GECINA - REFERENCE DOCUMENT 2017

02

COMMENTS ON THE FISCAL YEAR Business review

The Group’s consolidated net earnings is presented in a format that is appropriate for its real estate business and specifically includes the following items: income recorded in the Group’s income statement (gross ■ rental revenues), which mainly comes from rent paid by tenants of the Group’s properties; EBITDA (total of gross rental revenues and income from ■ services and other items minus total net property expenses, services and other items and overheads including salaries and benefits in kind and net management fees) represents income from operations related to the properties and service businesses.

The company also uses net recurring income as an indicator (which is EBITDA less net financial expenses and recurring tax, and adjusted from some expenses of an exceptional nature see note 2.1.4). This indicator is used to assess changes in the Group’s earnings from operations before disposals, valuation adjustments and non-current taxes. Value adjustments include changes in the fair value of properties as well as changes in the value of financial instruments. Gains or losses due to these changes in value are unrealized and do not generally correspond to actual transactions. The Group has no intention of disposing of its entire real estate portfolio in the short term, while most of the derivatives are hedges for long-term debt to safeguard the Group from interest rate rises and thus cap the cost of debt.

BUSINESS REVIEW 2.1

2.1.1

A STRATEGY THAT IS EFFECTIVELY FOCUSED ON ITS CONSUMER-CLIENTS IN ITS OFFICE AND COWORKING PROPERTIES, AS WELL AS RESIDENTIAL AND STUDENT RESIDENCES

2017 was marked by the acquisition and consolidation of Eurosic in a particularly buoyant market environment, in Paris’ best core sectors and particularly the major Grand Paris hubs. This operation is first and foremost a transformational operation for Gecina. This integration is further strengthening the unique features of Gecina, which is building its strategy around the deployment of new living spaces in the most central sectors within Paris and the Paris Region. It is underpinned by an acceleration of value extraction through the transformation of these living spaces with a major pipeline, and the portfolio’s rotation, as well as innovation to respond to new real estate practices such as coworking with its subsidiary Secondesk. Today, Gecina considers that its residential portfolio is also aligned with the needs of new more mobile and flexible 2.1.2 On a current basis, the rental performance reported for 2017 reflects the full impact of the significant changes in scope from 2016 (sale of the healthcare portfolio, transfer of five buildings to the pipeline and sales of various office buildings) and the acquisition of Eurosic from 2017. Total gross rental income came to €558.9 million for the year, up +3.5% on a current basis and +2.1% like-for-like. Like-for-like , the performance achieved reflects the improvement in the real estate environment on the Group’s preferred markets. The quarter-on-quarter trends show a continued improvement. Like-for-like growth represents +2.1% at end-December, compared with +1.8% at end-September, +1.6% at end-June and +1.0% at

lifestyles and the demand for central locations and scarcity, which are prerequisites for future performance, and that retaining this portfolio is relevant to complement Gecina’s specialization in urban offices. Tomorrow’s high-performance real estate will be increasingly central, but also firmly focused on services, digitalized, collaborative, fostering productivity and wellbeing, and responsible. Gecina is positioning itself upstream from this coming transformation. While the financial performances achieved in 2017 were particularly strong, the past year was a starting point for a new ambition for Gecina for the coming years, building a strategy that is effectively focused on its consumer-clients in its office and coworking properties, as well as residential and student residences, capitalizing on its specific strengths”.

IMPROVEMENT IN RENTAL INCOME, IN LINE WITH THE GROUP’S FORECASTS

end-March 2017. This performance, driven primarily by the office portfolio, factors in the level of indexation, which is still low, but positive (+0.5%), a slightly positive level of reversion, and the letting of buildings that were partially or completely vacant in 2016. On a current basis , the +3.5% increase is linked to the significant changes in scope from 2016 and 2017. This +€18.9 million increase factors in Eurosic’s integration since the end of August 2017 (for +€70.3 million), the like-for-like growth achieved (+€8.5 million) and the rental income from deliveries of buildings under development and recent acquisitions (+€11.2 million).

28 GECINA - REFERENCE DOCUMENT 2017

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