GROUP OVERVIEW Main risk factors 1 1.8.1.4 Risks related to the competitive acquisitions are made via an open bid process or in a period of environment significant economic volatility or uncertainty; Klépierre’s rental activities are highly competitive. Competition may > where an acquisition is financed by the disposal of other assets, arise as a result of current or future developments in the same market unfavorable market conditions or deadlines could delay or segment, other shopping centers, mail order, hard discount stores, compromise the ability of Klépierre to complete said acquisition; e-commerce or the attraction exerted by certain retail chains located > the assets acquired could contain hidden defects, such as in competitor centers. subletting, violations by tenants of applicable regulations (and More particularly, the development by competitors of new shopping particularly environmental regulations) or failure to comply with the centers located close to existing Klépierre centers and renovations construction plans which would not be covered by the guarantees or extensions to competitor shopping centers may have an adverse contained in the sale and purchase agreement. impact on Klépierre’s ability to let its retail premises, and therefore on Prior to the acquisition of assets, Klépierre conducts audits the rent levels it can charge and its forecast financial results. with the assistance of external, specialized firms to mitigate the As part of its business, Klépierre competes with many other players, abovementioned risks. Acquisitions may nevertheless not yield some of which may have greater financial resources and larger the expected benefits; in particular, the cost reductions and portfolios. Having the financial leverage and ability to undertake large- positive effects expected at operational level might be lower than scale development projects from their own resources gives the larger current expectations or achieved less rapidly than those originally market players the opportunity to bid for development projects or contemplated. In the event that the announced amount of the asset acquisitions offering high profitability potential at prices that do synergies was not achieved, or was not achieved within the anticipated not necessarily meet the investment criteria and acquisition objectives timeframe, this could have an adverse impact on the Group’s business, set by Klépierre, which may raise uncertainty on Klépierre’s business results of operations, financial position, prospects or image. forecasts. 1.8.1.7 Risks related to the estimation 1.8.1.5 Risks related to subsidiaries of asset values and partners’ agreements On December 31 and June 30 of each year, Klépierre updates the fair In the context of partnerships relating to real estate investments, market value of its real estate assets. The independently appraised Klépierre has entered into agreements that provide for Klépierre or market value depends on the relationship between supply and its partners to have pre-emption and exit rights at Klépierre’s benefit demand in the market, interest rates, the economic environment and that could generate acquisition costs or the disposal of jointly owned many other factors likely to vary significantly in the event of poor assets. The main partners’ agreements that Klépierre is party to are shopping center performance and/or a downturn in the economy. disclosed in note 9.4 to its consolidated financial statements. The form and frequency of the expert appraisals conducted are One of those partners’ agreements concerns Steen & Strøm which described in chapter 2 “Business of the year”, section 2.6 of the is 43.9% owned by ABP Pension Fund and 56.1% by Klépierre. The registration document; the valuation method is described in the equity percentage, together with certain provisions contained note 5.2 to the consolidated financial statements. in the shareholders’ agreement between the two shareholders, The value of Klépierre’s property portfolio is sensitive to a rise or a fall gives ABP Pension Fund significant influence in certain areas of in the main applicable assumptions used by the appraisers. strategic decision-making, such as major investment and divestment transactions involving Steen & Strøm. Under the terms of the 1.8.1.8 Risks related to the development agreement, certain decisions may be made on the basis of an 85% qualified majority vote, the effect of which is to give ABP Pension of new assets Fund an effective veto right over these decisions. For certain Steen & Klépierre is involved in real estate development on its own account. Strøm development decisions, the interests of ABP Pension Fund may This business poses in particular the following significant risks: diverge from those of Klépierre. The successful growth of Steen & Strøm’s business therefore depends to a certain extent on good > the cost of construction of the assets may turn out to be higher relations between its shareholders. The possibility of some divergence than initially estimated: the construction phase may take longer of approach occurring between the shareholders cannot be excluded, than expected, technical difficulties or completion delays may be which could disrupt the operation of Steen & Strøm, with a negative encountered due to the complexity of some projects and the price impact on the results of operations, financial position and prospects of construction materials may change adversely; of Klépierre. > Klépierre’s investments (in new projects, renovations and 1.8.1.6 Risks related to the acquisition extensions) are subject to obtaining the necessary regulatory approvals, which may be granted to Klépierre and/or its partners and disposal of assets later than anticipated or even refused; The acquisition of real estate assets or companies owning such assets > Klépierre may require the consent of third parties, such as is part of Klépierre’s growth strategy. anchor tenants, lenders or the associates involved in partnership This policy poses in particular the following significant risks: developments, and these consents may not be given; > Klépierre could overestimate the expected yield from these assets, > Klépierre may fail to obtain satisfactory funding for these projects; and therefore acquire them at a price too high compared with > up-front costs (e.g., the costs of studies) cannot normally be the financing put in place for such acquisitions, or be unable to deferred or canceled in the event of projects being delayed or acquire them under satisfactory conditions, especially where the abandoned. KLÉPIERRE 2017 REGISTRATION DOCUMENT 27