GECINA - REFERENCE DOCUMENT 2017

RISKS Risks

Risks

Change over the 2016-2017 period

CONTROL PROCESSES

MODERATE RISK LEVEL RISK OF TENANT INSOLVENCY

Risks of deterioration in rent recovery rates as a result of the financial difficulties of tenants. Impacts: payment delays or defaults, ■ deterioration of the company’s cash and earnings (see 3.5.4.3 on “Counterparty risk”).

the Group strives to diversify its tenant portfolios, ■ both in terms of income per tenant and in terms of business sectors; in 2017, Gecina’s top 20 tenants accounted around ■ a third of the annualized rental income of the entire Group; the top 10 tenants accounted around a quarter of ■ the annualized rental income of the entire Group; tenant selection procedures include an analysis of ■ their financial strength with the assistance of a financial advisor, in addition to the arrangement of collateral; rent monitoring and collection procedures are also ■ used to prevent and minimize the risk of losses on receivables. acquisition process based on technical, legal ■ and financial studies, including modeling tools; assistance from outside advisors; ■ acquisition projects are first studied by the ■ Investment Committee; thresholds are defined to limit powers within the ■ context of the review of investment projects (CEO, Board of Directors, Strategic Committee) ; the acquisition financing risk control mechanism is ■ presented with the financial risks (liquidity risk); for VEFA projects, the search for tenants begins ■ once the investment decision is made in order to sign pre-construction leases (Baux en l’État Futur d’Achèvement – BEFA). (See section 3.5.4.1 “Property market risk”); in view of the restrictions on the CEO’s powers ■ established by Gecina’s Board of Directors, these VEFA transactions must also, depending on pre-defined thresholds, receive the Board’s prior approval, and the opinion of the Strategic and Investments Committee. management of these risks is monitored by the ■ Real Estate Risks Department attached to the Technical Department; these risks are assessed on the basis of control ■ reporting standards defined for each area of risk (18), and indicators measuring the level of efficiency for the various buildings (see 6.1.7); each evaluation results in the introduction of action ■ plans based on objectives to be achieved; the introduction of a real estate risk map in 2006 ■ has improved the management of these risks. ACQUISITION RISKS PROPERTY RISKS

The risk level remained the same for the office segment. Gecina carefully monitors such key indicators as the rate of past dues or the loss rate. The risk level also stayed unchanged for the residential segment and there was little or no impact at Group level.

Risk of overestimating the expected yield or the value accretion potential of the acquired assets, or failure to detect hidden defects of said assets. This risk consists of the components related to acquisitions in the context of blank or pre-construction sale agreements (VEFA); in this case, the risk primarily affects the financing for the work and the financial costs. Impacts: the risk of not having the financial ■ resources projected at the time the asset is acquired; for projects under development, there ■ is the additional risk of underestimating development costs; risk of carrying costs for projects ■ initiated before marketing, if users are not found quickly after construction begins.

These risks remained stable over the period

06

Risks of non-compliance with the regulations for real estate activities (hygiene, safety, health, environment) Impacts: adverse consequences for the ■ company’s financial situation and earnings.

For new developments linked to these risks, please refer to the description of real estate risk mapping in chapter 6.1.7.

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GECINA - REFERENCE DOCUMENT 2017