Unibail opts for new SIIC tax regime Sharp rise in first-half 2003 results

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1 TOUR ARIANE > RUE CAMBON > CARRÉ SÉNART > CARROUSEL DU LOUVRE > CITÉ EUROPE > CITÉ DU RETIRO > ESPACE CHAMPERRET > CNIT > COEUR DÉFENSE > EURALILLE ESPACE 21-LES VILLAGES > QUAI OUEST > LES QUATRE TEMPS > 108 RUE DE RICHELIEU > ROSNY 2 > RUE SAINT-GEORGES > STRASBOURG-ETOILE > LA TOISON D OR-DIJON > CENTRE D AFFAIRES TOLBIAC MASSÉNA > ULIS 2 > VÉLIZY 2 > 41 RUE YBRY > 7 PLACE DU CHANCELIER ADENAUER > Unibail opts for new SIIC tax regime Sharp rise in first-half 2003 results Unibail s strong strategic positioning has been confirmed by an improvement in all its performance indicators, despite a tough environment. Unibail s Board of Directors convened on July 23, It agreed to opt for the new tax-exempt regime applicable to SIICs (French listed property investment companies). The Board subsequently approved the company s accounts for the first-half of 2003 in accordance with this new tax regime. Consolidated key figures Year-end 2002 Jun 30, 2002 Jun 30, 2003 VARIATION (millions of euros) 6 months 6 months (H1 2003/H1 2002) Gross rental income % Offices % Shopping centres % Convention and Exhibition centres % EBITDA % Pre-tax recurring cash flow (Group share) % per share (1) % Net profit (Group share) % NAV (fully diluted triple net liquidation NAV) per share (2) % (1) Based on an average number of shares in H of 45,934,253. (2) Based on 47,953,701 shares, i.e. 45,514,243 shares outstanding as at June 30, 2003, plus potential shares generated by share warrants ( BSAs ) and stock options. Business performance in first-half 2003 Gross rental income rose by 8.3% to 272.5m, despite a tough environment characterized by declining demand for office space, a slowdown in consumer spending and a wait-and-see attitude in the convention and exhibition market. This robust performance reflects the strong appeal of Unibail s property assets. The combined effect of increased rental income, a lean cost base and controlled financial charges boosted pre-tax recurring cash flow by 14.2% to 148.4m, giving a per-share increase of 14.9% to Pre-tax recurring cash flow per share remains a key performance indicator for Unibail and remains unaffected by the accounting changes resulting from the Group s decision to opt for the SIIC tax regime. SIIC tax regime Unibail has opted for the new SIIC tax-exempt regime, with retroactive effect to January 1, Unibail decided to revalue its consolidated balance sheet as at January 1, 2003 resulting in the booking of a revaluation reserve. The exit tax of 382m is offset against this revaluation reserve.this exit tax is payable in four equal instalments on December 15 of the current year and of the following three years. The adoption of this tax-exempt status has also generated various exceptional items in the accounts, notably the reversal of deferred tax liabilities accounted for on the balance sheet as at December 31, This exceptional gain explains the sharp increase in consolidated net profit to 185.6m. Net asset value (NAV) The value of the property portfolio (based on independent appraisals) amounted to 7,595m as at June 30, 2003 (compared to 7,550m at year-end 2002). In the context of the new SIIC tax regime, the most relevant Net Asset Value figure for Unibail is the triple net liquidation NAV, after deduction of latent capital gains taxes, of transfer taxes and disposal costs, and of the mark-to-market of the debt and financial instruments. As a result, fully diluted triple net liquidation NAV per share reached 70.30, compared to 67.2 as at December 31, 2002, rising by 4.6%. Outlook Due to Unibail s sound strategic positioning, the Group should see continued growth in its key performance indicators, despite a tough global economic climate, and barring any unexpected events. Furthermore, the decision to opt for the new SIIC tax regime should help Unibail sustain its expansion policy while enhancing dividends. As a result, Unibail should meet or exceed the 10% growth target it has set for 2003 pre-tax recurring cash flow per share. The Group also confirms its dividend target of 3 per share in 2004 (in respect of the 2003 financial year) Contact : Fabrice Mouchel : + 33 (0) La plus grande qualité de vie au m 2 The premier French commercial real estate company Property portfolio: 7.6 bn NAV per share (fully diluted triple net liquidation NAV): % to Pre-tax recurring cash flow per share: % to 3.23 Cœur Défense Forum des Halles Paris Expo Porte de Versailles < MÉRIADECK-BORDEAUX > HÔTEL MÉRIDIEN-MONTPARNASSE > AVENUE DE MESSINE/MURAT/MONCEAU > 50 AVENUE MONTAIGNE > NICE ETOILE > PALAIS DE HANOVRE > 70 BOULEVARD DE COURCELLES > TOUR EUROPE > LE FORUM DES HALLES > GALERIE GAITÉ-MONTPARNASSE > 168 AVENUE CHARLES DE GAULLE-NEUILLY > 42 AVENUE D IÉNA > RUE DE LISBONNE > 52 RUE DE LISBONNE > 5 BOULEVARD MALESHERBES > 189 BOULEVARD MALESHERBES

2 Supplement to the press release of July 23,

3 IMPACT OF OPTING FOR THE NEW SIIC TAX REGIME Unibail s financial statements as at June 30, 2003 reflect the full impact of Unibail's decision to opt for the new tax regime applicable to SIICs (French listed property investment companies), with retroactive effect 1 st January, In relation with this tax status, a revaluation of the Group s consolidated balance sheet has been realised as at January 1, The decision to opt for the SIIC regime affects neither Unibail s EBITDA nor pre-tax recurring cash flow per share, which comes to 3.23 (up 14.9% compared to first-half 2002). This latter indicator, which reflects Unibail s business performance during first-half 2003, allows comparisons with previous years. The revaluation of the consolidated balance sheet covers all tangible and financial assets, but excludes intangible assets such as leaseholds. This asset revaluation leads to a 1,854m increase of the revaluation reserve within shareholders' equity (Group share). In accordance with accounting rules, the exit tax ( 382m payable over four years) is offset against the revaluation reserve. The new tax-exempt regime modifies completely deferred taxes accounted for on the consolidated balance sheet as at December 31, As all future recurring income and, above all, capital gains on disposals will be tax-exempt, deferred tax liabilities relating to the Group s SIIC-eligible companies have been reversed, mostly in the income statement, generating an exceptional tax gain of 252m. As Unibail revalued its tangible and financial assets, it appeared appropriate to mark-to-market financial instruments. As a result, all swaps and caps were cancelled and a new hedging has been implemented. This leads to an exceptional expense of 126m in the accounts, to be connected with the 99.7m latent capital losses on debt and financial instruments mentioned in Unibail s Annual Report (note 10) and used to calculate the triple net liquidation NAV as at December 31, Recurring profit has been impacted by increased depreciation charges following the asset revaluation, while net profit has been affected by i) the disappearance of almost all corporate income tax, ii) the exceptional items mentioned above, and iii) the disappearance of capital gains on the disposal of revalued assets. Therefore, recurring profit and net profit are no longer directly comparable with previous years. Since opting for the new tax regime, the most relevant Net Asset Value figure for Unibail is the fullydiluted triple net liquidation NAV, i.e. after deducting i) the exit tax and residual tax on latent capital gains, ii) transfer taxes and disposal costs, and iii) the mark-to-market of debt and financial instruments. As a result, fully-diluted triple net liquidation NAV per share amounted to 70.3 at June 30, 2003, compared to 67.2 as at December 31, 2002, rising by 4.6%. 2

4 Consolidated Statements of Income ( m) 30/06/ /06/2003 Office property portfolio Rental income Net operating expenses Expenses related to properties Property management expenses Net allocation to provisions for doubtful accounts = Net rents Asset management expenses Office Portfolio Net Operating Income Shopping centres portfolio Rental income Net operating expenses Expenses related to properties Property management expenses Net allocation to provisions for doubtful accounts Ground rents = Net rents Asset management expenses Shopping Centres Portfolio Net Operating Income Convention-Exhibition centres portfolio Rental income Net operating expenses Expenses related to properties Property management expenses Net allocation to provisions for doubtful accounts Ground rents = Net rents Asset management expenses Convention-Exhibition Centres Portfolio Net Operating Income Property services Convention & Exhibition centres management Property management services Other Property Services Net Operating Income Finance leasing and other Net income Net operating expenses Net capital gain on sales of properties Net result on other loans Finance Leasing & Other Net Income General expenses and other Corporate and development expenses Miscellaneous Total General Expenses and Other = Earning Before Interest, Tax, Depreciation & Amortization Depreciation Net financial expenses Contribution of non-consolidated companies = Pre-tax recurring profit Net capital gains on sales of properties Non recurring income & expenses Provisions for impairment of value of properties Amortization of goodwill Corporate income tax = NET PROFIT Minority interests = NET PROFIT, Group share

5 Calculating recurring cash flow 30/06/ /06/2003 Pre-tax recurring profit Asset depreciation charges Depreciation Depreciation of financial leases PRE-TAX RECURRING CASH FLOW Group-share data 30/06/ /06/2003 Pre-tax recurring profit Minority interests Pre-tax recurring profit, Group share Depreciation and amortization Depreciation and amortization minority share PRE-TAX RECURRING CASH FLOW Group share Per share data 30/06/ /06/2003 Average number of shares 46,277,832 46,512,882 45,934,253 Net profit / share ( ) % change since previous year 154.3% 33.1% 73.5% Pre-tax recurring profit / share ( ) % change since previous year 22.5% 18.1% 2.4% Pre-tax recurring cash flow / share ( ) % change since previous year 16.5% 16.9% 14.9% Recurring cash flow / share ( ) % change since previous year 14.1% 15.7% 39.5% 4

6 CONSOLIDATED BALANCE SHEETS ASSETS 31/12/ /12/ /06/2003 Restated (1) Restated (1) m FIXED ASSETS 5,213 5,358 7,251 Goodwill Intangible fixed assets Leasehold Other intangible fixed assets Tangible fixed assets 4,658 4,846 6,760 Land 1,632 1,719 2,502 Buildings and fittings 3,022 3,123 4,254 Furniture, fixtures and equipment Financial assets Finance-leased fixed assets Other financial assets CURRENT ASSETS Trade receivables Receivables from property portfolio Other trade receivables Other receivables, accrued income, deferred expenses Tax receivables Deferred tax assets Other receivables Accrued income and deferred expenses Marketable securities Cash and equivalents TOTAL ASSETS 5,728 5,815 7,689 (1) The goodwills attached to the land in the case of leasehold were previously accounted under item "land" (tangible fixed assets). They have been restated as intangible fixed assets. 5

7 CONSOLIDATED BALANCE SHEETS LIABILITIES 31/12/ /12/ /06/2003 m SHAREHOLDERS' EQUITY (Group share) 1,264 1,383 2,991 Capital Additional paid-in capital Revaluation reserve 1,539 Reserves and consolidated retained earnings Treasury shares MINORITY INTERESTS DEFERRED TAX LIABILITIES CONTINGENCIES AND OTHER LIABILITIES BORROWINGS AND OTHER FINANCIAL LIABILITIES 3,426 3,311 3,385 Bonds 1,728 2,912 2,853 Borrowings and amount owed to credit institutions Other financial liabilities TRADE PAYABLES OTHER LIABILITIES, ACCRUED EXPENSES, DEFERRED INCOME Tax and social security liabilities Payables on fixed assets Guarantee deposits Sundry creditors Accrued expenses and deferred income TOTAL LIABILITIES 5,728 5,815 7,689 6

8 FINANCIAL POSITION Balance sheets ratios The ratio Net Financial Debt (1) / Market value of Properties is quasi-unchanged in comparison to end- December 2002, standing at 42% as at June 30, 2003 (vs. 41% at year-end 2002). Interest cover ratio The interest cover ratio, defined as EBITDA/Financial expenses (2) reaches a very high level of 3.3x as at June 30, 2003, vs. 2.8x at year-end The principal reason for this improvement is the increase of Unibail's cash flows, in the context of a stable debt level and a controlled cost of debt. Cost of debt The Group's average refinancing rate is 45% at the first-half of 2003 against 47% in This diminution of the cost of debt is largely the result of the decrease in interest rate. (1) Excluding exit tax, payable over 4 years without interests (2) For this calculation, property leasing costs have been stripped out of financial expenses. 7