Esteemed Stakeholders,

Amid the economic environment characterized by high inflation, contracted domestic demand and low investment appetite which dragged on for three quarters after beginning in the last quarter of 2018, our sector was also dominated by conditions that restrained activities. Revival, although limited, began in the economy and in the sector in parallel with the downtrend in inflation and interest rates from the third quarter of 2019.

Against this backdrop, İş REIC gave priority to correct management of risks, and continued to work to achieve the delivery, sales and leasing targets of existing projects, while focusing on the investment activities of its ongoing projects and on making sure that these activities are realized profitably.

In 2019, the Company’s rental income increased by approximately 13% to TL 246.6 million. Total sales revenues generated during the year, on the other hand, amounted to TL 1,206 million, and 99% thereof consisted of income derived on real estate. Net profit for the period was registered as TL 297.4 million at year-end. Our shareholders’ equity at 2019 year-end remains strong with TL 3,860 million. Total assets of the Company were recorded as TL 5,716 million, and the total portfolio value as TL 5,488 million. As at 31 December 2019, İş REIC represented nearly 6.1% of the real estate investment company sector with a market capitalization of TL 1,687 million.

We have reached completion phase in our ongoing projects.

In 2019, title deeds were delivered to all home buyers for the Manzara Adalar Project in Kartal, where settlement started. Various campaigns were carried for selling the remaining housing units. In İnistanbul project realized in Topkapı, İstanbul, residential units in the Hayat phase were delivered following Gala and Lokal phases where settlement started. The ratio of residential unit deliveries across İnistanbul including those in the first three phases reached 78%. In the Konsept project that makes the final phase of the project, 90% of construction has been finalized and deliveries are planned to be started by early 2020. 99% of the residential units in İnistanbul have been sold.

72% of housing and office sales was completed for Ege Perla that we have developed in Konak, İzmir, where the shopping center remains in operation with the goal of creating a differentiation. It is intended to increase the number of visitors by the day on the basis of new concepts developed by the shopping center in line with the needs and expectations of the area.

İş REIC implemented a “wait-and-see” strategy with respect to the projects it plans to realize in the medium term. Along this line, the Company will adhere to the same strategy for the planned projects until we embark upon a period of stable and relatively more predictable market conditions. As part of the transition strategy, the housing project targeted to be developed in Tuzla continued to be evaluated, for which the building permit has been received and which was decided to be postponed last year due to the negative marketplace conditions. As a result of these evaluations, it was decided to revisit the project according to the future market conditions. On another hand, the process for obtaining a building permit was carried on for the project planned to be developed on the property located in Üsküdar.

In 2019, İş REIC put into life various solutions as part of active management of its real estate portfolio and its securitization in part. In this context, the Company strengthened its cash position with profit-generating sales of the Kapadokya Lodge Hotel and the adjacent plot with an area of 11,409 m2, and part of Tuzla Mixed Use Project Office spaces and commercial areas. In addition, Manzara Adalar Office and commercial spaces were securitized by being transferred to real estate investment fund. As the result of these actions, significant gains were achieved towards our Company’s medium- and long-term priority targets, which are reduction of existing financial liability, maximizing rental and sales income, and ultimately increasing profitability. The main strategy of the Company set for the years ahead will also be shaped within the frame of these priority targets, and focus will be placed on maximizing the value generated.

Launched in 2018, the project Inspiring Minds, which is an educational program that proved to be a success set to disrupt the patterns in the literature with its demonstrated quality to improve creativity, was brought to a total of 850 students including 2019.

We started 2020 with positive expectations for the sector.

While housing sales lost momentum in keeping with declined demand in 2019, the housing market ended the year with a limited contraction of 1.9%. While there was a marked shrinkage also in the office market, 2019 has seen the lowest average rental fees and the highest vacancy rates of the past decade. A downtrend was observed also in the rental fees in the retail market, which displayed a similar outlook, and the said decline measured approximately 11% in the prime retail rent figures according to September 2019 data.

Having revived particularly from the second half of 2019 with the effect of interest rates and incentives, the housing sector holds a positive expectation for 2020. We project that the period ahead will be dominated by increased demand and flat supply, and sales from the stock will gain weight. The office and retail market that expands on the basis of a sustainable supply is anticipated to see additions to the supply through ongoing investments in the period ahead.

Having adopted an uptrend in the last quarter of the year, the housing prices index is expected to maintain this tendency, and that the rise in rental figures in the office and retail market will be gradual and span over the medium term.

Overcoming the stagnation in the sector with respect to the investment environment depends on the sustainability of economic and financial stability and the increase in confidence indices.

Our strategy is built on efficient management of our high-quality real estate portfolio

Carrying out its activities with a focus on sustainability, our Company implements its strategies so as to preserve its solid balance sheet structure and efficiently manage its high-quality real estate portfolio.

In 2020, our Company will be closely monitoring the changes in the world and in our country, and will continue to converts its projects into investments in line with the sector’s dynamics drawing on its financial capabilities, and to optimally utilize its market experience and innovative approach in a bid to contribute added value to its sector and stakeholders.

I would like to extend my heartfelt thanks to our principal shareholder İşbank, to our Board of Directors, all our business partners, employees and investors, for their continued support and confidence in our Company.

Sincerely,

Hasan K. Bolat

CEO