BUSINESS FOR THE YEAR 2Business activity by region Leasing activity remained dynamic in 2017, with 374 leases signed Bialetti, Lacoste, and Histoire d’Or will enhance the leasing mix. In (vs. 360 in 2016) at an average 11.0% reversion rate for relets and January 2018, Sephora opened its second largest store in France at renewals (France and Belgium). The EPRA vacancy rate ended the Saint-Lazare, showcasing its new concept store over 1,100 sq.m. At year at 3.3% (vs. 3.2% in 2016). Over the year, the increased focus on Grand’Place (Grenoble), the re-leasing campaign yielded the signature key account management triggered a strong deal-flow with retailers of 22 contracts. Fnac (2,900 sq.m.), André (250 sq.m.), Nature & such as Inditex (eight deals), JD Sports (seven), Sephora (six), Claire’s Découvertes (430 sq.m.), and Morgan renewed their leases, while JD (six), Celio (five), and Yves Rocher (four). Sports and NYX have unveiled new stores. Lastly, leasing operations From a mall-by-mall perspective, the re-leasing campaign at Saint- advanced at Prado (Marseille), with 17 leasing contracts signed with Lazare stood out as particularly successful, with 41 deals signed. Zara (3,290 sq.m.), Auchan (2,280 sq.m.; new gourmet concept), Lush, Undiz, Yves Rocher, and Petit Bateau renewed their contracts, while Courir, Repetto, Big Fernand, and Wagamama. The diversified retail popular retailers including NYX, Celio, Nespresso, Rituals, Levi’s, offer, in addition to the Galeries Lafayette flagship store, will greatly enhance the mall’s position in the region. 2.2.2 Italy (17.7% of net rental income) 3 NRI & EPRA VACANCY RATE IN ITALY Current-porfolio NRI Like-for-like portfolio NRI EPRA vacancy rate In €m 12/31/2017 12/31/2016 Change 12/31/2017 12/31/2016 Change 12/31/2017 12/31/2016 ITALY 195.2 189.8 2.8% 181.6 176.5 2.9% 1.2% 1.7% The Italian economy saw accelerated recovery in 2017, supported Klépierre’s Italian portfolio remained appealing to international by improved private consumption and stronger exports. GDP grew retailers. In 2017, Pandora signed seven deals, two of which included by 1.6% in 2017 (vs. 1.1% in 2016) and is expected to continue growing an enlargement of the store in line with the brand’s new concept. In at 1.5% in 2018. Unemployment improved slightly, from 11.7% last year addition, six contracts were signed with Kiko, five with Pimkie, two to 11.2%. with Nespresso, twelve with Calzedonia, Intimissimi and Intimissimi Retailer sales at Klépierre’s Italian malls were flat (-0.1%) in 2017, Uomo, and two with Foot Locker. Re-leasing campaigns carried out gradually improving in H2 (+0.8%). While rising competition in the at Romagna Shopping Valley (Emilia-Romagna region), Il Leone North of Italy negatively impacted Klépierre malls in 2016 and the first (Lonato), Porta di Roma (Rome), and Campania (Naples) helped part of the year, the impact faded away in the second half. secure 80 contracts at very positive reversion rates. At Nave de Vero (Venice), which opened in 2014, sales continued At Le Vele (Cagliari), Stradivarius opened a 600-sq.m. store in to grow (+5.1%). At Porta di Roma (Rome), retailer sales were also December on a previously vacant unit; the third Inditex store opened dynamic (+2.4%), benefiting from the recent leasing campaign and at the center, together with Bershka and Pull & Bear. Shi’s, the urban the implementation of our Clubstore® concept. Japanese concept restaurant, opened a 360-sq.m. unit in October, further diversifying the mall’s mix. At Il Leone (Lonato), 2017’s renewal Net rental income growth on a like-for-like basis remained strong and re-leasing campaign helped sustain good reversion rates. Retailers at 2.9%, 260 bps above indexation. The high level of reversion in such as Pimkie, Kiko, Intimissimi, and Calzedonia renewed their leases. 2016 (+16.7%) and 2017 (+15.8%) remained the main growth driver. In Additionally, the retail offer will be further enriched with the arrival addition, the decrease in vacancy (-50 bps), higher specialty leasing of popular brands that include Victoria’s Secret, JD Sports, Alice income, a lower bad debt allowance, and higher turnover rents more Pizza, Bialetti, Bata, and O Bag. At Milanofiori (Milan), the ongoing than offset the property tax increase. implementation of the Clubstore® and Destination Food® concepts A total of 337 leases was signed in 2017 (vs. 303 leases in 2016), triggered an acceleration of renewals and openings: new restaurants, of which 315 re-leasing or renewal leases contributed to an average including Spontini and Eatica, opened to the public in December 2017. 15.8% reversion rate. 48 KLÉPIERRE 2017 REGISTRATION DOCUMENT