrial real estate approach to capture value creation that exceeds the market average.

Today Colonial is a leading European company that specifically focuses on areas in city centres and leads the Spanish property market in terms of quality, sustainability and efficiency in its portfolio of offices.

It has also adopted a comprehensive approach in all areas of corporate social responsibility and aspires to maximum standards of (1) sustainability and energy efficiency, (2) corporate governance and transparency, and (3) excellence in human resources and social actions, making them an integral part of the Group's strategy.

Over the last three years, the Group has successfully executed its acquisition programme, making investments of more than 700 million euros (committed amounts including future capex). All acquisitions relate to assets in excellent locations with good fundamentals, the potential for additional return through property repositioning and maintaining maximum financial discipline.

At the close of the first half of 2019, the Colonial Group had a robust capital structure with a solid "Investment Grade" rating. The Group's LTV (Loan to value) stood at 37.9% in June 2019.

The Company's strategy is to consolidate itself as a leader in prime office rentals in Europe, with special emphasis on the Barcelona, Madrid and Paris markets:

- A solid capital structure with a clear commitment to maintaining the highest credit rating standards – investment grade.

- Attractive returns for shareholders based on recurring return combined with the creation of real estate value based on value added initiatives.

2. Business performance and results

Introduction

At 30 June 2019, the Group's gross rental income reached 174 million euros, corresponding to its recurring business, property rentals.

Profit from operations amounted to 133 million euros.

According to the independent appraisals carried out by CB Richard Ellis and Jones Lang Lasalle in Spain and Jones Lang LaSalle and Cushman & Walkefield in France at half year end, the investment property and assets classified as held for sale were valued at 419 million euros. This revaluation, reported both in France and in Spain, reflects a 4.2% increase in value in like-for-like terms on rental assets in operation with respect to December 2018 (5% in Spain and 4% in France).

The net finance cost amounted to 53 million euros, including 2 million euros relating to the finance costs of developments in progress that were capitalised.

After subtracting profit attributable to non-controlling interests (78 million euros), the profit after tax attributable to the Parent amounted to 338 million euros.

Profit (loss) for the year

The highlights of rental business are as follows:

The first half of 2019 was excellent for the Colonial Group, with a total annual return for shareholders of 18%, due to the year-on-year increase in the EPRA NAV per share of 16% in combination with a dividend yield of 2%.

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The results for the first half of 2019 are a clear reflection of the Group's successful growth strategy, as the following figures show:

> Value of assets of 11,798 million euros, +16% vs. the previous year (+4% like for like in the last 6 months) > Rental income of 174 million euros, corresponding to the company's recurring business, +2% vs. the previous year (+4% like for like). > Recurring net profit of 69 million euros, +66% compared to the previous year > EPRA NAV of €10.52/share, +16% compared to the previous year > Total return for the shareholders of 18% in one year

The Group has obtained very sound operating results, capturing strong rental increases in all markets:

> 60 contracts signed for more than 129,000 m² and 43 million euros in the annual gross rental income > EPRA vacancy rates at levels of 4% > Attracting growth in rent: 9% compared to market rent December 2018 and +11% "release spread"2

Strong revenue growth

The Group ended the first half of 2019 with gross rental income from the company's recurring business of 174 million euros, an increase of 4% in comparable "like for like" terms compared to the previous year.

The like-for-like increase in rental income has been obtained in all markets in which the Group operates:

> Barcelona +4% like for like due to rental price increases across the entire portfolio, highlighting the Diagonal 609 asset, as well as an increase in occupancy in assets such as Park Cugat and Torre BCN.

> Madrid +5% like for like driven by the market update of current rental prices on assets such as Castellana 43, Sagasta 31, Martínez Villergas and Egeo. The new leases signed on the Discovery Building also resulted in a significant positive impact.

> Paris +4% like for like rental increases rose to 3.3 million euros. This was due to the new leases signed in 2018, mainly on Washington Plaza and Cézanne Saint-Honoré with an increase in rents.

These like-for-like growth levels are clearly above the average of comparable data from competitors in Spain and Europe.

Creation of real estate value

The valuation of the Colonial Group's assets at the end of the first half of 2019 were appraised at 11,798 million euros, a year-on-year increase of 9% like for like (+4% in 6 months). Including the impact of sales, the year-on- year increase was 5% (+4% in 6 months).

This increase in value is the result of increases in rental prices and compression of yields throughout the portfolio complemented by increases in value obtained through the successful execution of projects.

By segment, the portfolios of Barcelona and Madrid have reached a growth like for like year-on-year of 19% and 9%, respectively. Particularly noteworthy was the sharp increase of 8% in the value of Barcelona over the last six months.

The Paris portfolio increased by +6% like for like in year-on-year terms (+4% like for like in the first six months of 2019), setting a clear benchmark for growth in the Paris market.

(1) Growth in NAV per share + dividend paid (2) Rent signed on renewals compared to previous rent 39

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Solid fundamentals in all segments

The Colonial Group's business has performed excellently, with take-up levels moving at a strong pace, achieving levels close to full occupancy.

Lease agreements with significant increases in rent

In the first half of 2019, the Colonial Group has signed 60 rental contracts corresponding to more than 129,000 sqm and annual rents of 43 million euros.

Compared with the market rent (ERV) at December 2018, signed rents in the first half of 2019 increased by +9% and the release spread stood at +11%.

Sound occupancy levels

Particularly noteworthy are the office portfolios in Barcelona and Paris, with vacancy rates of 1.4% and 1.6%, respectively.

The Madrid office portfolio has an vacancy rate of 9%, improving +311 bps compared to the previous year, and +91 bps in 6 months:

> A 6% vacancy corresponds primarily to assets in the Axiare portfolio located in Arroyo de la Vega and Campo de las Naciones. Especially noteworthy are the recent deliveries of Avenida de Bruselas (100% let, although the occupancy comes into effect in July) and Ribera del Loira (20% occupancy at June). Additionally, the Virto asset had 40% occupancy in June.

> The rest of the Madrid portfolio has solid occupancy levels, maintaining a vacancy rate of 3%. The current available GLA represents a supply of maximum quality in attractive market segments, where there is a clear scarcity of Grade A products. Consequently, this offers significant potential for additional rental income to be captured in the coming quarters. In addition, noteworthy is the entry into operation of 1,900 sqm in the Castellana 163 asset, located in the Madrid CBD, which is being successfully repositioned by floors.

Considering the letting of the 100% surface of Avenida de Bruselas 38 asset, which will be effective during July, the vacancy of the Madrid Portfolio will reach 6.9%.

Growth vectors

The Colonial Group has an attractive growth profile, based on its strategy of industrial value creation with a high "Alpha" component in returns. In particular, the value creation is based on the following value drivers:

A. An attractive project pipeline A portfolio of 12 projects corresponding to more than 211,000 sqm to create prime products that offer strong returns and therefore, future value creation with solid fundamentals.

As of today, 5 of the 12 projects (specifically Pedralbes Centre, Gala Placidia, Diagonal 525, Castellana 163, and Louvré Saint Honoré) already have pre-let agreements in favourable terms, significantly increasing the visibility of future cash flow and value creation. The other projects in the portfolio continue to progress and already have very good market prospects, in excellent locations with scarce supply.

B. A strong prime positioning with an asset portfolio to capitalize on the cycle

The first half of the year has once again shown the capacity of the Colonial Group’s contract portfolio to capture maximum market rents and obtain significant rental price increases with double digit release spreads.

In addition, new renovation programs have been identified, accelerating tenant rotation in the corresponding spaces. In this respect, of note are two buildings in the prime CBD, in particular 106 Haussmann in Paris, Ortega y Gasset in Madrid and the TorreMarenostrum asset in the 22@ technological district in Barcelona.

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The Haussmann 106 building offers almost 15,000 sqm in the centre of Paris which will be updated in the year 2020, offering a top-quality product. These characteristics have enabled the pre-letting of the entire building in the second half with a 12-year minimum fixed terms lease at a rent above €800/sqm/year, prime reference in Paris.

C. Discipline in the acquisitions & disposal programme

Over recent years, Colonial has successfully delivered the organic investment targets announced to the capital markets: asset acquisitions, prioritising off-market transactions and identifying properties with value- added potential in market segments with solid fundamentals.

Since 2015, the Colonial Group has carried out significant investments and disposals:

In this context, at the beginning of 2019, the Colonial Group carried out the Alpha rotation 2019 consisting in the following transactions:

> Disposal of the Hotel Centro Norte, a non-strategic asset at a secondary location in the Northeast of Madrid with a premium of +11% on the appraisal value.

> Acquisition of the remaining 45% of the Torre Marenostrum building from Naturgy, archieving 100% ownership of this unique building located in front of the sea in the 22@ market.

Potencial cash flow & future value

Colonial Group's portfolio of asset contracts has the potential to reach annual income (passing rents) of 511 million euros, which represents an increase of 42% (+151 million euros) with regard to the current cash flow.

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Financial structure

At 30 June 2019, the Colonial Group had a solid balance sheet with an LTV of 37.9% (135 bps better than at the beginning of the year) and a Rating by Standard & Poors of BBB+, the highest rating in the Spanish real estate sector.

Colonial Group has 2,195 million euros between cash and available lines of credit with a maturity of the debt of 5.3 years. In particular, it is worth mentioning that 64% of the Group's debt matures in 2031.

In the first half of 2019, Colonial completed the restructuring of Axiare's outstanding debt by cancelling various bilateral loans amounting to 162 million euros and refinancing two bilateral loans amounting to 151 million euros, improving margins and cancelling mortgage guarantees.

Short-term promissory notes were issued under the ECP programme registered in December 2018, with current issues at 30 June amounting to 424 million euros.

SFL has restructured a syndicated loan which has allowed it to increase the limit to 390 million euros and improve both margins and maturities. During the first half of the year it also issued short-term promissory notes, with issues at the close of the half year amounting to 354 million euros.

Solid development on the stock market

Colonial shares closed the first half of 2019 with a 25% revaluation, beating the benchmark indices (EPRA & IBEX35). The share price development reflects the support of the capital market for the Colonial Group's growth strategy. Colonial's share price stands out against its competitors as one of the securities closest to value regarding fundamentals.

ESG Strategy

Colonial pursues the clear leadership in ESG, being a fundamental key in its growth strategy in which offering maximum quality in its portfolio constitutes a main characteristic. This fact is reflected in the high number of certifications in the Colonial Group’s property portfolio

91% of the portfolio has energy certificates Leed or Breeam. In particular, 1,845 million euros of assets have Leed ratings (+4% vs 12/18) and 8,837 million euros of assets have Breeam ratings (+4% vs 12/18).

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This level of certification is clearly above average in the sector. In addition, the strategic sustainability plan carries out improvements in energy efficiency, betting on continuous improvement asset by asset.

The high quality of Colonial's portfolio is reflected in the high level of asset certification. At the beginning of 2019, BREEAM/GRESB recognised the Colonial Group as the leader, number one in Europe, in responsible investment through the "Award for Responsible Real Estate Investment" in the large portfolios category.

Colonial's European leadership in ESG has allowed it to formalise loans for a total volume of 151 million euros with ING and Caixabank.

3. Liquidity and capital resources

See "Capital Management and Risk Management Policy" in Note 14-o to the consolidated financial statements for the year ended 31 December 2018 and Note 10 to these condensed interim financial statements.

4. Risk management policies and objectives

Risk Management

Colonial is exposed to a variety of risk factors arising from the countries in which it operates and from the very nature of its activities. Colonial's Board of Directors is responsible for determining the risk management and control policy, identifying the Group's main risks and implementing and supervising the Control and Risk Management System that Colonial has developed as the foundation for the efficient and effective management of risks throughout the organisation. The risks associated with the Group's activities are described below.

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Strategic Risks: The risks related to the sector and the environment in which the Group carries on its business, the markets in which it operates and the strategies adopted in order to carry out its activities are analysed below. ▪ Risks associated with the industry climate: The Colonial Group pays special attention to the economic, political, legal and social risks related to the countries in which it operates (Spain and France). Despite the slowdown in the global economy, the European real estate sector has continued to be dynamic, with very significant levels of investment and marketing. The growth forecast for the French economy at levels similar to the European average and for the Spanish economy at levels clearly above that average, allow the Group to face the coming years with optimistic prospects in terms of sustainable growth and the profitability of its investments. ▪ Risks associated with a competitive sector: The real estate sector is characterised as being highly competitive, reaching high levels of investment in recent years, and was driven by specialised international investment funds and by listed real estate investment companies (REITs). Colonial Group maintains a benchmark position in the European real estate sector as a result of the high quality and value of its assets and its strategy of focusing mainly on its office rental activities in prime or Central Business District (CBD) areas of Barcelona, Madrid and Paris. The successful investment and organic growth strategy implemented in recent years, and the different Alpha projects have strengthened the Group's position as leader in the sector. ▪ Risks related to the value of assets: Every six months the Group carries out appraisals, through independent experts and by applying objective market criteria, on all of its property assets. Colonial allocates a significant portion of its resources to investing in and maintaining its property assets in order to enhance their value and position on the market, and to optimise income and returns.

Corporate Risks: Risks relating to the organisational structure, corporate culture, corporate policies and key decision-making processes of the governing bodies are analysed. ▪ ESG Commitment Risk: The Environment, Social and Governance policysets out the principles and bases of the Group's corporate social responsibility commitment to its stakeholders. The management of these expectations and of the strategy in the environmental, social and corporate governance spheres forms part of the Group's objectives for the coming years in terms of sustainability and the creation of value for these stakeholders. ▪ Anticipation of new trends: As is the case with other sectors, the real estate sector requires continuous adaptation to emerging trends. The growing implementation of digitalisation in all sectors, the new technology supplied in the real estate sector, and the increase in coworking spaces results in constant changes that specifically affect the real estate sector. In this area, in 2019 theColonial Group continues to consolidate its growth strategy in the field of coworking, through the opening of new Utopicus centres, as well as through the development of digitalisation projects and new technologies in the development of services and new business models in the real estate sector.

Operational Risks: Operational risks refer to the risks arising from losses due to failures or flawed management of operations. ▪ Financial risks: The Group efficiently manages its financial risks with the aim of maintaining adequate levels of liquidity and debt, minimising borrowing costs and ensuring compliance with its business plans: - Risk of exposure to interest rate fluctuations: Management of this risk aims to reduce interest rate volatility to limit and control the impact of interest rate fluctuations on profit and cash flows and to keep overall borrowing costs at reasonable levels. The Colonial Group arranges financial instruments to hedge interest rate fluctuations. A high percentage of the Group's gross financial debt is at fixed rates. - Risks relating to financing and debt: The Group’s financial structure calls for diversification of its sources of financing, both by entity and by product and maturity. In 2018, the Group obtained a Standard & Poor’s credit rating of BBB+ with a stable outlook and in 2019 Colonial obtained a Moody’s rating of Baa with a stable outlook. This is a consequence of the improvement in the financial structure, extending and diversifying the maturity of the debt and keeping the Group's net financial debt (“Loan to Value”) at adequate levels, thus providing sufficient financial capacity for the Group to undertake the projects planned and to assume significant growth levels in the coming years.

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- Liquidity risk: As mentioned in the preceding paragraph, the Group has the necessary sources of financing to take on current projects, as well as those included in its business plan, while maintaining a high capacity to attract capital, obtain liquidity and new lines of credit. ▪ Asset management risks: Sustainable property management requires that the Group allocate a significant portion of its investments to acquiring, constructing, renovating and maintaining the high quality of its properties, which stand out as a result of their high energy efficiency. This property management strategy is a key part of the Group's organisation and business plan. Likewise Colonial Group's real estate assets are exposed to the generic risk of damage for which the Group has contracted sufficient coverage to cover the cost of rebuilding the property and the damage caused to third parties. In addition, commercial management is focused on maintaining minimum vacancy levels by maximising the income obtained from leasing the Group's assets and the average maturity of the contracts signed. The success of this asset management has a direct impact on the value of the Group's assets. Compliance Risks: Potential regulatory risks in relation to compliance with obligations arising from applicable legislation, agreements with third parties and obligations self-imposed by the Group, mainly through its Code of Ethics and Code of Conduct, are analysed. ▪ Regulatory compliance risks: The process of identifying and assessing risks of regulatory or contractual breach that may give rise to legal proceedings against the Group allows it to take the appropriate corrective measures to mitigate these risks or, where applicable, any possible impact thereof, through the controls established in the crime prevention model defined and implemented by the Group. The Company has also taken out insurance to cover any legal costs or possible damage against directors and executives. ▪ Tax risks: Colonial Group must adhere to the general tax legislation of the countries in which it operates, as well as those specific to the SOCIMI and SIIC schemes, respectively in Spain and France. Accordingly, Colonial has a tax policy, a tax strategy and a tax risk management system, establishing adequate measures to control and monitor the management of risks in this connection.

Reporting Risks: In order to cover any reporting risks that may arise from errors or a failure to comply with requirements concerning the public information to be disclosed by the Group, and to ensure the reliability of this public information, Colonial has developed an Internal Control over Financial Reporting (ICFR) Organisational and Monitoring Model. Internal Audit is responsible for performing the necessary tests to verify compliance with the ICFR policies, manuals and procedures, validating the efficacy of the controls in place in these processes. 5. Events after the reporting period

There have been no significant subsequent events.

6. Future outlook

Barcelona and Madrid

The Spanish economy has maintained a good growth rate and has weathered the global economic slowdown better than its counterparts. Therefore, while in the first quarter of 2019 the eurozone as a whole advanced 1.2% year- on-year, the growth of Spain's GDP was 2.4% year-on-year. This pace of growth reflects the high generation of employment, the improvement in consumer confidence and the good rate of growth in business in the services sector (+5.4% year-on-year in April, three-month rolling average) and the industrial sector (+2.4% year-on-year). Proof of this is that in May 2019 the total number of Social Security contributors stood at 19,442,113 people, a figure very close to the all-time high reached in July 2007.

With regard to the office market in Barcelona and Madrid, demand is expected to continue at a high rate. This demand, together with a scarce supply of quality, means that prime rents continue to grow and that projects continue to be pre-leased. This is expected to whet the appetite of the investor seeking higher returns than traditional financial markets.

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Paris

The Paris market is one of the most important markets in the world. During the last few quarters, there have been clear signs of an improvement in demand, especially in CBD areas, where there is an obvious lack of prime rentals. Today the availability of office space in this area is the lowest that it has been in the last 10 years. Consequently, leading consultants expect this positive trend that began at the end of 2014 to be consolidated for prime property rentals in CBD areas.

In terms of growth prospects, the French economy is expected to grow by around 1.6% over the next two years, a positive development as this growth is higher than that achieved in 2018 and is above the eurozone average.

Strategy for the future

The investment market has shown record contracting levels. In the current climate of low interest rates, expectations are that investors will continue to be interested in prime products.

In this market context, the Parent is implementing a selective investment policy, in order to maximise value for its shareholders.

In particular, it has focused its efforts on acquiring top-quality properties in high-potential market areas, including assets with the wherewithal to become prime rentals through repositioning.

7. Research and development activities

As a result of the nature of the Group, its business activities and structure, Inmobiliaria Colonial, SOCIMI, S.A. does not habitually carry out any R&D activities.

8. Treasury shares

During the first half of 2019, Inmobiliaria Colonial, SOCIMI, S.A. delivered 493,894 treasury shares to the beneficiaries of the long-term incentive plan. At 30 June 2019, the Parent held a closing balance of 278,866 shares with a par value of 697 thousand euros (2.5 euros per share), representing 0.06% of the Parent's share capital.

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9. Alternative Performance Measures (European Securities and Markets Authority)

Below follows a glossary of the Alternative Performance Measures, including their definition and relevance for Colonial, in accordance with the recommendations of the European Securities and Markets Authority (ESMA) published in October 2015 (ESMA Guidelines on Alternative Performance Measures). These Alternative Performance Measures have not been audited or revised by the company's auditor (Deloitte, S.L.).

Alternative Performance Measure Calculation method Definition/Relevance

EBIT Calculated as the “Operating profit” Indicator of the profit generating (Earnings before interest and taxes) plus “Changes in fair value of capacity of the Group, considering only investment property” and “Losses due its productive activity less debt and tax to impairment of assets”. effects.

EBITDA This calculated as the “Operating Indicator of the profit generating (Earnings Before Interest, Taxes, profit” adjusted for“ Amortisation” and capacity of the Group, considering only Depreciation and Amortization) the “Net change in provisions”. its productive activity, eliminating any provisions for amortisation, debt and tax effects.

Gross financial debt (GFD) Calculated as the sum of the items Relevant indicator for analysing the “Bank borrowings and other financial financial position of the Group. liabilities” and “Issuance of bonds and other similar securities”, excluding “Interest” (accrued), “Arrangement expenses” and “Other financial liabilities” of the consolidated statement of financial position.

Net financial debt (NFD) Calculated by adjusting in gross Relevant indicator for analysing the financial debt the item "Cash and cash financial position of the Group. equivalents".

EPRA1 NAV Calculated based on the equity of the Standard analysis ratio for the real (EPRA Net Asset Value) Company and adjusting specific items estate sector, recommended by EPRA. according to EPRA recommendations.

EPRA1 NNNAV Calculated by adjusting the following Standard analysis ratio for the real (EPRA “triple net”) items in the EPRA NAV: The market estate sector and recommended by value of the financial instruments, the EPRA. market value of the financial debt, any taxes that would be accrued with the sale of assets at market value, applying the reinvestment tax rebate and the tax credit recognised in the balance sheet taking into account the going concern criteria.

Market Value excluding transaction Appraisal of all the assets in the Standard analysis ratio for the real costs or Gross Asset Value (GAV) Group's portfolio carried out by external estate sector. excluding Transfer costs appraisers to the Group, deducting the transaction costs or transfer costs.

Market Value including transaction Appraisal of all the assets in the Standard analysis ratio for the property costs or GAV including Transfer Group's portfolio carried out by external sector. costs appraisers to the Group, before deducting the transaction costs transfer costs.

1 EPRA (European Public Real Estate Association) which recommends the standards for best practices to follow in the property sector. The calculation method for these APM has been carried out following the instructions established by EPRA.

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Alternative Performance Measure Calculation method Definition/Relevance

Like-for-like Rentals Amount of rental income from leases This permits the comparison, on a like- included in the item “Revenue” for-like basis, of the changes in the comparable between the two periods. rental income of an asset or group of To obtain these, the rental income from assets. investments or divestments made between both periods are excluded, together with those from assets included in the portfolio of projects and renovations, as well as other atypical adjustments (for example, compensation for early termination of lease agreements).

Like-for-like Valuation Market Value excluding transaction This permits the comparison, on a like- costs or the Market Value including for-like basis, of the changes in the transfer costs, comparable between Market Value of the portfolio. the two periods. To obtain these, the rental income from investments or divestments made between both periods are excluded.

Loan-to-Value Group or LtV Group Calculated as the result of dividing the This permits an analysis of the relation Gross financial debt less the amount of between the net financial debt and the the item “Cash and cash equivalents” appraisal value of the Group's asset between the Market Value, including portfolio. transaction costs, of the Group's portfolio of assets.

LtV Holding or LtV Colonial Calculated as the result of dividing the This permits an analysis of the relation Gross financial debt less the amount of between the net financial debt and the “Cash and cash equivalents” of the appraisal value of the portfolio of Parent and the Spanish subsidiaries assets of the parent company of the wholly owned thereby between the Group. sum of the market value, including transaction costs of the asset portfolio of the head of the Group and the Spanish subsidiaries wholly owned thereby, and the EPRA NAV of the rest of the financial investments in subsidiaries.

Alternative Performance Measures included in the foregoing table arise from items in the consolidated financial statements and in the condensed consolidated interim financial statements of Inmobiliaria Colonial, SOCIMI, S.A. and subsidiaries or from the breakdowns of the items (sub-items) included in the corresponding explanatory notes to the report, except as indicated below.

Below follows a reconciliation of those alternative performance measures whose origin does not fully derive from items or sub-items in the consolidated annual financial statements of Inmobiliaria Colonial, as provided for in paragraph 28 of the aforementioned recommendations.

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EPRA NAV (EPRA Net Asset Value)

30/06/2019 31/12/2018

EPRA NAV (EPRA Net Asset Value) (Millions of euros)

"EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT" 5,047 4,811

Includes:

(i.a) Revaluation of investment assets 19 24

(i.a) Revaluation of assets under development 7 7

(i.c) Revaluation of other investments 19 26

(ii) Revaluation of finance leases n.a. n.a.

(iii) Revaluation of assets held for sale 8 n.a.

Excludes:

(iv) Market value of financial instruments 4 2

(v.a) Deferred taxes 244 228

(v.b) Goodwill resulting from deferred assets n.a. n.a.

Includes/excludes:

Adjustments of (i) to (v) in relation to the interests of strategic alliances n.a. n.a.

EPRA NAV 5,348 5,098

▪ EPRA NNNAV (EPRA “triple net”)

30/06/2019 31/12/2018

EPRA NNNAV (EPRA “triple net”) (Millions of euros)

EPRA NAV 5,348 5,098

Includes:

(i) Market value of financial instruments (4) (2)

(ii) Market value of the debt (272) (14)

(iii) Deferred taxes (244) (229)

EPRA NNNAV 4,831 4,853

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▪ Market Value excluding transaction costs or GAV excluding transfer costs

30/06/2019 31/12/2018

Market Value excluding transaction costs or GAV excluding transfer costs (Millions of euros)

Barcelona 1,268 1,175

Madrid 2,460 2,511

Paris 6,484 6,256

Operating portfolio 10,211 9,942

Projects 1,099 925

Logistics and others 488 481

Total Market Value excluding transaction costs and Parent's treasury shares 11,798 11,348

Spain 4,975 4,778

France 6,823 6,570

▪ Market Value including transaction costs or GAV including transfer costs

30/06/2019 31/12/2018

Market Value including transaction costs or GAV including transfer costs (Millions of euros)

Total Market Value excluding transaction costs 11,798 11,348

Plus: transaction costs 592 567

Total Market Value including transaction costs, treasury stock, EPRA 12,390 11,915

Spain 5,115 4,910

France 7,276 7,005

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▪ Like for like Rentals

Logistics and Barcelona Madrid Paris others TOTAL

Like-for-like Rentals (Millions of euros)

Rental income 1st half 2017 17 25 99 0 141

Like-for-like 1 2 4 0 7

Projects and registrations 0 1 0 0 1

Investments and divestments 0 2 (7) 0 4

Axiare 2 16 0 8 26

Others and compensation 0 0 0 0 0

Rental income 1st half 2018 20 46 96 8 170 like for like 1 2 3 0 6

Projects and registrations 1 (1) (1) 0 (1)

Investments and divestments 1 (4) 0 2 (1)

Axiare 0 0 0 0 0

Others and compensation 0 0 0 0 0

Rental income 1st half 2019 23 43 98 10 174

▪ Like-for-like Valuation

30/06/2019 31/12/2018

Like-for-like Valuation (Millions of euros)

Valuation at 1 January 11,348 9,282

like-for-like Spain 223 381

like-for-like France 254 341

Acquisitions - 1,422

Divestments (27) (78)

Total valuation 11,798 11,348

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▪ Group Loan to Value or Group LtV

30/06/2019 31/12/2018

Loan to Value Group or LtV Group (Millions of euros)

Gross financial debt 5,029 4,748

Less: "Cash and cash equivalents" (330) (68)

(A) Net financial debt 4,699 4,680

Market Value including transaction costs 12,391 11,915

Plus: Treasury shares of the Parent valued at EPRA NAV 8 8

(B) Market Value including transaction costs and Parent's treasury shares 12,399 11,923

Loan to Value Group (A)/(B) 37,9% 39,3%

▪ LtV Holding or LtV Colonial

LtV Holding or LtV Colonial 30/06/2019 31/12/2018

Holding Company (Millions of euros)

Gross financial debt 3,225 3,002

Less: “Cash and cash equivalents” of the Parent and Spanish subsidiaries wholly owned thereby (284) (41)

(A) Net financial debt 2,941 2,961

(B) Total Market Value including transaction costs and Parent's treasury shares and EPRA NAV of subsidiaries with non-controlling interests 8,953 8,538

Loan to Value Holding (A)/(B) 32,8% 34,7%

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