VGP : reports full year 2017 record profits

• Record profit for the period of € 96.0 million (+ € 4.7 million compared to 31 December 2016)
• Proposal for the distribution of a dividend of € 35.3 million (€ 1.90 per share) representing a gross dividend yield of 3.1%^[1].
• Record signed and renewed rental income of € 27.4 million driven by 484,000 m² of new lease agreements signed corresponding to € 24.3 million of new annualised rental income combined with 61,000 m² of lease
  agreements renewed corresponding to € 3.1 million of annualised rental income. Total net increase of € 21.7 million when considering the sale of Estonia.
• The signed annualised committed leases represent € 82.8 million equivalent to 1.66 million m² of lettable area, a 35.0% increase since December 2016 (when excluding Estonia).
• New development land of 729,939 m² acquired and an additional 1,452,336 m² of new land plots under option, subject to receiving permits expected to be acquired during 2018 which adds to a total remaining development
  land bank as of December 2017 of 3,261,364 m² (34% net increase since December 2016)
• A total of 17 projects delivered representing 349,871 m² of lettable area, with an additional 22 projects under construction representing 475,113 m² of future lettable area. It is expected that more than 200,000 m² of lettable area will be delivered during the first quarter of 2018.
• Continued geographical expansion into Western Europe with consolidation of presence in Spain where 4 buildings are under construction (2 new buildings started up after year-end) and where 3 new lease contracts with blue chip tenants were signed during the past few months.
• VGP European Logistics joint venture saw one closing in 2017 of €173 million, this is expected to be followed by an > € €370 million closing by end of March 2018 which will allow VGP to reinvest in its development pipeline and continue to grow the business.
• A new long-term remuneration plan aligned with shareholders' interests, based on the growth of VGP's NAV, is currently being reviewed by the remuneration committee and will disclosed in further detail in the remuneration report included in the Annual Report 2017. The new plan will be applicable as from 2018 onwards.
• Conservative financing policy in place with a current gearing of 42.3%, in line with the Company's target maximum consolidated gearing of 55%.

^{[1] Based on the closing share price of € 62.20 as at 20 February 2018.}

VGP, the developer, manager and owner of high quality logistics real estate in Europe, has today published its annual 2017 results. The Company experienced strong growth in all its active markets, with profits for the period up to € 96.0 million, an increase of 5.2% compared to last year, and net valuation gain on the portfolio amounting to € 94.6 million.

Jan Van Geet, CEO of VGP Group, said: '2017 delivered record profits and was a record year on many measures for VGP and importantly, we are delivering on all our commitments - strong underlying commercial performance, geographical expansion into Western Europe towards EPRA Index inclusion eligibility, build-up of our land bank, successful completion of disposals to our joint venture and an 2018-onwards shareholder aligned long-term remuneration plan.'

Jan Van Geet added: 'Our key asset remains our decentralised, comprehensive and experienced team with strong knowledge of the local business environment and legal framework, providing our client base one-stop turn-key solutions for high quality properties in top locations. We are seeing exciting opportunities to invest for the future, to continue to deliver on our commitments as we grow into a pan-European pure-play logistics real-estate company'.

The Group's portfolio has continued to make strong progress during the second half of 2017, growing both in value and physical size. The value of annualised committed leases stood at € 82.8 million^[1], as at 31 December 2017. For the whole year 2017, the annualised committed leases increased with € 21.7 million on a like for like basis^[2]. The signed annualised committed leases at the end of December 2017 represent a total of 1,658,414 m² of lettable area, a 35.0 % increase since 31 December 2016 (excluding VGP Estonia). Of this total space 648,474 m² belong to the own portfolio (545,715 m² as at 31 December 2016) and 1,009,940 m² to the VGP European Logistics joint venture (732,523 m² at 31 December 2016).

During the year 2017 VGP delivered a total of 17 projects representing 349,871 m² of lettable area, with an additional 22 projects under construction representing 475,113 m² of future lettable area. It is expected that more than 200,000 m² of lettable area will be delivered during the first quarter of 2018.

At the end of May 2017, a third successful closing occurred with the VGP European Logistics joint venture (50/50 JV with Allianz Real Estate). The transaction value of the third closing was in excess of € 173 million. It is currently anticipated that a fourth closing will occur at the end of March 2018 which will have an estimated transaction value of > € 370 million.

Gearing level of the Group increased slightly to 42.3% as at 31 December 2017 (39.4% at 31 December 2016) despite raising of new debt during the first half of 2017.

The portfolio's strong performance during the year allows the Company to propose a dividend distribution of € 35.3 million (€ 1.90 per share).

Summary

During 2017 VGP continued its strong growth in all the markets where the Group is active. E-commerce continues to be a strong driver of demand for new lettable space. Development and letting activities continue to perform at record levels.

During the first half of 2017, a third closing was made with VGP European Logistics (the 50/50 joint venture with Allianz Real Estate) in which the Joint Venture acquired 6 new parks from VGP, comprising 7 logistic buildings, and another 4 newly completed logistic buildings which were developed in parks previously transferred to the Joint Venture. The 6 parks are located in Germany (3) and in the Czech Republic (3). The additional 4 buildings which were acquired by the Joint Venture are also located in Germany (3 buildings) and in the Czech Republic (1 building).

VGP continued to improve its financial debt profile with the successful private placement of an 8 year, € 80 million bond at the end of March 2017, and the issue at the beginning of July of a new € 75 million, 7 year retail bond to refinance the Jul-17 Bond maturing on 12 July 2017.

VGP's activities during the year 2017 can be further summarised as follows:

• The operating activities resulted in a profit for the year of € 96.0 million (€ 5.17 per share) for the financial year ended 31 December 2017 compared to a profit of € 91.3 million (€ 4.91 per share) for the financial year ended 31 December 2016.
• The increase in demand of lettable area resulted in the signing of new lease contracts in excess of € 27.4 million in total of which € 24.3 million[3] related to new or replacement leases (€ 8.6 million on behalf of VGP European Logistics) and € 3.1 million[4] (€ 1.9 million on behalf of VGP European Logistics) were related to renewals of existing lease contracts.
• The weighted average term of the annualised committed leases of the combined own and Joint Venture portfolio stood at 9.7 years at the end of December 2017 (10.3 years as at 31 December 2016). The own portfolio reached 13.0 years, while the Joint Venture portfolio reached 7.9 years.
• The Group's property portfolio, including the own and Joint Venture property portfolio, reached an occupancy rate of 100.0% at the end of December 2017 compared to 98.8% at the end of December 2016.
• The own investment property portfolio consists of 15 completed buildings representing 445,958 m² of lettable area whereas the Joint Venture property portfolio consists of 45 completed buildings representing 830,905 m² of lettable area.
• At the end of December 2017, 22 buildings representing 475,113 m² of lettable area were under construction.
• The net valuation of the property portfolio as at 31 December 2017 showed a net valuation gain of € 94.6 million (against a net valuation gain of € 118.9 million per 31 December 2016).
• 729,939 m² of new development land plots were acquired during the year and 1,452,336 m² new land plots under option to support the development pipeline and which are expected to be acquired in the course of 2018, subject to obtaining permits. Besides this a significant number of new land plots (> 1 million m²) have been identified and are under investigation. VGP expects that a significant number of these land plots will be contractually locked in during the first half of 2018.
• As at 31 December 2017 the financial income benefited from the interest income on loans made available to the Joint Venture (€ 5.3 million) and the unrealised gain on financial instruments (€3.5 million) but was adversely impacted by the interest on the issued bonds (€ 18.8 million). This resulted in a net financial cost of € 10.5 million as at 31 December 2017 compared to € 16.9 million as at 31 December 2016.
• Successful private placement of a new 8 year € 80 million bond at the end of March 2017 and successful placement of a 7 year € 75 million retail bond at the beginning of July 2017 to refinance the maturing Jul-17 Bond.
• On 4 August 2017, the Company performed a capital reduction of € 20,069,694.00 capital reduction paid out in cash, corresponding to € 1.08 per share.
• On 27 October 2017, completion of the successful re-IPO through a secondary public offering, allowing the broadening of the shareholder base and increasing the free float from 10.1% to 37.5%.

[1] Including VGP European Logistics (joint venture with Allianz Real Estate). As at 31 December 2017 the annualised committed leases for VGP European Logistics stood at € 52.5 million (30 June 2017: € 51.3 million) compared to € 38.6 million as at 31 December 2016.
[2] Excluding the € 3.2 million committed leases outstanding as at 31 December 2016 related to VGP Estonia, which was divested during Sep-17
[3] Including € 1.0 million of new leases of VGP Estonia
[4] Including € 0.4 million of renewed leases of VGP Estonia.

In view of the broadened investor base and in order to provide a more transparent and consistent basis to enable comparison between European property companies the Directors have introduced the Adjusted operating profit measure. Whilst this measure does not include the development activities outside Germany, the Czech Republic, Slovakia and Hungary the Directors are of the opinion that it provides a fair representation of the recurrent profit generated by VGP and provides a reasonable basis to reconcile to EPRA metrics.

Given the fact that VGP is currently mainly geared towards its development activities, the Directors have elected to apply only the most relevant EPRA metrics. Further review and application of additional EPRA metrics will be considered when VGP will have reached a more mature investment portfolio profile.

Reconciliations between VGP Adjusted operating metrics and EPRA metrics are provided in the Supplementary Notes to the condensed financial information, which also include EPRA metrics as well as VGP's Adjusted income statement and balance sheet presented on a proportionally consolidated basis.

Adjusted operating profit before tax decreased by 29.7 % to € 73.7 million (2016: € 104.9 million) during 2017 as a result of the above movements (see Note 2). When including the net valuation gain on developments undertaken in counties outside Germany, the Czech Republic, Slovakia and Hungary the Adjusted operating profit before tax (including other countries)[1] would increase to € 87.3 million (2016: € 107.2 million).

Net rental income

The net rental income decreased slightly with € 0.1 million to € 16.0 million after taking into effect the full impact of the income generating assets delivered during 2017, the deconsolidation of the VGP European Logistics portfolio in May 2016 and the third closing with the Joint Venture in May 2017.

Following the entering into the VGP European Logistics joint venture, the analysis of the net rental income on a 'look-through' basis (with the Joint Venture included at share) provides a more meaningful analysis of the net rent evolution.

Therefore, taking into account VGP's share of the Joint Venture, net rental income in total has increased by € 9.6 million, or 39.9% compared to 2016 (from € 23.9 million as at 31 December 2016 to 33.5 million as at 31 December 2017)^[2] .

Annualised committed rent income

The increase in demand of lettable area resulted in the signing of new lease contracts in excess of € 27.4 million in total of which € 24.3 million related to new or replacementleases (€ 8.6 million on behalf of VGP European Logistics) and € 3.1 million (€ 1.9 million on behalf of VGP European Logistics) were related to renewals of existing lease contracts. During the year lease contracts for a total amount of € 1.6 million (€ 1.3 million on behalf of VGP European Logistics) were terminated.

The annualised committed leases therefore increased to € 82.8 million[3], as at the end of December 2017 (compared to € 64.3 million as at 31 December 2016).

Germany was the main driver of the growth in committed leases with € 12.5 million of new leases signed during the year (€ 7.1 million on behalf of VGP European Logistics).

The other countries also performed very well with new leases being signed in the Czech Republic + € 6.2 million (€ 0.8 million on behalf of VGP European Logistics), in Spain + € 1.4 million (own portfolio), in Latvia + € 1.4 million, in Romania + € 1.1 million (own portfolio), in Hungary + € 0.6 million (JV portfolio), in Slovakia + € 0.1 million (JV portfolio), and finally in Estonia + € 1.0 million (own portfolio) which was divested in September 2017.

The signed committed lease agreements of the own portfolio represent a total of 648,474 m² of lettable area with the weighted average term of the annualised committed leases standing at 13.0 years^[4] as at the end of December 2017.

The signed committed lease agreements of the Joint Venture portfolio represent a total of 1,009,940 m² of lettable area with the weighted average term of the annualised committed leases standing at 7.9
years^[5] as at the end of December 2017.

The weighted average term of the annualised leases of the combined own and Joint Venture portfolio stood at 9.7 years[6] at the end of December 2017 compared to 10.3 years at the end of December 2016.

Net valuation gains on the property portfolio

As at 31 December 2017 the net valuation gains on the property portfolio reached € 94.6 million compared to a net valuation gain of € 118.9 million for the period ended 31 December 2016.

The trend of increasingly lower yields in real estate valuations continued to persist during the second half year. The own property portfolio, excluding development land, is valued by the valuation expert at 31 December 2017 based on a weighted average yield of 6.26% (compared to 6.49% as at 31 December 2016) applied to the contractual rents increased by the estimated rental value on unlet space.

The (re)valuation of the own portfolio was based on the appraisal report of the property expert Jones Lang LaSalle.

Income from Joint venture

The Joint Venture management fee income increased by € 4.2 million to € 8.1 million. The increase was mainly due to the growth of the Joint Venture portfolio and the development activities undertaken on behalf of the Joint Venture.

Property and facility management fee income increased from € 3.2 million for the period ending 31 December 2016 to € 4.4 million for the period ending 31 December 2017. The development management fee income generated during the period was € 3.7 million, an increase of € 3.0 million compared to 31 December 2016.

Share in result of the Joint Venture

VGP's share of the Joint Venture's profit for the period increased by € 21.3 million from 7.9 million in 2016 to € 29.3 million in 2017, reflecting the increased income generating contribution
of the Joint Venture portfolio and the contraction of the yields on the investment properties.

Net rental income at share increased to € 17.5 million for the period ending 31 December 2017 compared to € 7.8 million for the period ended 31 December 2016. The increase reflects the underlying growth of the Joint Venture Portfolio resulting from the different closings made between the Joint Venture and VGP since May 2016.

At the end of December 2017, the Joint Venture (100% share) had € 52.5 million of annualised committed leases representing 1,009,940 m² of lettable area compared to € 38.6 million of annualised committed leases representing 732,523 m² at the end of December 2016.

The net valuation gains on investment properties at share increased to € 24.4 million for the period ending 31 December 2017 (compared to € 6.9 million for the period ending 31 December 2016). The VGP European Logistics portfolio was valued at a weighted average yield of 5.63% as at 31 December 2017 (compared to 5.92% as at 30 June 2017 and 6.08% at 31 December 2016) reflecting the further contraction
of the yields during the second half of 2017. The (re)valuation of the Joint Venture portfolio was based on the appraisal report of the property expert Jones Lang LaSalle.

The net financial expenses of the Joint Venture at share as at 31 December 2017 increased to € 5.5 million from € 3.9 million as at 31 December 2016. For the period ending 31 December 2017, the financial income at share was € 0.8 million (€ 0.1 million for the period ending 31 December 2016) and included a € 0.7 million unrealised gain on interest rate derivatives (€ 85k as at 31 December 2016). The financial expenses at share increased from € 4.0 million for the period ending 31 December 2016 to € 6.3 million for the period ending 31 December 2017 and included € 1.3 million interest on shareholder debt (€ 0.7 million as at 31 December 2016), € 5.3 million interest on financial debt (€ 2.3 million as at 31 December 2016), € 85k unrealised losses on interest rate derivatives (€ 0.6 million as at 31 December 2016), € 1.0 million other financial expenses (€ 0.6 million as at 31 December 2016) mainly relating to the amortisation of capitalised finance costs on bank borrowings and a positive impact of € 1.3 million (€ 0.6 million per 31 December 2016) related to capitalised interests.

Other income / (expenses) and administrative costs

The other income / (expenses) and administrative costs for the period were € 20.2 million compared to € 16.1 million for the period ended 31 December 2016, reflecting mainly the continued growth of the VGP team in order to support the growth of the development activities of the Group and its geographic expansion. As at 31 December 2017 the VGP team comprised more than 130 people active in more than 9 different countries.

Net financial costs

For the period ending 31 December 2017, the financial income was € 9.7 million (€ 2.8 million for the period ending 31 December 2016) and included € 5.3 million interest income on
loans granted to VGP European Logistics (€ 2.5 million as at 31 December 2016), 3.5 million unrealised gain on interest rate derivatives (€ 0.2 million as at 31 December 2016), € 0.6 million of net foreign exchange gains (compared to € 0.1 million losses as at 31 December 2016) and € 0.3 million other financial income (€ 0.2 million as at 31 December 2016).

The reported financial expenses as at 31 December 2017 are mainly made up of € 19.4 million interest expenses related to financial debt (€ 13.0 million as at 31 December 2016), € 0.1 million unrealised losses on interest rate derivatives (€ 4.8 million as at 31 December 2016), € 3.7 million other financial expenses (€ 3.2 million as at 31 December 2016) and a positive impact of € 3.0 million (€ 1.4 million for the period ending 31 December 2016) related to capitalised interests.

As a result, the net financial costs reached € 10.5 million for the period ending 31 December 2017 compared to € 16.9 million at the end of December 2016.

Shareholder loans to VGP European Logistics amounted to € 149.9 million as at 31 December 2017 (compared to € 89.9 million as at 31 December 2016) of which € 137.1 million (€ 81.6 million as at 31 December 2016) was related to financing of the buildings under construction and development land held by the VGP European Logistics joint venture.

Evolution of the property portfolio

The development activities of 2017 can be summarised as follows:

Completed projects

During the year 17 buildings were completed totalling 349,871 m² of lettable area.

For its own account VGP delivered 12 buildings i.e. In the Czech Republic: 1 building of 14,383 m² in VGP Park Tuchomerice, 1 building of 8,725 m² in VGP Park Usti nad Labem, 3 buildings in VGP Park Olomouc totalling 28,778 m², and 2 buildings in VGP Park Jenec totalling 54,466 m². In Germany: 1 building of 53,777 m² in VGP Park Berlin, 1 building of 35,670 m² in VGP Park Ginsheim, 1 building of 23,679 m² in VGP Park Hamburg, 1 building of 24,587 m² in VGP Park Leipzig and 1 building of 8,386 m² in VGP Park Schwalbach.

Of these buildings the Joint Venture acquired at the end of May 2017: In the Czech Republic the building of VGP Park Tuchomerice (14,383 m²), and in Germany: the buildings in VGP Park Leipzig (24,587 m²), in VGP Park Schwalbach (8,386 m²) and 1 building in VGP Park Hamburg (23,679 m²)

For the Joint Venture VGP completed 5 buildings i.e. In the Czech Republic: 1 building of 12,226 m² in VGP Park Brno, in Germany 3 buildings in VGP Park Hamburg of 72,982 m² in total and finally, in Hungary, 1 building of 12,212 m² in VGP Park Györ.

Projects under construction

At the end of December 2017 VGP has the following 22 buildings under construction:

For its own account VGP has 15 new buildings under construction i.e. in the Czech Republic: 2 buildings in VGP Park Usti nad Labem, 1 building in VGP Park Olomouc, 2 buildings in VGP Park Jenec, and 1 building in VGP Park Chomotov, In Germany: 2 buildings in VGP Park Berlin, 1 building in VGP Park Wetzlar, 1 building in VGP Park Göttingen, and 2 buildings in VGP Park Wustermark. In other countries: 1 building in VGP Park San Fernando de Henares (Spain), 1 building in VGP Park Kekava (Latvia) and 1 building in VGP Park Timisoara (Romania). The new buildings under construction on which 67%[1] pre-leases have already been signed as at 31 December 2017, represent a total future lettable area of 255,699 m² which corresponds to an estimated annualised rent income of € 12.6 million.

On behalf of the Joint Venture VGP is constructing 7 new buildings: In the Czech Republic: 1 building in VGP Park Cesky Ujezd and 1 building in VGP Park Hradek nad Nisou. In Germany: 1 building in VGP Park Hamburg, 1 building in VGP Park Frankenthal and 2 buildings in VGP Park Leipzig. In the other countries: 1 building in VGP Park Malacky (Slovakia). The new buildings under construction on which 82%

pre-leases have already been signed as at 31 December 2017, represent a total future lettable area of 219,414 m², which corresponds to an estimated annualised rent income of € 11.5 million.

Land bank

During the year, VGP continued to target land plots to support the development pipeline for future growth. In 2017, VGP acquired 729,939 m² of new development land of which 469,203 m² was located in Germany, 169,792 m² in the Czech Republic and 90,944 m² in Romania. These new land plots have a development potential of 357,000 m² of future lettable area.

Besides this VGP has another 1,452,336m² of new land plots under option which are located in Germany, the Czech Republic, Romania. Slovakia. These land plots have a development potential of approximately 665,000 m² of new lettable areas and the bulk of the land plots are expected to be purchased during 2018, subject to obtaining the necessary permits.

VGP has currently a remaining secured development land bank of 3,261,364 m² of which 56% or 1,809,028 m² is in full ownership. The secured land bank allows VGP to develop, in addition to, the current completed projects and projects under construction an additional 1,560,000 m² of lettable area of which 530,000 m² in Germany, 462,000 m² in the Czech Republic, 245,000 m² in Spain, 206,000 m² in Slovakia, 77,000 m² in Romania and 37,000 m² in Latvia.

The Joint Venture has currently a remaining development land bank in full ownership of 126,605 m² on which a total of 52,518 m² of new lettable area can be developed.

Disposal group held for sale

The balance of the Disposal group held for sale increased from € 132.3 million as at 31 December 2016 to € 442.0 million as at 31 December 2017 and relates to the assets under construction and development land (at fair value) which are being / will be developed by VGP on behalf of VGP European Logistics.

It is currently planned that a fourth closing will occur at the end of March 2018 with the Joint Venture whereby assets for a total amount of > € 370 million (at fair value) will be transferred.

Under the joint venture agreement VGP European Logistics has an exclusive right of first refusal in relation to acquiring the income generating assets developed by VGP that are located in Germany, the Czech Republic, Slovakia and Hungary. The development pipeline which is transferred to the Joint Venture as part of the different closings between Joint Venture and VGP is being developed at VGP's own risk and subsequently acquired and paid for by the Joint Venture subject to pre-agreed completion and lease parameters. The fair value of the asset under construction which are being developed by VGP on behalf of VGP European Logistics amounted to € 194.9 million as at 31 December 2017 (compared to € 132.3 million as at 31 December 2016).

During September 2017, VGP completed the sale of its VGP Park Nehatu located in Tallinn (Estonia) to East Capital Baltic Property fund III, a fund managed by East Capital. The transaction covered a total of 5 modern logistics buildings with a total of more than 77,000 m2 of lettable area. The assets and liabilities related to VGP Park Nehatu were only reclassified as held for sale at the end of June 2017.

Financing

During 2017 VGP continued to improve its financial debt profile with the successful private placement of an 8-year, € 80 million bond at the end of March 2017 with a fixed rate of 3.35% per annum. At the beginning of July VGP issued another new € 75 million, 7-year retail bond, with a fixed rate of 3.25% per annum, to refinance the Jul-17 Bond maturing on 12 July 2017.

The financial debt increased from € 409.6 million as at 31 December 2016 to € 471.4 million as at 31 December 2017. The increase was mainly driven by a private placement of a new 8-year, € 80 million bond at the end of March 2017 and bank debt decreased with € 18.1 million following the divestment of VGP Park Nehatu in September 2017.

The gearing ratio[2] of the Group increased from 39.4% at 31 December 2016 to 42.3% as at 31 December 2017.

Dividend

In view the successful and sustainable evolution of the Group's results, the Board of Directors of VGP has decided to propose to the Annual General Meeting a distribution of a gross dividend of € 35,307,795 (€1.90 per share).

Outlook 2018

Based on the positive trend in demands for lettable area recorded by VGP during the second half of 2017, VGP expects to be able to continue expanding its rental income and property portfolio through the completion and start-up of circa 500,000 m² of additional new buildings in 2018. It is expected that more than 200,000 m² of lettable area will be delivered during the first quarter of 2018.

We expect a > € 370 million closing with VGP European Logistics joint venture by the end of March 2018.

For more information

Mr Dirk Stoop
CFO
Tel.+32 2 719 00 45
E-mail: dirk.stoop@vgpparks.eu

[1] Including the net valuation gain on development properties in Spain, Romania, Latvia and Estonia which amount to € 13.6 million as at 31 December 2017 and € 2.3 million as at 31 December 2016.
[2] See Note 2 of the Supplementary notes not part of the condensed interim financial information.
[3] Including VGP European Logistics (joint venture with Allianz Real Estate). As at 31 December 2017 the annualised committed leases for VGP European Logistics stood at € 52.5 million (30 June 2017: € 51.3 million) compared to € 38.6 million as at 31 December 2016.
[4] The weighted average term of the committed leases up to the first break stands at 10.1 years as at 31 December 2017.
[5] The weighted average term of the committed leases up to the first break stands at 7.1 years as at 31 December 2017.
[6] The weighted average term of the committed leases up to the first break stands at 8.2 years as at 31 December 2017.