Klepierre : 2017 Half-Year Earnings

P R E S S R E L E A S E

F I R ST - H AL F 2 0 17 EAR N I N GS

Pa r is - J u ly 2 5 , 2 0 17

Klépierre, the leading pure player in shopping mall property in Europe, today reported earnings for the six months ended June 30, 2017.1 The main highlights include:

• Net current cash flow per share +4.9%2 in first half 2017 at €1.22
• Shopping center net rental income +2.7% on like-for-like basis3, outperforming indexation by 200 bps
• Retailer sales trends improving: +1.8% in 2nd quarter like-for-like, +0.8% in the first half4
• Cost of debt further reduced to 1.9%
• Portfolio valued at €23.3bn, +4.3% like-for-like; EPRA NAV at €37.00, +6.1% over 12 months
• Acquisition of Nueva Condomina mall in Spain for €233m, and disposals totaling €242m
• Successful openings in April 2017 of Val d'Europe extension and Hoog Catharijne first phase of redevelopment
• Initial cash-flow guidance for full-year 2017 raised to at least €2.45 from €2.35-2.40 range.

Shopping center net rental income +2.7% on a like-for-like basis

Net rental income (NRI) generated by shopping centers reached €527.1 million in the first half of 2017, up

€6.4 million on a current-portfolio and Total-Share basis compared to the same period of 2016. This increase reflects the combination of:

• a €13.5-million increase in NRI on a like-for-like basis (+2.7%);

• €2.9 million in additional NRI from the acquisition of Nueva Condomina in Murcia, Spain, and the opening of two extensions at Hoog Catharijne in the Netherlands and Val d'Europe in France;

• a €10.2-million decrease in NRI from asset disposals, notably in Scandinavia and Spain; and

• a limited foreign exchange impact.

On a like-for-like portfolio basis,3 shopping center NRI was up by 2.7%, outperforming by 200 bps index- linked rental adjustments of +0.7%.

In France (36.1% of total net rental income), NRI was up 2.0% on a like-for-like basis in the first half, outperforming indexation by 190 bps. This performance was driven by the positive effects of re-tenanting initiatives implemented in 2016 and the first half of this year. The recent renegotiation of the Clear Channel contract for in-mall advertizing, as well as lower operating costs thanks to centralized procurement initiatives, also contributed to NRI growth.

The Italian portfolio (17.3%) posted a 2.2% rise in like-for-like NRI over the six-month period, outperforming indexation by 190 bps. The main NRI growth driver remained the dynamic re-leasing activity achieved in 2016 and first half of 2017. Additional revenues generated by specialty leasing and variable rents, as well as higher rent collection also contributed to like-for-like rental growth.

Scandinavia (16.0%) registered strong 4.2% growth in like-for-like NRI with indexation at 2.4%. Solid reversion and improved occupancy (+110 bps) at the end of the period are expected to contribute to higher NRI in the second half of the year.

NRI from Iberian assets (9.5%) rose by 4.8% on a like-for-like basis. The outperformance versus indexation amounted to 310 bps in Portugal and 380 bps in Spain. On top of the effect of re-leasing campaigns carried out at a high reversion rate, occupancy improved by 100 bps and rent collection rose by 40 bps in Spain.

In CEE & Turkey (10.3%), like-for-like NRI was up 2.2% in the first half. Hungary and the Czech Republic grew by 12.6% and 13.0% respectively on a like-for-like basis, thanks to re-tenanting initiatives. Shopping center NRI in Poland was down 1.3% mainly due to slightly negative reversion. In a challenging environment, NRI in Turkey declined by 6.7% on a like-for-like basis, reflecting temporary measures granted to tenants to soften the effects of the Turkish Lira's depreciation against the Euro and US dollar.

In the Netherlands (4.2%), NRI increased by 2.1% like-for-like in the first half (indexation at 1.0%), showing a clear year-on-year improvement. Rent collection improved by 210 bps in the first half of 2017, reflecting an improving retail environment after the bankruptcy of several retailers in 2016.

In Germany (3.9%), like-for-like NRI was almost flat in the first half of 2017, with no contribution from indexation. While negative reversion continued to impact the evolution of NRI, it was offset by lower operating costs, reflecting higher occupancy (+50 bps) and better rent collection (+120 bps).

Retailer sales trends improving: +1.8% in the second quarter

On a like-for-like portfolio basis,3 retailer sales at Klépierre's shopping malls rose by 1.8% in the second quarter of 2017 benefiting from improved macro-economic conditions and favorable weather (except in Scandinavia). Adding in the first quarter which had been negatively impacted by adverse calendar effects (-0.6%), retailer sales grew by 0.8% in the first half of 2017 on a like-for-like basis (+0.5% excluding extensions).

On a geographical basis, CEE & Turkey posted very strong results (+6.9%), with Hungary posting the best performance (+11.6%). On the back of accelerated GDP growth, Iberia also reported strong figures: retailer sales in Spain and Portugal grew by +4.8% and +4.4%, respectively. Retailer sales were stable in Scandinavia (- 0.3%) and Germany (+0.6%), and down slightly in Italy (-1.2% due to competition in Northern Italy) and France (-0.3% due to an adverse calendar effect in the first quarter not fully offset by sales growth in the second quarter).

Another record period for leasing

Klépierre posted another record in terms of leasing activity in the first half of 2017 with 972 leases signed, of which 815 leases renewed or relet at an average 12.2% reversion rate.

This performance corresponds to a 9% increase in the number of leases signed and €18.9 million in additional annual minimum guaranteed rents (MGR), excluding the Val d'Europe and Hoog Catharijne extensions. The €6.4-million increase compared to the first half of 2016 was driven mainly by France which confirmed its attractiveness to retailers with 190 leases signed (+16%, or €5.6 million in additional MGR), Spain (+40%, or €2.7 million in additional MGR), and Italy (+19%, or €2.2 million in additional MGR).

Deal flow with top international retailers remained extremely strong, as 15 leases were signed with the Inditex Group (notably including six Zara stores), and six leases with Sephora. The Sephora leases include a new, 600-sq.m. concept store at Val d'Europe (which opened in April 2017) and another at St. Lazare (over 1,000 sq.m. to open in April 2018).

Klépierre also accelerated the implementation of its Destination Food® strategy, with the introduction of innovative concepts such as Five Guys (at Hoog Catharijne and Alexandrium), Grom (Val d'Europe, Prado), Johnny Rockets (Lonato), Leon (Hoog Catharijne) and Wagamama (Prado). New dedicated food areas in Hoog Catharijne (City Square and Pavillon), Val d'Europe (Place des Étoiles) and the Prado rooftop will further enhance the attractiveness of the food and beverage offering in Klépierre's malls.

This dynamic leasing activity translated into further improvement in the Group's key operational performance indicators in the first half. After significant improvements posted in 2016, the shopping center vacancy rate (EPRA format) was reduced to 3.4%, a 10-bp improvement from December 2016 and a 40-bp improvement from June 2016. At the same time, the bad debt allowance was maintained at a low 1.6%.

Net current cash flow per share +4.9%2at €1.22 in the first half

Net current cash flow for the period amounted to €442.8 million on a Total-Share basis (€377.4 million on a Group-Share basis), up from €427.9 million in the first half of 2016 (€362.4 million, Group-Share basis). On a per-share basis, net current cash flow rose by 4.9% to €1.22 from €1.16 a year earlier. This excellent performance mainly reflects Klépierre's lower cost of debt (for +€0.04), NRI growth (+€0.02) and the accretive impact of the share buyback program (+€0.01).

Total portfolio valuation +4.3% year-on-year to €23.3 billion

The value of Klépierre's shopping center portfolio (excluding transfer duties) amounted to €22.9 billion at June 30, 2017, compared with €22.2 billion one year earlier. The increase in value reflects €891 million in like- for-like growth (+4.4% over 12 months) and €470 million in acquisitions (notably Nueva Condomina) and investments related to the Group's committed pipeline, partly offset by divestments for €525 million (mainly in Scandinavia, France and Spain) and a limited foreign exchange impact of -€88 million.

On a Group-Share basis, the value of Klépierre's shopping center portfolio amounted to €19.5 billion at June 30, 2017, reflecting a 4.3% like-for-like increase over 12 months. The EPRA average net initial yield of this portfolio was 4.8%, down 20 bps from one year earlier, mainly due to the yield compression observed in the shopping center investment markets in which Klépierre operates.

Adding in other activities, the total portfolio valuation (excluding duties) at June 30, 2017 amounted to

€23.3 billion on a Total-Share basis (+4.3% like-for-like over 12 months) and €19.8 billion on a Group-Share basis.

EPRA NAV per share +6.1% year-on-year at €37.00

EPRA net asset value (NAV) per share amounted to €37.00 at the end of June 2017, versus €34.80 one year earlier. This improvement mainly reflects net current cash flow generation (+€2.40 per share) and the increase in the value of the like-for-like portfolio (+€2.30), which were partly offset by the dividend payment (-

€1.82).

Loan-to-value at 38.2%

As of June 30, 2017, consolidated net debt stood at €9,134 million, compared to €8,613 million on December 31, 2016. The €521-million increase is mainly attributable to the dividend payment,5 implementation

of the share buyback program, and investments made in the first half of 2017 which exceeded the proceeds of disposals and free cash flow generated in the period. The increase in net debt combined with strong rise in property values led Klépierre's Loan-to-Value ratio6 to 38.2% at the end of June 2017, which is within the company's targeted 35-40% range.

In the first half of the year, Klépierre raised €800 million in new financing through bond issues and banking credit lines. In February, Klépierre issued €600 million in new long-term notes (10 years) bearing a 1.375% coupon.

At June 30, 2017, the average duration of Klépierre's debt stood at 6.3 years, an increase of approximately three months compared to year-end 2016. The Group's level of liquidity remained high at €1.8 billion, including

€1.3 billion of unused committed credit lines with an average remaining maturity of 5.5 years. This amount is more than sufficient to cover the Group's financing needs for 2017, 2018 and 2019.

Cost of debt reduced to 1.9%

As expected, the Group average cost of debt fell below 2% in the first half, to reach 1.9%. This figure reflects the low level of short-term interest rates, the benefits of financing cost synergies following Klépierre's acquisition and integration of Corio, and favorable funding conditions.

In January 2017, Klépierre had early-terminated its €200-million fixed-rate position of payer swaps and implemented a new €1.3-billion portfolio. Comprised of payer swaps and caps, the new portfolio increased the Group's hedging ratio from 81% at year-end 2016 to 91% at June 30, 2017.

Share buyback program

As of July 21, 2017, Klépierre had allocated a total of €344 million to the share buyback program, out of the maximum €500 million, announced on March 13, 2017. This represented 9,577,528 shares repurchased at an average price of €35.87 per share.

Successful delivery of two iconic projects

After three years of construction, on April 12, 2017, Klépierre unveiled a 17,000-sq.m. extension at Val d'Europe near Paris, bringing the French mall's total sales area to more than 105,000 sq.m. The extension features 30 new brands, including flagship stores. In addition, the Group has implemented the Clubstore® concept through a refurbishment of the entire shopping center. Since the extension opening, Val d'Europe has hosted 4.3 million visitors, an 8% increase compared to the same period last year, and generated a 12% increase in retailer sales.7

One week earlier, on April 6, 2017, Klépierre officially opened 16,000 sq.m. of new retail space at Hoog Catharijne (Utrecht), the leading mall in the Netherlands. New stores were notably added to the shopping center's offering in the fashion, food & beverage, and health & beauty segments.8 Since opening the new area, Hoog Catharijne's footfall has increased by 6% and retailer sales by €7.5 million.

Prado on track to become one of Marseille's iconic malls

Construction of Prado, a new 23,000-sq.m. mall to be delivered in the first quarter of 2018 in the most affluent district of Marseille, is proceeding according to plan. Galeries Lafayette has taken possession of its flagship and initiated its fit-out. Prado's glass canopy which covers the whole mall and constitutes a bold architectural statement, was completed at the end of the first half.

As of June 30, 2017, 78% of Prado's leasable space had been signed or was in advanced negotiations. In addition to Galeries Lafayette, Prado will boast a 3,300-sq.m. Zara anchor, which will be the Spanish retailer's largest shop in the catchment area. Prado's mix will be further enhanced by distinctive brands, including Repetto and Pellegrin & Fils, and innovative food concepts, such as Wagamama's first restaurant in a French shopping center, Big Fernand's gourmet burgers, and Les Petits Producteurs by renowned French chef Thierry Marx.