MRM_REGISTRATION_DOCUMENT_2017

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Information on M.R.M.’s activities

Business overview

Diverse interpretations of risk The predominance of large transactions had a significant impact on how the market could be interpreted. The very significant increase in core+ assets is partly due to the Coeur Defense signature and two major pan-European logistics portfolios (Logicor and Gazeley). Indeed, it is clear that for the largest volumes, especially the portfolios offering good rent pooling, investors are ready to become more flexible, as very core properties are in limited number. However, in the €50 million to €100 million asset segment, fully secure buildings constitute the majority of assets (63%). In any case, potential buyers had to adjust to the quality, and also to the price levels of the properties for sale. Therefore they had to consider more diversification to obtain the targeted yields. Value-added products thus constituted a significant part of the market, which included the signature of major deals for speculative off-plan sales and properties with a low level of pre-letting, generally ranging from €100 million to €200 million. However, investors continued to act somewhat conservatively in terms of locations. It is true that Paris has definitely slowed down, particularly in traditional business districts, due to insufficient supply. However, investors have shown a preference for transferring their interest to the most well known suburbs, the Western Crescent and La Defense. In just these two zones, over a third of the volumes were transacted. A difficult time for retail The retail market is the only market that finished the year with a drop in volume, with €3.2 billion exchanged. The sector is concentrated in the hands of large specialised players with low portfolio turnover, concerns questions related to rising e-commerce competition, and consumers becoming increasingly selective: the imbalance between the arbitrated assets and the qualitative expectations of investors continue to strain the market. The shopping centre segment recovered a little thanks to transactions signed at the end of the year. However, this segment is no longer a driving force. High street retail have taken over for the long term, despite the low number of large transactions in the Parisian luxury sector in 2017. The office market performed well once again, with €18.1 billion already recorded. Excluding the western part of the Ile-de- France area, the regions also performed well. Off-plan sales were particularly dynamic, with over €4 billion signed, the highest volume recorded since 2007, with large transactions such as Grand Central St Lazare, the Duo towers and Hekla at the end of the year. Although the speculative portion, in terms of rental risk, decreased compared to 2016, it remained high, at 47%. As for industrial property investment, an all-time high was reached, with €4.1 billion of transactions signed, including two large corporate deals. The segment is starting to rise and become an asset class of its own, as an increasing number of non¬specialised players would like to gain exposure to

it. It is clear that the dynamic is European, with some new entrants on the market wanting to take massive positions with an international portfolio strategy. Domestic institutional investors are difficult to challenge As expected, international investors held more sway, as large transactions were signed. In this segment, there are usually more foreign investors. 2017 was the year in which Asian investors consolidated their increase, after several years of becoming familiar with the French market. However, domestic institutional investors continue to occupy a dominant position that is difficult to challenge, especially with SCPI relayed by retail “OPCIs”. However, some of these investors are attentively monitoring the foreign markets to dilute risk, following several years of very strong activity in France. Towards a gradual consolidation? Whilst 2017 got off to a slow start on the real estate investment front, the beginning of 2018 should be more active. Indeed, many important deals slipped in at the end of the year. In addition, it appears that the context will continue to be promising, with real estate investments in large mature markets as sound as ever for the large international capitals owners. The French market is in a strong position given the European context. Although some countries such as Germany seem to have peaked off after several years of constantly rising volumes exchanged, France still has growth potential. The Macron Effect, especially abroad, the expected mid- term impact of reforms, strengthened positive signals on the rental market front: France is one of the few major European countries to position itself at the start of the rent resumption cycle, which has already begun elsewhere — even though the perspectives encourage investors to be cautious in their valuation forecasts. In the short term, there is thus a window of opportunity to create added value in a selective way, pending an increase in financial rates, which is still postponed, and which will be slow and gradual in any case. For long-term core investors, despite exceptionally high entry level prices, the security, depth and readability of the French market ensure its undeniably strong international position. These are intermediary positions which may turn out to be more complicated for purchasers who have an investment horizon of 4-5 years. They do not have the resources to challenge core players for the most prime assets but continue to seek controlled risk profiles. In this competitive context, there will continue to be pressure on prime property yields, particularly for small assets. The compression will end up spreading to the different market segments. However, for the large volumes, the limited number of players that are likely to position themselves will make the valuations less aggressive, with some potential adjustments.

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M.R.M. 2017 REGISTRATION DOCUMENT