MRM - 2018 Registration document

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Risk factors

Risks related to the business environment

Assessing the value of the property portfolio depends on a number of factors, mainly involving the balance between market supply and demand, interest rates, the global economic climate and applicable regulations, which can vary significantly, with a direct impact on the valuation of the Company’s property assets and, as an indirect consequence, on the various loan to value (LTV) ratios used as indicators of the Group’s debt and liquidity risk. The appraised value of the Group’s properties and their final value on disposal may not be identical. In addition, such valuations are based on a number of assumptions which may not prove to be correct. Because M.R.M.’s property assets are booked at market value by outside appraisers, the value thereof can be affected by variations in the bases used in the valuation methods (property market trends, mainly in terms of received rents, changing interest rates especially with regard to discount and capitalisation rates employed).

In addition, the valuation of the Company’s property assets, when published, corresponds to an appraisal carried out by the property appraisers at a precise moment in time. Given the gap between the moment when the appraisal valuations are carried out and the moment when this information is made public, the valuation of the Company’s property assets could have changed by the time that the information is published. At 31 December 2018, on a like-for-like basis (i.e. after restatement for asset disposals carried out in 2018), it is noted that the appraisals, calculated on the basis of appraisal value excluding transfer taxes, provided by the appraiser, Jones Lang LaSalle, had the following impacts for the Company:

31/12/2017 restated (1)

Value of the property portfolio excl. transfer taxes (in millions of €)

31/12/2018

Change

% change

Retail

159.3

158.8

+0.5 +1.8 +2.3

+0.4%

5.4

3.6

+50.4% +1.5%

Offices

M.R.M. ASSET PORTFOLIO

164.7

162.4

(1) Restated for disposals carried out in 2018.

In 2018, therefore, the increase in the value of the portfolio was limited to 1.5% over one year due to higher capitalisation rates and lower market rental values, retained by the appraisers for certain assets, which partially offset the solid progress made in the retail-property value-enhancement plans during the year.

A sensitivity study simulating a change in the capitalisation rates as of 31 December 2018 showed that a 50 basis-point increase in these rates would reduce the asset portfolio value by €13,150 thousand (down 8.3%), whereas a 50 basis-point reduction would increase it by €15,580 thousand (up 9.8%).

Economic risk

(i) weaker demand for renting the Group’s property assets leading to increased risk of vacancy if a tenant leaves as well as a longer time required to let its properties that are currently partly or wholly vacant, which would have an adverse impact on a) the value of the Company’s property portfolio and b) its operating income (no rental revenues and property expenses not recovered for those properties), (ii) a deterioration in the capacity of tenants to fulfill their obligations to the Group, notably to pay their rent,

Since the Group’s real estate portfolio is made up of retail property assets in France, changes in the main French macroeconomic indicators are likely to affect M.R.M.’s business, its rental revenues, the value of its property portfolio, as well as its policy relating to investment in and development of new properties, and consequently its growth prospects. Consequently, changes in the economic environment in which the Company operates, such as economic growth rates, interest rates rental indices could significantly affect its business and development, and thus its growth prospects. • A prolonged economic slowdown at the national or international level and/or in the property market could continue to entail:

M.R.M. 2018 REGISTRATION DOCUMENT

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