On behalf of the members of the Board Directors, I am pleased to present you with the Prima Inmobiliaria annual Report for the financial year 1999. Which includes a detailed description of our activity and its development throughout the present year.

1999: Objectives met

We can be satisfied with the results obtained in the company’ s recent history: 1999 saw the culmination of an ambitious business plan that began three years ago, thanks to the support of you, our shareholders. In 1997, at the beginning of this new era, our first capital increase was undertaken, and the second in 1998. In just 8 months we doubled the company’s capital twice-over with the intention of implementing an ambitious investment programme that would allow us to teach a total asset figure of 100,000 million pesetas: In 1997 we stated that we were in a position to invest 60,000 million: we had the investment capacity and the market knowledge to meet this objective, and, in a short period of time, that is that what we have done.

Our three years of recent history have been dominated by two important, inseparable achievements: first, the extraordinary reception of our project by national and international investors, for which both of our capital increases were completely subscribed and disbursed during the preferred subscription period, despite having taken place only 8 months: and thanks to that, the investments made; outstanding for both their amount and quality, have made our property portfolio one of the most important in the country, with approximately 45 prime income producing properties.

Our three years of recent history have been dominated by two important, inseparable achievements: first, the extraordinary reception of our project by national and international investors, for which both of our capital increases were completely subscribed and disbursed during the preferred subscription period, despite having taken place only 8 months: and thanks to that, the investments made; outstanding for both their amount and quality, have made our property portfolio one of the most important in the country, with approximately 45 prime income producing properties.

As for our profits, the net profit obtained during 1999 rose to 4,010 million pesetas, an increase of 140% with respect to the previous year. Also, rental income doubled that of 1998 reaching 5,000 million pesetas. This growth is due not only to the addition of new property assets, but also to the total incorporation into our accounts of revenues from properties acquired throughout 1998. A truer image of the profitability of our property portfolio will emerge from the results of the financial year 2000.

Investment policy, and financing

The investment policy adopted has been the one we announced during the start up stage, with investments concentrated on " pure play" standing investments in the office, industrial and retail sectors. The high level of occupation of the properties, close to 100%, and the quality of the lessees ensure an optimal return on the investment. As for the geographical distribution of our property portfolio, this denotes a clear tendency towards domestic business, accounting for 87% of the total invested, especially concentrated in Madrid and Barcelona, with 59.2% and 24.7 % respectively.

We have acquired our properties on the basis of clearly established criteria. For each investment project, we finance one third out of equity and two thirds with external mortgage debt on fixed interest rate basis. The average term for mortgage debt on fixed interest rate basis. The average term for mortgage debt is 12 years, with an average cost of approximately 5.4%. In the current environment, with interest rates tending to rise, our financial structure and our favourable borrowing conditions give an added implicit value to our business.

1999: Prima´s international diversification

During 1999, PRIMA has embraced the potential of globalisation of markets in an industry such as real estate that has hitherto been primary local and with the idea that geographical diversification would help ease industry cycles. What at the end of 1998 was a 5% shareholder’s exchange with RSE, the German real estate company, and PRIMA, at the end of this year turned into an 3-party association, strengthened by cross shareholdings between the German real estate company RSE, the Swiss company Maag Holding, and PRIMA. This business association is the first to exist in the industry at a Pan-European level, and pursues the achievement of specific, low-risk projects dealing with acquisition of pure play property or portfolios within Europe, in which there is always a member with knowledge of the local market. Today PRIMA owns 3 properties on 50% Joint Venture basis with RSE: Paseo de Gracia, 56 in Barcelona, the OMNI building in Lisbon Portugal and the Descartes Building in Luxembourg. All three are office buildings and represent for PRIMA an investment of 4,000 million pesetas.

However, there have been two especially significant transactions in the international arena: firstly, PRIMA has entered into a purchase option on the Barclays Financial Centre office building in Miami, for 15 million dollars. This building, currently under construction, has a lettable floor area of 48,000m2 and is situated on Brickell Avenue, the most prestigious business area in Miami. The total cost of the transaction is established at 130 million dollars ( approximately 20,000 million pesetas). The expected yield on the investment is 8% and to-date 40% has been pre-let predominately to Barclays Bank.

The year’s second transaction, completed in October, was the acquisition of a portfolio of 85 properties from UBS, by way of a sale and leaseback, for the price of 871 million Swiss Francs. The properties, the majority of them office buildings, are situated in the strategic Zurich-Bern-Basel triangle. The investment was made through MPC ( Maag Property Company), of which PRIMA holds 40% and Maag 20%. This is a very significant transaction within the European real state market and constitutes a firm pledge for a market with great potential for development, and which is starting to gain a dynamism that to date has not existed.

1999: A good stock market performance

We are satisfied with the performance of our shares in this period, bearing in mind the severity with which the market has treated the real estate industry in Spain. We close the period with a stock market revaluation of 11.4%, emphasising that within the listed property companies sector, we are the only one with positive results for 1999.

We firmly believe, however, that the penalisation by the market has been excessive, through this punishment has fallen upon real estate companies with a strong residential development component. PRIMA is not involved in residential development business and this has helped us again a strong stock market trajectory since the market has recognised this in its valuations. This does not prevent us from believing that the real estate cycle in general may still present sustained and sustainable growth in different sub-sectors in the coming years, nor that the existing penalisation on companies’ s share prices is unjustified.

2000: The future of the industry, the future of the company

The main indicators for our economy in 1999 have been very satisfactory, despite the increases in inflation and interest rates. Growth in GDP was 3.7%, and inflation, around 2.9%. Employment continues to rise, and the percentage of working population has reached 85%. Through it is true there might be a slight deceleration in the evolution of growth rates, according to the latest information provided by Ministry of Finance and Economic Affairs, economic activity will continue growing at a greater pace than that of other countries in the "Euro" zone.

As for the industry, there will continue to be strong demand for office buildings, as well as for logistics centres and shopping centres. Office rent rose by 20% in Madrid this year and by 30%, in Barcelona, reaching 4,000 pesetas/m2/month in Madrid. Industry forecasts continue to be positive, the demand for office buildings will be sustained in the line with the country’ s economic growth. Larger corporation will be requiring logistic centres, appropriate for the "new economy" driven by the e-commerce.

Future prospects for PRIMA are good. We have recurring profit through rental income in addition to the potential of obtaining capital gains through the trading of non-core assets, in order to realise additional profits. Within this apparent opportunism lies true market knowledge.

As for our share price, we cannot ensure that economic stability will lead to recovery of confidence in the Securities Market in the short-term. But we do believe and hope that investment in easily-assessable companies such as ours, contributes to the idea of strength that we want to transmit to the markets. PRIMA has easily identifiable and tangible assets: our profits are recurrent, and believe that the management and the business approach we have developed up to this point allows us to have faith in the future. Thanks to the confidence that you have entrusted in us, we have been able to achieve what we announced in its day, and we will do everything possible to make sure that PRIMA continues to be a dynamic industry leader.

Yours sincerely,

John Gómez Hall
Chairman and CEO

Madrid, March 2000