Klémurs: 2008: A Good First Half

PARIS--(BUSINESS WIRE)--

Regulatory News:

The Supervisory Board of Klémurs (Paris:KMU) met today to review the business of the company and its financial statements for the first six months of 2008, as submitted by the Manager.

In millions of euros		June 30, 2008		June 30, 2007		Change		Change on a constant portfolio basis
Lease income		15.1		10.8		+39.5%		+8.8%
Net rents		14.2		10.2		+39.3%
Cash flow from operations		14.0		10.7(1)		+30.1%
In euros per share
Net current cash flow		1.01		0.85(1)		+19.6%
Net earnings		0.53		0.36		+44.8%
Revalued net assets, excluding duties(2)		26.72		22.62		+18.1%
Revalued net assets, including duties(2)		31.07		25.21		+23.2%

(1) Includes cash flow generated by Cap Nord through June 30, 2007.

(2) After taxation on unrealized gains and marking to market of financial instruments.

The concept of a real estate company specializing in the outsourced retail real estate assets of major retailers developed by Klémurs is gradually gaining ground, as illustrated by the rental performances and acquisition program of the first half of 2008.

RENTS UP SHARPLY, REFLECTING GROWTH

For the six months ended June 30, 2008, consolidated rents reached 15.1 million euros, an increase of 39.5% compared with June 30, 2007.

On a current portfolio basis, the increase is attributable to:

• acquisitions made in 2007: the contributions of Cap Nord (€1.2M), the 8 Buffalo Grill restaurants (€0.6 M) and 2 Sephora stores (€0.3M)
• acquisitions made in the course of the second quarter of 2008: the 77 retail properties from the Défi Mode/Vivarte agreement contributed 1 million euros, while the 14 assets located in Avranches, Rochefort-sur-Mer and Messac contributed 0.3 million euros.

On a constant portfolio basis, the strong rise (+8.8%) is attributable to:

• index-linked rent adjustments (for €0.5 M), which matched the rise in the index for 2Q07 (+5.05%),
• variable rents (for €0.4M), based on the 2007 sales revenue of the restaurants in the Klémurs portfolio operated by Buffalo Grill.

Buffalo Grill accounted for 74% of the rents collected by Klémurs on June 30, 2008, versus 82% on December 31, 2007. This change reflects the diversification of the retail partners in the portfolio.

At June 30, 2008, the financial occupancy rate was 99.6% and the default rate was 0.1%. The occupancy cost ratio (rent + expenses over revenues excluding tax) was 9.1%.

NET CURRENT CASH FLOW PER SHARE: +19.6%

Consolidated cash flow from operations increased by 30.1% to reach 14 million euros on June 30, 2008. After taking into account the cost of debt (€5.6M), net current cash flow was 8.3 million euros on June 30, 2008. Per share, it comes to 1.01 euro, versus 0.85 euro one year earlier, an increase of 19.6%.

At the June 30, 2008 reporting date, net debt came to 373 million euros, versus 213.9 million euros on December 31, 2007 and 189.8 million euros on June 30, 2007. The significant increase is attributable to investments of 154.5 million euros made in the course of the first six months of 2008.

The Loan-to-Value ratio for the period is 60% (46.8% on December 31, 2007 and 47.1% on June 30, 2007). The average interest cost for the first six months of 2008 is 4.6%. Klémurs benefited from additional hedges that it entered into in late 2007 and early 2008 in anticipation of subsequent developments, thanks to which 98% of its debt is fixed rate on June 30, 2008.

Net income for the period is 4.3 million euros, an increase of 44.7% over June 30, 2007 (€3.0M), or 0.53 euro per share.

REVALUED NET ASSETS (RNAV): 31.07 EUROS PER SHARE

The value of Klémurs’ holdings, transfer duties included, was 621.5 million euros on June 30, 2008, versus 403.1 million euros one year earlier. The unrealized capital gain on these holdings (duties included) increased by 35.6 million euros in 1 year, reflecting the rise in rents, driven by index-linked adjustments. The average yield on assets used by the appraisers is virtually unchanged at 5.8%.

RNAV, duties included, after taxation on unrealized gains and marking to market of financial instruments, was 31.07 euros per share on June 30, 2008, versus 25.21 euros per share one year earlier, an increase of 23.2% over 12 months (+6.4% over 6 months).

FIRST HALF OF 2008 RICH IN ACQUISITIONS

Klémurs invested a total of 154.5 million euros over the first half of 2008:

• 77 assets acquired on April 30 for 104.1 million euros as part of the Défi Mode/Vivarte agreement signed in late 2007;
• 17 restaurant properties of Buffalo Grill, including two under construction, for a total investment of 28.9 million euros;
• 14 of the 15 retail assets under purchase agreement since the end of 2007 located in Avranches, Rochefort-sur-Mer and Messac and acquired in April for 17.6 million euros;
• A first retail park, acquired on a future as is basis, located in the leading retail area of Chalon sur Saône, for an investment of 14.8 million euros (€3.8M outlaid in 1H08) and scheduled to open in the 3^rd quarter of 2009.

Full year, these new assets (excluding the 3 assets under construction) will generate rent totaling 9.3 million euros, bringing the total annual rental base for Klémurs to 36.1 million euros, of which 64% for Buffalo Grill and 16% for Vivarte.

In addition, at the end of June, Klémurs signed an agreement to acquire 23 assets operated by retailer King Jouet, which should lead to an investment of 22.8 million euros by the end of this year.

OUTLOOK

In 2008, the lease income earned by Klémurs will be positively impacted by the acquisitions made in the second quarter as well as those to be pursued in the second half of the year. These new investments should be supportive of high growth in net current cash flow per share.

Accordingly, in 2008, Klémurs is pursuing an acquisition program that is primarily centered on the outsourcing by major retailers of their property assets, and is gradually reaching its objective of owning assets worth one billion euros by the end of 2009. A real estate specialist, Klémurs offers, to carefully selected retailers, a relevant alternative to the in-house management of commercial real estate and ensures, as part of a long-term partnership, indexed and secure revenue flows that via variable rents capture their performance.

Next release:

October 28, 2008 3^rd quarter revenues of 2008

COMPOSITION OF KLÉMURS PROPERTIES AT JUNE 30, 2008

LOCATION		ASSET NAME		NUMBER		FACILITIES		Sq.m.
Throughout France		Buffalo Grill		151		Buffalo Grill restaurants		85 047
Throughout France		Défi Mode/ Vivarte		77		Stores of which 67 are operated by the Vivarte group		75 742
Throughout France		Klécapnor		26		Retail stores operated by Mondial Moquette, Heytens, King Jouet and various other retailers		20 231
Rochefort sur Mer, Avranches et Messac		Diversified properties		14		Stores operated by various retailers such as La Halle, Gémo, Leader Price et Malin Plaisir		13 752
Paris		Paris Flandre		1		BHV departement store		7 752
Paris		Truffaut		1		Truffaut departement store		3 606
Rouen		Rouen Candé		8		Shops on Rue de la Champmeslé, various retailers		2 848
Avignon-Metz		Sephora		2		Sephora retail stores		1 177
281 assets representing 210 155 sq.m.

APPENDICES

Management report for the six months ended June 30, 2008

1 – Business through June 30, 2008

2 – Consolidated earnings for the first six months of 2008

3 – Revalued net assets (RNAV)

4 – Change in cash flow per share

5 – Financing policy

6 – Capital and capital ownership

7 – Events subsequent to the interim cut-off date

8 – Business outlook for the second half of 2008

1- BUSINESS THROUGH JUNE 30, 2008

Rental business

In the course of the first six months of 2008, Klémurs pursued its business of renting out retail spaces, collecting 15.1 million euros in lease income.

Rents increased by 4.3 million euros versus the June 30, 2007 interim reporting date, which is 39.5% up on a current portfolio basis and 8.8% up on a constant portfolio basis.

The rise on a constant portfolio basis is attributable to:

• the impact of index-linked rent adjustments (the French Cost of Construction Index for 2Q07 applied to leases increased by 5.05%);
• the collection of 0.4 million euros in additional variable rent on the Buffalo Grill restaurants; these additional variable rents are based on the sales revenue generated by the restaurants in 2007.

On a current portfolio basis, the change is attributable to the following items:

• the acquisition on April 30 of 77 retail store properties, of which 67 flying the Défi Mode logo, with an impact on rents of 1.0 million euros;
• the acquisition in April of 14 retail assets located at sites in Avranches, Messac and Rochefort (€0.2 M);
• the acquisition in December 2007 of two Sephora retail properties, one in Metz and one in Avignon (€0.3 M);
• for the Buffalo Grill portfolio, the impact over the six-month period of the 8 restaurant properties acquired in late 2007, plus the impact of 15 restaurants acquired in June 2008, for a total of 0.6 million euros;
• the contribution of Cap Nord, a company whose assets were acquired in March 2007, for 1.2 million euros.

It should be noted that Buffalo Grill accounted for 74% of the rents collected by Klémurs on June 30, 2008, versus 82% on December 31, 2007. This change reflects the diversification of the retail partners in the portfolio.

The financial occupancy rate on assets held was 99.6% on June 30, 2008 (one space measuring 1 485 sq.m. vacant in Saint Etienne du Rouvray), compared with 100% on June 30, 2007.

The default rate is very low: 0.1% on June 30, 2008.

The average occupancy cost ratio (rents + expenses over revenues excluding tax) is 9.1%.

Under a management mandate entrusted by Klépierre Conseil to Ségécé, the latter created a dedicated department called Ségémurs to handle the rental and property management of the retail properties owned by Klémurs:

• the property assets of the former Cap Nord, comprised of 26 retail stores, 11 of them flying the Mondial Moquette banner, but also Gémo, Heytens, King Jouet, Autour du Bébé, Kiloutou, Univers du Sommeil, Animalis, Poltronesofa, The Phone House and Jean Delatour; together they cover 21 300 sq.m. of floor area for total rents of 2.4 million euros.
• certain downtown assets that form the historical portfolio of Klémurs: Truffaut Quai Rive Gauche in the 13^th arrondissement of Paris, the BHV store on Avenue de Flandre in Paris, 8 retail storefronts on the Rue de la Champmeslé in Rouen, and two Sephora stores, one in Metz and one in Avignon, for a total of 12 assets covering 14 200 sq.m. and generating 1.5 million euros in rents.
• the Buffalo Grill property assets, which in early 2008 included 136 restaurant properties.

On June 30, Ségémurs managed on behalf of Klémurs a total of 281 retail assets, covering 210 000 sq.m. and generating rent of 36.1 million euros (annual basis).

Ségémurs also assumed management responsibility for the retail assets acquired by Klémurs during the six-month period just ended.

A change in tenant mix with no impact in the first half concerns the partial sale of the Mondial Moquette retail property located in Orléans, with the arrival of Générale d’Optique, which will occupy 211 sq.m. out of 1 149 sq.m. of total floor area, generating a rental capital gain of 25%.

Development

Investments made in the first six months of 2008

Klémurs invested 154.5 million euros in the first six months of 2008.

The Company pursued the partnership it entered into with Buffalo Grill in August 2006 and the terms of the additional agreement of December 2007 with the first implementation of the development of new sites on a future-as-is basis. It acquired 17 new restaurants in the Buffalo Grill portfolio, including 2 on a future-as-is basis, located in Lyon Vénissieux, Brignoles, Carvin, Laon, Fougères, Marennes, Lamballe, Ancenis, Achères, Chateaubriand, Saint-Germain Les Corbeil, Cholet, Bourg-en-Bresse, Arles, Bourg Les Valence, Saint Amand Les Eaux, and Nogent le Rotrou, for a total of 28.9 million euros including transfer duties.

The 15 assets in operation will generate 1.8 million euros in net rents annually. The two assets under development will open at the end of the year and should bring in an additional 0.2 million euros in net rents.

These acquisitions bring the total number of Buffalo Grill restaurants held by Klémurs to 153.

After signing a purchase agreement at the end of 2007, in April 2008 Klémurs completed the definitive acquisition of the 14 retail assets located in three retail zones (Avranches, Messac and Rochefort-sur-Mer) for 17.6 million euros. These assets, which feature GLA of 15 195 sq.m., have tenants that include nationwide retailers such as La Halle, Aubert, Mobalpa, and Gémo and produce 1.1 million euros in net rents annually. The definitive acquisition of the fifteenth asset will be completed by June 1, 2009.

In April 2008, Klémurs also acquired 77 sites of the 112 assets specified in the Défi Mode outsourcing agreement signed in late 2007 with the founders of the retail chain, for a total of 104.1 million euros. Full year, net rents will reach 6.1 million euros.

In a parallel development, the Vivarte group acquired Défi Mode’s operations, a move that makes it the tenant of Klémurs.

In completing this transaction, Klémurs pursued the diversification of its portfolio, integrating 67 retail properties previously owned by Défi Mode as well as the retail properties of King Jouet, la Halle aux chaussures, la Halle aux vêtements, Mille et une Idées, Orchestra and Leader Price.

A retail park located in the leading retail area of Chalon sur Saône was acquired on a future-as-is basis for a total amount of 14.8 million euros (€3.8M of which were outlaid during the six-month period) and expected net rent of 1 million euros. The opening is scheduled for the 3^rd quarter of 2009.

Investments planned for the second half of 2008 and development potential for 2008 – 2012

In late June 2008, an agreement was reached with the founders of Teddy Toys (a company that was sold in 2005 to the King Jouet group) for the sale of 23 suburban stores (16 400 sq.m.) operated by King Jouet. The agreement calls for the definitive acquisition of the portfolio in the course of the second half of this year, for a total amount of 22.8 million euros and expected net rents of €1.5 M. In parallel, a new 10-year lease will be signed with the tenant, the terms of which include a firm period of 6 years and a variable rent clause.

The second half of 2008 will also see the definitive acquisition of around thirty additional assets out of the 112 stipulated in the Défi Mode agreement.

During the first six months of 2008, Klémurs was able to consolidate its positioning in the market for outsourced retail property assets, concluding a number of promising partnership agreements.

The partnership agreement signed in 2007 with the founders of retailer Défi Mode continues to produce benefits, and 17 new stores located in two new sites with a diversified set of retailers were offered under the preferential right to acquire clause.

2- CONSOLIDATED EARNINGS FOR THE PERIOD

Klémurs published its financial statements in a consolidated format for the first time on December 31, 2007. As a reminder, the financial statements of Klémurs that were published on June 30, 2007 were presented in parent company format and did not include data from the subsidiary Cap Nord. In order to render the data comparable, the cash flow at June 30, 2007 below includes the cash flow generated by Cap Nord since March 2007.

Cap Nord merged with Klécapnor with retroactive effect from January 1, 2008.

Building expenses came to 0.9 million euros, reflecting:

• 0.4 million euros in rental management fees, at a rate of 3% of rents collected over the period;
• 0.1 million euros in administrative fees paid to the Manager, Klépierre Conseil;
• 0.1 million euros in rents on land and construction leases.

Other operating income includes a refund by the notary of the remaining fees provisioned in connection with recent acquisitions.

Depreciation and amortization for the period are calculated in accordance with IAS 40 using the cost model. The increase is attributable to the integration of Cap Nord and the various acquisitions made in the second half of 2007 and the first half of 2008. Depreciation and amortization for the period of termination indemnities correspond to an indemnity of 1.4 million euros paid to Mondial Moquette in 2007 and spread over several periods.

Other operating expenses include, in particular, dividend payout costs (€29K) and director’s fees (€25K).

Cost of debt increased by 1.9 million euros versus with June 30, 2007 due to the rise in net debt, which came to 373 million euros on June 30, 2008, compared with 184 million euros on June 30, 2007. This increase remains limited to the first half of 2008, with the bulk of the increase in net debt occurring late in the first half.

The subsidiary Klécapnor opted for SIIC status in the course of the first half of 2008, requiring the payment of an exit tax of 3.5 million euros. This payment is being spread over four years, and the consolidated financial statements of Klémurs for this period record (due to the impact of discounting) a net gain of 310 thousand euros that takes into account the erosion over 4 years of the real value of the tax debt compared with its nominal value (in accordance with IAS 32).

The consolidated financial statements of Klémurs on June 30, 2008 show a profit net of tax of 0.2 million euros, which includes 3.4 million euros of tax payable (primarily the tax expense related to the adoption by Klécapnor of SIIC status as of 2008) less deferred taxes (-3.2 million euros, primarily reflecting the recovery of a provision for deferred tax on Cap Nord for – 3.5 million euros and the discounting of tax losses carried forward for 0.2 million euros).

3 – REVALUED NET ASSETS

RNAV (revalued net assets) per share is calculated each year on December 31 and on June 30. The method used to establish RNAV is to add the unrealized capital gains on the real estate portfolio resulting from the difference between their market values as estimated by an appraiser and the net book values as carried in the Company’s consolidated financial statements, which are established using the cost method.

For the six months ended June 30, 2008, the task of appraising the assets in the Klémurs portfolio was entrusted to two experts. The Retail Consulting Group (RCG) performed this appraisal for the BHV Flandres, Truffaut Seine Rive Gauche and Rouen Candé assets, as well as the 136 Buffalo Grill restaurant properties acquired in 2006 and 2007. Atis Real performed the appraisal for the portfolio of 14 retail assets acquired via Cap Nord in 2007, as well as the two Sephora retail properties acquired in December 2007, one in Metz and the other in Avignon.

This appraisal was conducted in accordance with the specifications developed by AFREXIM (Association Française des Sociétés d’Expertise Immobilière) and with the recommendations issued by the COB/CNC “Barthès de Ruyter Work Group.” Fees paid to appraisers are set prior to their property valuation work, on a lump sum basis in accordance with the size and complexity of the assets being appraised, and independently of the appraised value of the assets.

To determine the fair market value of a retail property, appraisers apply a yield rate to annual lease income net of all non-chargeable fees for leased-up premises, and to the net market rental price for vacant properties, discounted for the expected vacancy period. The yield rate is applied after deduction of the net present value of all reductions or rebates on leases with step rents, the net present value of all expenses on vacant premises, and all work carried that is done but not re-invoiced to tenants. A standard vacancy rate is also defined for each asset. The discount rate used is equal to the yield rate applied to determine fair market value.

Gross rent includes the minimum guaranteed rent (MGR), the variable rent, and the going market rate for vacant properties. Net rent is determined by deducting all expenses from gross rent: management fees, expenses that are not re-invoiced to tenants, expenses incurred on vacant buildings, and losses recorded on unpaid receivables past due.

The appraiser determines the yield rate on the basis of numerous variables, in particular retail sales area, layout, competition, type and percentage of ownership, rental reversion and extension potential, and comparability with recent market transactions.

For the appraisal of the Buffalo Grill restaurant properties, RCG analyzes for each restaurant the estimated occupancy cost ratio and the market rental value. The observed occupancy cost ratio (i.e., MGR 2008 / REV Excluding taxes 2007) for each restaurant is then compared with the estimated occupancy cost ratio determined by RCG on the basis of occupancy cost ratios for similar theme-based restaurants and also taking into account such factors as the quality of the location, the accessibility of the premises, the visibility of the establishment, the quality of the retail environment and, in particular the competition. RCG also compares the market rental value (less the application of the estimated occupancy cost ratio for each restaurant to revenues for 2007 excluding tax) with the minimum guaranteed rent. To determine the yield rate for each Buffalo Grill restaurant, RCG compare the MGR with the market rental value and takes into account the principal clauses of the lease: indexing of MGR to ICC, variable rent equal to 8.5% of the restaurant’s revenue, re-invoicing to the tenant of all relevant building expenses.

Since December 31, 2007, Klémurs uses two methods to appraise the value of assets whose last appraised value is at most 110% higher than the net book value (excluding deferred taxes): an appraisal based on yields (see discussion above), and an appraisal based on the DCF method.

This second method determines the value of a real estate asset as the sum of discounted cash flows using the discount rate defined by the appraiser.

The appraiser estimates all of the asset’s expected revenues and expenses and derives a terminal future value at the end of the period of analysis (10 years). By comparing market rental values and face rent values, the appraiser captures the property’s rental potential by using market rental values at lease expiration less costs incurred to relet the property. Finally, the appraiser discounts these projected cash flows in order to determine the present value of the property asset.

The discount rate takes into account the prevailing risk-free rate, to which will be added a risk and liquidity premium based on the location, the key features and the occupation of each property.

Similarly, Klémurs also conducts an appraisal using the two methods on assets appraised for the first time on December 31, 2007 or on June 30, 2008. This pertains to the eight Buffalo Grill restaurants and the two Sephora stores acquired in late 2007, as well as the assets acquired from Cap Nord in March 2007.

Au June 30, 2008, the assets acquired in the last six months were not appraised. They are valued at their acquisition price. These are the 15 Buffalo Grill restaurant properties acquired in June 2008, the 14 retail assets located in Rochefort, Messac and Avranches and acquired in April 2008, and the 77 retail stores acquired on April 30 and mostly under Défi Mode operation.

The constant portfolio includes the assets already owned on December 31, 2007. The variable portfolio includes acquisitions made since January 1, 2008, carried at their acquisition cost, as well as long-term fixed assets in progress on June 30, 2008. These correspond to the retail park development project in Châlon sur Saône, as well as the first payments on the purchase of two Buffalo Grill restaurants on a future as-is-basis.

The average net yield on assets owned by Klémurs is 5.8%, stable versus December 31, 2007.

On June 30, 2008, as was the case on December 31, 2007, duties and fees on the sale of assets are calculated based on 6.20% of the appraised value excluding duties for all of the assets of the Klémurs group, including the assets under finance leases. This assumption leads to a more conservative approach to the rate, and takes into account the exercise of options to come in the next five years, after which Klémurs will become the full and outright owner of the assets.

In addition, the net worth of Klémurs includes the fair value of the interest rate hedges that the Company has entered into. For cash flow hedge type instruments, and in compliance with IAS 39, these instruments are marked to market value in the consolidated financial statements. This value, which was 5.2 million euros on December 31, 2007, had risen to 10.3 million euros on June 30, 2008.

4- CHANGE IN CASH FLOW PER SHARE

The financial statements of Klémurs were published for the first time in a consolidated accounting format for the year ended December 31, 2007. Accordingly, the financial statements for the six months ended June 30, 2007 do not include the subsidiary Cap Nord, which was acquired in March 2007, the decision having been made to present the parent company statements. In the interest of comparability of data, the cash flow at June 30, 2007 below includes the cash flow generated by Cap Nord in the first half of 2007.

Net current cash flow per share increased by 19.6% in one year, thanks to the satisfactory rise in rents on a constant portfolio basis (+8.4%) and to acquisitions made in both 2007 and 2008.

5- FINANCING POLICY

As the global financial crisis continued to weigh adversely on financing conditions for businesses in the first half of 2008, Klémurs sought to secure the cost of its debt by acting on two parameters, rates and credit margins:

• with respect to interest rates, Klémurs benefited from additional hedges that it entered into in late 2007 and early 2008 in anticipation of subsequent developments, thanks to which 98% of its debt is fixed rate on June 30, 2008.
• with respect to credit margins, the Company opted to use its membership in the Klépierre group to finance the increase in debt to avoid a long-term lock-in at exceptionally high margins. The equity loans arranged in the 2^nd quarter of 2008 can be refinanced by Klémurs in the bank market at its convenience, when it deems that the conditions are right.

Financing resources

The net debt of Klémurs stood at 373 million euros on June 30, 2008, compared with 213.9 million euros on December 31, 2007.

This 159.1 million euro increase is primarily attributable to investment outflows (154.5 million euros), partly offset by free cash flow for the period after the payout of a dividend totaling 8.2 million euros.

Au June 30, 2008, the financing resources available to Klémurs can be broken down into these sources of financing:

• the club deal of up to 150 million euros that was set up in December 2006 is now fully drawn down. It falls due in December 2011.
• the property finance leases that were bought when the Buffalo Grill and Cap Nord assets were acquired represent a total outstanding of 56.4 million euros on June 30, 2008; the average term remaining on these finance leases is 6.4 years, reduced to 3.1 years if the first dates on which early options can be exercised are taken into account.
• an equity loan of 130.1 million euros was granted by Klépierre to complete the financing of the acquisitions made in the first half. This advance is subordinated to Klémurs’ bank borrowings.
• Klémurs also has the option of obtaining financing over the short term via the Klépierre Group’s centralized cash management service, for EONIA plus 0.35%, up to 36.4 million euros.

Interest rate hedges

The exposure of Klémurs to short-term interest rate fluctuations was limited in the first half of 2008 by the start of several fixed-rate payer swaps contracted in anticipation of investment financing needs for 2008:

• 150 million euros in swaps entered into in November 2007 went into effect in January 2008
• 100 million euros in swaps entered into in January 2008 went into effect in April 2008.

At the June 30, 2008 reporting date, 98% of Klémurs’ total financing debt was hedged, calculated as the percentage of fixed-rate debt (after hedging) to total financing debt.

Klémurs hedge portfolio contains only plain vanilla swaps.

Financial ratios

At the June 30, 2008 reporting date, the principal financial ratios for Klémurs are in line with the targets set and the covenants related to its bank financing:

		Syndicated loan limit		Value at 06/30/2008
Loan-To-Value		55% (65% including subordinated debt)		34% (60% including subordinated debt)
EBITDA / Net interest expense		2 (1.8 including interest on subordinated debt)		3.40 (2.49 including subordinated debt)
Secured debt / RNAV		20%		9.1%

Cost of debt

In spite of increased pressure on interest rates, the cost of Klémurs’ debt improved slightly in the first half of 2008 (4.8% for the whole year in 2007 versus 4.6% in the first six months of 2008). It is calculated as the ratio of interest expense to the average outstanding financing debt. This positive development is attributable to the positive impact of fixed-rate hedges.

6- CAPITAL AND CAPITAL OWNERSHIP

On June 30, 2008, share capital amounted to 82 500 000 euros, divided into 8 250 000 shares, each with a par value of 10 euros, fully paid up. The shares may be registered to individual holders or held in bearer form, at the option of the shareholder.

On the June 30, 2008 reporting date, Klépierre SA held (in connection with a stock market agreement undertaken with an independent service provider) 6 939 372 shares of Klémurs, which is 84.1% of its share capital.

In addition and also on the June 30, 2008 reporting date, Klémurs owned (in connection with a stock market agreement undertaken with an independent service provider) 16 876 shares of its own stock, i.e., 0.2% of its share capital, for a net balance sheet value of 323 640.04 euros.

7- EVENTS SUBSEQUENT TO ACCOUNTING CUT-OFF DATE

To the best of Management’s knowledge, no events of a material nature that could change investor assessment of the financial position or condition of Klémurs as presented in this report have occurred since the date on which the period ended and this report was drawn up.

8- BUSINESS OUTLOOK FOR THE SECOND HALF OF 2008

In the second half of 2008, the lease income earned by Klémurs will be positively impacted by the acquisitions made in the course of the first half, i.e., the 15 additional Buffalo Grill restaurants, the 77 retail properties acquired on April 30, 2008, and the 14 assets located in Avranches, Rochefort-sur-Mer and Messac acquired in April 2008. Over the full six-month period, these assets should produce 4.7 million euros in rents. In the first half of 2008, they contributed only 1.3 million euros. The new investments made should be supportive of high growth in net current cash flow per share.

Accordingly, in 2008 Klémurs plans to pursue an acquisition program that is primarily centered on the outsourcing by major retailers of their property assets, and is gradually reaching its objective of owning assets worth one billion euros by the end of 2009. The Company is particularly attentive to the relationships it develops with operating partners in connection with the implementation of new leases that offer long terms, a minimum guaranteed rent that is indexed, and an additional variable rent based on the retailer’s revenue growth. However, the supply of retail real estate assets for sale is generally limited, which means that the emergence of new investment projects in the year ahead will depend mainly on market conditions.