Mercialys: Activity at End-September 2014

Regulatory News:

Eric Le Gentil, Chairman and Chief Executive of Mercialys (Paris:MERY) commented: "Our robust organic growth and sharp outperformance in terms of both footfall and growth in retailers' sales are testimony to our innovative capability and agility in continuously adapting our commercial offering to our clients' needs. In terms of governance, we have just won 3rd place in the second annual SBF 120 company rankings for female representation at management level."

I. Change in rental revenues

Organic growth in rents remained robust at end-September, enabling Mercialys to raise its full-year forecast by +50bp

Mercialys delivered an above-market operating performance at end-September 2014, confirming the merits of its unique positioning in the shopping center investment sector and the effectiveness of its growth model.

At end-September 2014, invoiced rents grew by +2.9% on a like-for-like basis with an indexation impact of just 0.3 points. Organic growth before indexation therefore remains high and in line with the trend at end-June 2014.

Mercialys is therefore raising its full-year organic growth forecast excluding indexation to +2.5% from +2% initially.

Rental revenues came to €114.5 million at September 30, 2014, an increase of +1.5% compared with the first nine months of 2013.

The change in invoiced rents at end-September reflects:

• Organic growth in invoiced rents: +2.9 points including +2.6 points relating to measures to improve the lease portfolio and +0.3 points relating to indexation;²
• The impact of projects completed in 2013 and 2014 and acquisitions made in 2014: +7.4 points;
• The impact of asset sales in 2013 and 2014: -6.4 points;
• Other effects, primarily including the strategic vacancy relating to current redevelopment programs: -0.7 points.

Lease rights and despecialization indemnities received during the period³ amounted to Euro 1.2 million compared with Euro 2.0 million at end-September 2013 and mainly comprise lease rights relating to ordinary reletting activities.
After the impact of deferrals required under IFRS, lease rights recognized in the nine months to September 30, 2014 totaled Euro 3.0 million, compared with Euro 4.8 million at September 30, 2013, as 2013 benefited in particular from the effects of the deferral of significant lease rights received over the previous three years.

II. Robust operating performance, significant positive impact of the development policy

Mercialys shopping centers outperform the sector once again

Third quarter 2014 operating indicators were dynamic, reflecting the continued appeal of Mercialys' neighborhood shopping center model:

• On a cumulative basis to end-August 2014, retailers' sales in Mercialys shopping centers⁴ grew by +0.7% compared with a -0.2% decline for the CNCC shopping center index.
• Footfall in Mercialys shopping centers grew by +0.9% cumulatively to end-August 2014, compared with a -0.6% decline for the CNCC shopping center index.
• Letting activity retained buoyant, with 191 leases signed versus 167 at September 30, 2013. Growth in rents achieved on lease renewals and relettings is among the highest in the sector.

Seven new developments or redevelopments totaling 16,700 sq.m will be completed during the second half of 2014, generating an extra Euro 5.6 million in rents

During the second half of 2014, Mercialys will complete 7 new developments or redevelopments totaling 16,700 sq.m in Nîmes (completed in September), Annemasse, Angers, Saint-Paul Savanna, Besançon, Clermont-Ferrand and Albertville.

The average financial letting rate on the projects is higher than 100% as the rental terms on some projects have proved better than initially expected, reflecting both the appeal of the centers and the effectiveness of Mercialys' letting process. The completed projects will generate an additional Euro 5.6 million in gross rental revenues in a full year.

In the first half of 2014, Mercialys completed 3 projects totaling 7,900 sq.m: a retail park in Albertville, a shopping mall extension in Lanester and the first phase of a shopping mall extension in Aix-en-Provence.

Mercialys' development activity in 2014 will thus contribute rental revenues of Euro 8.1 million in a full year.

III. Interim dividend of Euro 0.36 per share paid on October 14, 2014

When the 2014 half-yearly results were published, the Board of Directors of Mercialys announced an interim dividend of Euro 0.36 per share, which was paid on October 14, 2014.

Mercialys will thus have paid a total of Euro 1.18 to its shareholders in 2014, representing a 6.6% return on liquidation NAV at June 30, 2014 (Euro 17.91 per share).

IV. Governance: Mercialys ranks 3rd (of 120 participants) in female representation at management level

In the second annual rankings for female representation at management level in SBF 120 companies, compiled by the French Secretary of State for Women's Rights, Mercialys obtained 3rd place with a score of 66.55 out of 100, up from 7th place in 2013.

Mercialys owes this place to its overall female representation rate within the company of almost 47% and an improvement of more than 7 points in the criteria for female representation on the Board of Directors, which has four women out of a total eleven members.

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This press release is available on the website www.mercialys.com

About Mercialys

Mercialys is one of France's leading real estate companies, solely active in retail property. At June 30, 2014, Mercialys had a portfolio of 2,170 leases representing a rental value of Euro 137.5 million on an annualized basis.

At June 30, 2014, it owned properties with an estimated value of Euro 2.6 billion (including transfer taxes).

Mercialys has benefited from "SIIC" tax status (REIT) since November 1, 2005 and has been listed on compartment A of Euronext Paris, symbol MERY, since its initial public offering on October 12, 2005. The number of outstanding shares was 92,049,169 as of June 30, 2014.

IMPORTANT INFORMATION
This press release contains forward-looking statements about future events, trends, projects or targets.
These forward-looking statements are subject to identified and unidentified risks and uncertainties that could cause actual results to differ materially from the results anticipated in the forward-looking statements. Please refer to the Mercialys shelf registration document available at www.mercialys.com for the year to December 31, 2013 for more details regarding certain factors, risks and uncertainties that could affect Mercialys' business.
Mercialys makes no undertaking in any form to publish updates or adjustments to these forward-looking statements, nor to report new information, new future events or any other circumstance that might cause these statements to be revised.

¹ Mercialys preempted IFRS 11 at December 31, 2013. Subsidiaries that were previously proportionally consolidated have therefore been accounted for under the equity method as of December 31, 2013. SCI Geispolsheim rental revenues, which were proportionally consolidated at end-September 2013, have accordingly been restated on the 2013 basis.
² In 2014, for the majority of leases, rents were indexed either to the change in the construction cost index (ICC) or to the change in the retail rent index (ILC) between the second quarter of 2012 and the second quarter of 2013 (respectively -1.74% and +0.79%).
³ Lease rights received in cash before the impact of deferrals required under IFRS (deferral over the firm period of the lease).
⁴ Mercialys' large shopping centers and main neighborhood shopping centers.
⁵ Mercialys preempted IFRS 11 at December 31, 2013. Subsidiaries that were previously proportionally consolidated have therefore been accounted for under the equity method as of December 31, 2013. SCI Geispolsheim rental revenues, which were proportionally consolidated in 2011, 2012 and the first quarter of 2013, have accordingly been restated on the 2011, 2012 and 2013 basis.