Acquire Develop Build Refurbish Lease Welcome Supply Manage Enhance Sell

Transcription

1 2003 Annual Report

2 Acquire Develop Build Refurbish Lease Welcome Supply Manage Enhance Sell Shopping Centres Carré Sénart Carrousel du Louvre Chelles 2 Le Forum des Halles Galerie Gaîté-Montparnasse Les Quatre Temps Rosny 2 Ulis 2 Vélizy 2 Bab 2 in Biarritz Bonneveine in Marseille Cité Europe Euralille Labège 2 in Toulouse Marques Avenue in Calais CMK-Mériadeck in Bordeaux Nice Etoile Place d Arc in Orléans Saint-Martial in Limoges Les Passages de l Etoile in Strasbourg La Toison d Or in Dijon Convention-Exhibition Centres Carrousel du Louvre Cœur Défense Conference Centre Cnit Espace Champerret Espace Grande Arche Hôtel Méridien-Montparnasse Palais des Sports de Versailles. Office Buildings Paris Expo Porte Tour Ariane 7 place du Chancelier Adenauer rue Cambon Cité du Retiro Cœur Défense 23 boulevard de Courcelles 70 boulevard de Courcelles 168 avenue Charles de Gaulle 42 avenue d Iéna rue de Lisbonne 52 rue de Lisbonne 5 boulevard Malesherbes 189 boulevard Malesherbes Immeuble Michelet-Galilée 50 avenue Montaigne Palais du Hanovre Quai Ouest Projet Monceau-Murat-Messine 1 rue Saint-Georges rue Saint-Georges 40ter avenue de Suffren Centre d affaires Tolbiac Masséna Les Villages Contents Key Figures 2 Message from the Chairman 4 Office Buildings 6 Shopping Centres 10 Convention-Exhibition Centres 14 Corporate Governance 18 Sustainable Development 20 Property Portfolio 22 Management s Discussion and Analysis 26 Consolidated Financial Statements 45 Legal Information 79 Report of the Chairman of the Board of Directors 90 Stock Market Performance and Shareholding Structure 101

3 Profile Unibail is a leading French commercial property investment company Owner of a property portfolio valued at 7.5 billion, Unibail is a commercial property investment company proactive in three major business lines: offices, shopping centres and convention and exhibition centres. Unibail is a leader in France in each of these sectors. A clear focus The Group decided to focus on high-quality commercial properties with a leading competitive position in their respective markets, in terms of size, technological performance, location or reputation. A value creation approach For each business line, Unibail aims at maximising shareholder value and return on investment through creative acquisitions, proactive management, a selective disposal policy and a high level of expertise in managing major development or refurbishment projects. An independent group Unibail has the largest free float of all the listed property stocks in continental Europe. Part of the SBF 120 and Euronext 100, Unibail had a 3.31 billion market capitalisation at year-end The company is rated A- by Standard & Poor s. The French original version of this report has been registered with the AMF* on March 9, 2004, pursuant to the rule n It can only be used to support a financial transaction if it is accompanied by a specific document also registered by the AMF. * L Autorité des Marchés Financiers (The French Control Authorities for Stock Market). 01

4 Rental income ( m) Property portfolio value in replacement value ( m) Office properties Shopping centres Convention-exhibition centres 6,375 3,794 1, ,550 7,513 7,327 4,642 2, ,511 2, ,272 2, Pre-tax recurring cash flow and net dividend, per share * ( ) Fully diluted triple net liquidation NAV per share ( ) Recurring cash flow per share Net dividend per share* * exluding tax credit (chart page 3)

5 Key figures 2003: another year of value creation The growth in triple net liquidation Net Asset Value per share, plus the annual dividend distributed in June 2003 (including the tax credit), reflects the value created by the Company, i.e. in 2003, 16.3% for institutional shareholders and 16.8% for individual shareholders. The Total Shareholder Return (TSR) indicates the value creation derived from both the changes in the share price and the dividend (see the last page of this report). In 2003, the TSR of Unibail s shares amounted to 11.6%. Consolidated key figures ( million) Portfolio valuation as at 31 December 6,375 7,327 7,550 7,513 New investments Disposals Shareholders equity (before appropriation) 1,486 1,411 1,496 3,297 * Triple net liquidation Net Asset Value, Group share * 2,851 2,984 3,304 3,580 Gross rental income Office buildings Shopping centres Convention-exhibition centres EBITDA Pre-tax recurring cash flow, Group share After-tax recurring cash flow, Group share Net profit, Group share Net profit Total distribution ** Number of shares at year-end *** 46,563,123 45,193,193 46,552,001 44,007,263 Average number of shares 45,081,345 45,877,069 46,512,882 45,633,386 Number of shares, fully diluted 49,469,079 48,113,803 49,189,508 46,565,586 Key figures per share ( ) Earnings per share - EPS Pre-tax recurring cash flow per share After-tax recurring cash flow per share Fully diluted triple net liquidation NAV per share Net dividend per share ** Tax credit (for institutional/for individual shareholders) 0.29/ / /0.47 /0.19 ** * Effect of the revaluation of consolidated balance sheet, see page 27. ** Distribution of dividend subject to Shareholders Meeting approval in April 2004 (based on the number of shares as at December 31, 2003). *** Excluding treasury shares

6 The Executive Committee From right to left: Léon Bressler : Chaiman & CEO Guillaume Poitrinal : Managing Director Jean-Marie Tritant : General Manager of the Office Division Catherine Pourre : Executive Vice-President Michel Dessolain : General Manager of the Shopping Centre Division Renaud Hamaide : General Manager of the Convention-Exhibition Division

7 Message from the Chairman 2003 was the first year of the new tax regime for listed property investment companies ( SIIC ). Under these new conditions, which benefit both the company and its shareholders, Unibail pursued and stepped up its value-creation strategy by focusing on high value-added transactions, improving the long-term yield on its major property assets, and divesting of its mature assets. The Group achieved strong results, notably a 14.4% increase in pre-tax recurring cash flow per share, driven by a robust performance in all three business divisions: office buildings, shopping centres and conventionexhibition centres. Backed by its major development projects and sound balance sheet, Unibail is well-placed to continue creating value over the medium and long term. For 2004, the Group has set a growth target of 5 to 10% for its pre-tax recurring cash flow per share. The provisions of the new SIIC tax regime have also paved the way for a new dividend policy. In addition to the sharp rise in the dividend for the 2003 financial year (i.e. a net dividend of 3.50 payable on June 15, 2004), Unibail aims at ensuring that its shareholders benefit from a substantial and steadily rising income over the long term. From now on, the dividend will be paid on a quarterly basis, on the 15th of the first month of each quarter. For the 2004 financial year, the first interim dividend will be paid on October 15, 2004, followed by the second on January 15, 2005, and the third on April 15, The balance of the dividend will be paid on July 15, Each interim dividend will amount to at least one quarter of the full dividend paid this year in respect of the 2003 financial year. The Group s high yield dividend combined with a regular and steady distribution, and strong growth outlook and business prospects, should encourage a growing number of individual shareholders to invest in Unibail shares. They will be more than welcome. Léon Bressler Chairman & CEO 04-05

8 Cœur Défense La Défense Levallois-Perret Neuilly 17 e 8 e 9 e 2 e 16 e Paris 1 e 11 e Boulogne- Billancourt 15 e 14 e Issy-les- Moulineaux 13 e Office Portfolio Offices under construction/renovation

9 Office Buildings Mixed market performance Office rents in the Paris region decreased in 2003, continuing a gradual downward adjustment that started in However, the number of transactions increased -with take-up rising by 10.4% to 1,708,000 m 2 (1) - while vacancy rate remained contained (6.4% in the Paris region) and the launching of office development projects decreased. These are all positive factors that point towards renewed balance in the market. The Paris market, underpinned by the remarkable diversity of its economy and a tightly controlled real estate supply is more resilient to an economic downturn than those of other European capitals. Rental values are less volatile in Paris, and the market shows greater recovery potential, which naturally makes it attractive among international investors. Transaction levels remained very high in 2003, with 9.5bn invested. more and more differentiated Demand focused on large, new buildings. These buildings are particularly attractive to tenants, since they allow substantial savings in terms of cost per workstation. They also enhance efficiency, since they offer a great deal of flexibility in organising space. In terms of location, the Paris CBD and West Paris (including La Défense) remain the favoured location for head offices and decision-making centres, particularly among banks, government departments and law firms. The appeal of the Paris CBD and La Defense is reflected in their vacancy rate, which remained low at 5.5% and 6.8 % respectively at year-end 2003, compared to 15.8% on the Northern outskirts and 13.2% on the Eastern outskirts. Unibail: a highly selective positioning in the office sector The most sought-after locations In 2003, Unibail continued its effort to focus on the most central districts. In value terms, 96% of Unibail s office portfolio is located in the Paris CBD and West Paris (between La Bourse and La Défense). There remains a nearly structural under-supply of modern office space in the Paris CBD, which retains its key position as a location for large companies, banks and government departments in France, and will continue to do so. 1. Data: Jones Lang Lasalle More than ever, large companies regard the office buildings that they occupy as a working tool. A well-designed building in a central location gives a boost to efficiency and offers attractive cost savings. In this context, Unibail s office buildings are particularly highly appreciated. Jean-Marie Tritant General Manager of the Office Division 06-07

10 Quai Ouest the market background was tough. Unibail s current office development programmes will be completed between late 2004 and early 2006, during a period when the supply from the various market players is limited and when the economy starts showing first signs of recovery. Top-quality large buildings Unibail s portfolio consists mainly of modern and large offices. In value terms and at year-end 2003, 89% of Unibail s office portfolio consisted of buildings of more than 10,000 m 2 and 97% of the portfolio of more than 5,000 m 2 units, a segment that accounted for more than 44% of take-up in Large offices allow major companies to address their constant need for efficiency in their use of property, particularly in the services sector. This trend is likely to remain sustainable, since many large French companies are still using inefficient buildings, with multiple locations consisting of small or medium-sized units in Haussmann-style buildings. Unibail s market position allows the Company to deal with prime quality tenants, such as Axa, Société Générale, Crédit Lyonnais, CCF-HSBC, BNP Paribas, Cartier, Péchiney, Total, Ciments Français, Air Liquide, LD Com and Cegetel. It is worth noting, however, that none of these tenants accounted for more than 5% of the rents billed by Unibail in A very effective positioning in 2003 Once again, Unibail s positioning allowed the Company to cope well with the tougher market environment in The company let or re-let almost 36,000 m 2 of office space, which equates to almost 5% of its portfolio. These lettings improved Unibail s tenant profile still further, since they involved major multinational manufacturing and consultancy firms. Leases were long-term commitments of 6-9 years, ensuring a high level of visibility in Unibail s future rental revenues. This letting activity allowed Unibail to maintain a low vacancy rate of 5.6% in its Office Division at year-end 2003, compared to 6.4% for the Paris region as a whole. Active and highly selective investment policy First deliveries to take place in a more favourable environment Unibail has a counter-cyclical development policy. The Company did not deliver any new office buildings in 2003, at a time when Tour Ariane

11 Continued enhancement of the portfolio In 2004, the renovation of Tour Ariane, which was initiated in 2001, will continue, with the completion of 17,811 m 2 of fully-renovated office space. Unibail will also start full refurbishments of two other buildings: (i) 136 avenue Charles de Gaulle (10,165 m 2 ) in Neuilly, which should be delivered in the second-half of 2004 and (ii) the office space in the Cnit at La Défense. Furthermore, Unibail scheduled also a light renovation of the 50 avenue Montaigne (11,076 m 2 ) building in Paris 8, which should be ready for let in the second half of These works will optimise the value of these exceptional buildings and will allow a substantial rise in the rents charged in these buildings. Determined on-going policy of selling mature assets 325 m of office assets sold in 2003 The investment market was very buoyant for the third consecutive year in Against this background, Unibail continued its policy of selling mature office buildings. These assets offer less rent growth potential than the rest of the portfolio. Therefore, selling them enhances the portfolio s average rent growth profile, and releases funds that can be used for new investments with major value creation potential. The prime quality of the Paris office market is clearly demonstrated by the large range of investors for these buildings, including German funds, Middle East investors and French pension funds. A major development project in Paris 8: Monceau-Murat-Messine Monceau-Murat-Messine is the largest office development project in the Central Business District of Paris, and the only one within its delivery timeframe; it consists of 62,530 m 2 of office space. The development will be completed in two phases. The first, comprising 18,030 m 2 of office space will be completed in late 2004-early 2005, and the second, concerning a major 44,500 m 2 business centre, in early These offices will offer a unique range of services and technologies, ensuring the optimal use of space for companies, and optimal comfort for users. The development features 4,000 m 2 floor plates capable of accommodating one workstation every 12 m 2, a modern design within a garden setting, 24-hour security Unibail s office disposals amounted to 325m, equal to 7.5% of the office portfolio s value at year-end This is a record for the Office Division. Divested assets included Tour Europe, which was acquired in several lots in 1999 and 2000, renovated in 2002, let to the OECD (76% of available space) and sold to a German fund. All the assets sold in 2003 reached prices above the latest appraisal value included in the NAV calculation

12 Les Docks de Rouen Les Quatre Temps Vélizy 2 Ulis 2 Cité Europe Marques Avenue Euralille Rosny 2 Chelles 2 Le Forum des Halles Le Carrousel du Louvre Gaîté-Montparnasse Carré Sénart Les Passages de l Etoile Place d Arc La Toison d Or Lyon Confluence Saint-Martial Saint-Genis Îlôt Bonnac CMK-Mériadeck Marques Avenue BAB 2 Shopping centres Shopping centre project developments Labège 2 Bonneveine Nice Etoile

13 Shopping Centres Shopping centres are attracting more and more consumers At a time of declining consumer confidence, the French population remained eager to consume in 2003, against all expectations. There is an increase in impulse buying, spurred by products offering shoppers pleasure, new experiences and self-fulfilment. In this context, large shopping centres remain one of the favourite places of almost 80% of French people, since they provide a wide, modern, varied and constantly changing offer. This trend is becoming stronger every year. As a result, sales generated by Unibail s tenants in its shopping centres rose by 2.7% (1) in 2003, whereas French consumer spending increased by only 1.6% (2). Demand from major national and 1. Consolidated figures. 2. INSEE provisional forecast (December 2003). international retail chains remained strong for the largest shopping centres, in prime locations. Market positioning focused on large and very large shopping centres in France Exceptional centres that remain highly successful With more than 525,000 m 2 of retail space in 22 regional or super-regional centres, Unibail has confirmed its leading position in the large shopping centre segment. Unibail s centres became even more popular in 2003, with almost 225 million visitors compared to 210 million in This resulted from Unibail s dynamic management, particularly in terms of tenant-mix renewals, service facilities and marketing activities, along with an active events policy. The success of a shopping centre hinges on creating a preferential relationship with customers and expressing a strong personality that is shared by the retailers. Beyond the basic qualities of the centres, Unibail s staff have this particularly needed expertise to guarantee the success of its centres, now and in the future. Michel Dessolain General Manager of the Shopping Centre Division A shopping environment and services that are popular with customers In each of its centres, Unibail develops its Welcome Attitude concept for the well-being of shoppers. This approach involves good design of the buildings (sense of space, wide walkways etc.) and a broad range of customer services (baby facilities, high-quality rest rooms and pleasant rest areas etc.), all intended to make shoppers feel more comfortable. Enhancing the appeal of shopping centres through events In addition, Unibail organises events to create closer relations between consumers and its shopping centres, to enhance its centres appeal and to boost customer satisfaction and loyalty. The main events organised by Unibail s specialist subsidiary U2M in 2003 were: Matisse-Picasso workshops for children, developed through an exclusive partnership with the Centre Georges Pompidou of Paris; Carré Sénart s first anniversary event. Horses were the main theme, and the event involved partnerships with PMU (the French tote) and Le Cheval Français association. It also led to the creation of the Carré Sénart prize; 10-11

14 Carré Sénart P tit Ours Rouge ( Little red Bear ) events to raise funds for underprivileged children in partnership with the French Red Cross, taking place during the Christmas period in all Unibail s shopping centres; Soyez les Premiers ( Be the first ), an event allowing shoppers exclusive early access to the summer sales. The event was such a hit that it was repeated for the winter sales. Unibail s prime centres attract the most successful retail chains Unibail, with an active leasing and marketing policy, is always on the look-out to welcome successful new retail concepts. In 2003, this enabled Unibail centres to attract popular chains that meet new consumer needs, such as H&M in Chelles 2, Zara in Rosny 2, Loisirs et Créations in Carrousel du Louvre, Maisons du Monde in Nice-Etoile... These retail chains decided to open stores in Unibail s shopping centres because these centres generate large and growing visitor flows. For example, Forum des Halles attracts more than 40 million visitors every year. The constant introduction of new concepts also gives a strong boost to the appeal and image of Unibail s shopping centres. Shopping centres for the future Consumers attitude towards shopping centres is changing. They want places to brighten up their everyday lives while considering their personal fulfilment. To meet these requirements, shopping centres must be able to offer visitors and shoppers genuinely novel experiences and excitement. They must: create new environments that combine pleasure and shopping activity; have strong brand images that convey clear values and messages; have high-quality architectural design that respects both the site and the environment; provide a large space that contains a wide range of human-scale stores, including outlets belonging to the major retail chains and leading brands; an eclectic, surprising and constantly changing atmosphere, created through events. Lyon Confluence

15 In the next few years: almost 40% of additional space between now and the year 2008 Unibail s Shopping Centre Division generates robust organic growth; the company has set a target of increasing average net rents on a like-for-like basis by 4% above the inflation every year. In addition, it has substantial expansion potential which grew further in 2003, through renovation, extension and development projects. Between now and the year 2008, Unibail s total retail space will increase by almost 40%. 52,500 m 2 of expansion projects planned To boost the number of shoppers in its centres and to enhance their appeal within their catchment areas, Unibail has a dynamic policy of renovating, restructuring and expansion of its existing shopping centres. The main centres undergoing renovation and expansion works are Chelles 2, Les Quatre Temps at La Défense (15,000 m 2 extension) and Forum des Halles. The restructuring and renovation of Forum des Halles, the largest shopping centre inside Paris, will form part of the Paris city council s major redevelopment of Les Halles district. 134,000 m 2 of new shopping centres under development After the successful opening of Carré Sénart in August 2002 and Marques Avenue in December 2003, and in addition to the on-going projects, Les Passages de l Etoile in Strasbourg and Îlot Bonnac in Bordeaux, Unibail has been awarded in 2003 two new major developments in Lyons and Rouen. These projects are ambitious and innovative in terms of commercial offering and architecture. They will cater for all new consumer trends, developing a fun shopping approach combining retail outlets and leisure activities. The new centres will be built mainly in city centres, in high-quality locations as an integral part of broad urban redevelopment projects. Lyon Confluence Located in the heart of Lyons, Lyon Confluence will be a key development project for the city. The architect is Jean-Paul Viguier, who has already designed the Cœur Défense building and Carré Sénart shopping centre for Unibail. Lyon Confluence is a new 60,000 m 2 urban leisure and retail centre, set within a 150-hectare plot that includes a 38-hectare park, a dock and a museum. The centre will include shops, restaurants and services, along with urban leisure facilities including a 16-screen multiplex cinema, a bowling alley, a roller dome and a climbing wall. Les Docks de Rouen This 40,000 m 2 project, located on the banks of the river Seine, is an important part of the development of West Rouen, and will include shops and leisure facilities among which a 14-screen multiplex cinema. The design, by Jean-Michel Wilmotte, involves the redevelopment of two existing Les Docks de Rouen docks of major architectural interest, and the construction of a contemporary dock to create a high-quality development that combines tradition with modernity. New developments beginning in 2003 In the future, Unibail intends to develop retail parks located close to its existing centres, in order to increase their appeal within their catchment areas. As part of this strategy, Unibail opened a new-generation factory outlet Marques Avenue in December Designed by architect Jean-Michel Wilmotte and built in partnership with Concept et Distribution, the centre enhances the appeal of the Cité Europe regional shopping centre located opposite. The site, which benefits from the excellent infrastructure of the French Eurotunnel terminal, has become a major consumer tourism attraction for French visitors, but also those coming from the UK and Belgium. Marques Avenue has been a big hit since it was opened

16 Hall 5 Espace Grande Arche A1 La Défense Cnit Conférences Cœur Défense A1 Espace Champerret Carrousel du Louvre A3 A13 Paris Hôtel Méridien Montparnasse Palais des Sports Paris Expo Porte de Versailles A6

17 Convention-Exhibition Centres Tough market conditions in was marked by a unique combination of adverse circumstances affecting the convention-exhibition sector, such as the economic slowdown, tension resulting from the September 11, 2001 terrorist attacks, the war in Iraq and SARS. However, the conventionexhibition sector held out well Against this background, the convention-exhibition sector showed a general resilience. Conventions and exhibitions are a favourite medium for companies to communicate, since they allow direct contact with existing customers and prospects, at a lower cost than traditional media. Exhibitor numbers rose by 4% in France in 2003, and visitor numbers also grew, particularly for large public exhibitions. The increase in the number of visitors to large public exhibitions was mainly due to rising demand for local and low-cost leisure activities. Unibail strengthened its positioning in the convention-exhibition sector in 2003 Low volatility due to a stable supply of suitable venues In addition to the sector s general resilience, Unibail -through its Paris Expo subsidiary- operates in a very low-volatility segment of the market. Listening carefully to the clients expectations, whether they are event organisers, exhibitors or visitors, is the guidelines to all our actions. The constant improvement of the quality of our centres and services constitutes the core of our strategic vision. Renaud Hamaide General Manager of the Convention-Exhibition Division Paris Expo owns and manages convention and exhibition centres and it leases these spaces out to event organisers, and provides additional services to organisers, exhibitors or visitors. It is noteworthy that the venues capable of hosting large-scaled events are limited in number and almost impossible to duplicate, due to the lack of available, adequately situated land, and high construction costs. Unique centres that win the loyalty of organisers In addition, Unibail s convention and exhibition centres are the largest ones in Paris. They are also the most wellknown with a very easy access, since they are located at the heart of a vast transportation network (metro, suburban trains, buses etc.). Unibail owns seven centres with a complementary positioning, i.e. Parc des Expositions de la Porte de Versailles, Palais des Sports, Cnit, Carrousel du Louvre, Espace Champerret, Cœur Défense Conference Centre and Espace Grande Arche

18 This unique market position enables Paris Expo to enjoy a large amount of recurrent business. For example, the Foire de Paris has been taking place at the Porte de Versailles centre every year without interruption since Highly appealing venues for new exhibitions and corporate events In 2003, Paris Expo increased its presence in the convention-exhibition sector. It strengthened its position in each of the three sub-sectors (exhibitions, corporate events and conventions) by harnessing commercial synergies among Hall 5 After the renovation of Hall 1 (mainly completed in 1997) and the reconstruction of Hall 4 in 1998, the modernisation of the Porte de Versailles Exhibition Centre continued last year with the reconstruction of Hall 5. This new hall has a total exhibition space of 18,154 m 2, i.e. 2,000 m 2 larger than the previous hall. The rebuilt hall takes into account the needs of organisers (absence of column, air conditioning etc.); it is highly flexible to the benefit of both exhibitors and organisers, for shows, as well as exhibitions and corporate events. It allows optimal use of space and offers high comfort in a well-being environment. As well as its technical quality, aesthetics played a key role in the building s conception, designed by the architects Valode & Pistre. The project illustrates further the skills of Unibail s staff, who completed the project in a record 16-months timeframe, on time and on budget. The Mayor of Paris presided over the grand opening of Hall 5 in early November 2003 and the first exhibition was Batimat, France s largest professional exhibition, which was a major success.

19 its various sites, and by constantly improving its services and customer facilities. In the exhibitions segment, Paris Expo hosted 24 of the 28 newly-created exhibitions in the Paris region in In terms of visitor numbers, 2003 was a good year, particularly for large public exhibitions such as the Salon de l Agriculture. In the corporate event and convention segments, Paris Expo increased the number of events it hosted by 11% in 2003, while the market remained flat. Unibail carried out targeted investments in 2003, strengthening its position A new hall at Porte de Versailles In November 2003, Hall 5 at the Porte de Versailles site was completed. This new 18,000 m 2 hall gives back to the Porte de Versailles Exhibition Centre the capacity it had in the past. Hall 5 availability will increase the complex s capacity by 8% in Completion of Espace Grande Arche Espace Grande Arche, located at the foot of the Grande Arche at La Défense, was also completed in This 9,500 m 2 space hosts corporate events, conventions and exhibitions at La Défense, and complements Cnit and the Cœur Défense Conference Centre. New catering concepts at Porte de Versailles In addition to these investments, Paris Expo intents to enhance the appeal of its venues by focusing on the well being of its visitors. Among these efforts, the company developed new catering concepts at Porte de Versailles as part of a new contract with the Elior Group. The last remaining non-core activities were outsourced in 2003 Unibail finalised the reorganisation of its business portfolio in Proximages, which specialises in audio and video services, was sold, and Paris Expo is now entirely focused on the rental of convention and exhibition space. Two hotels complement the portfolio Beyond Paris Expo, which operates seven convention-exhibition centres, Unibail also owns the buildings which host two renowned hotels, i.e. the Méridien-Montparnasse in Paris 14 and the Hilton at La Défense, located in the Cnit centre. As regards the latter, the 18-year operational lease agreement with Hilton came into effect in May 2003 after the completion of the renovation works on the hotel. A large order book should bring even better performance in 2004 Paris Expo s sites should become even more appealing in Hall 5 at Porte de Versailles and the Espace Grande Arche will be in operation all year round, and the Company will step up efforts to further improve service facilities for visitors and exhibitors. As at December 31, 2003, conventionexhibition orders already signed or to be signed for 2004 already equalled 93% of 2003 turnover. In addition, the Division intends to broaden the range of services offered to exhibitors. Further out, the appeal of the Porte de Versailles site should be enhanced by the construction of two tram lines surrounding the site, i.e. the Maréchaux Sud tram line and the completion of T2 tram line linking Porte de Versailles to La Défense. Le Cnit 16-17

20 Corporate Governance Unibail adopted Corporate Governance guidelines in 1995, and has updated its rules regularly in line with recommendations made in the Viénot reports of July 1995 and July 1999 and the Bouton report of September Corporate Governance has long been a genuine priority for Unibail. The company complies with the best practices of the Paris Market Place and often exceeds recommendations. Unibail pays attention to the latest researches published in France and abroad, such as the recent proposals made by the French Law Commission s information group concerning the reform of Company Law in its report dated December 2, 2003 to the French Parliament. Many of these proposals have already been adopted by Unibail, such as devising a set of internal by-laws for the Board of Directors, having fewer than fourteen directors and embracing transparency as regards the remuneration of the Company s responsible officers. In 2003, Unibail carried out various initiatives to enhance its Corporate Governance system and practices. The company signed the United Nations Global Compact, which promotes nine governance principles in the fields of human rights, labour conditions and environmental practices. Unibail made a commitment to achieve a sustained improvement in its governance practices in these areas. To emphasise the importance that Unibail attaches to the respect of values and rules, the Company adopted a Code of Ethics, which formalises the values and conduct to be applied by all the staff in their relationships with fellow staff, with the Group, and with professional contacts they have outside the Group. Board of Directors Members Unibail s Board of Directors currently comprises ten members. The Board convened seven times in Procedures and responsibilities (1) The Board of Directors complies with a set of internal by-laws defining its internal procedures and, above all, its powers with respect to: defining the Group s strategy; approving acquisitions, disposals or investments within the frame of the Group s strategy in excess of 300 million; approving acquisitions or investments outside the frame of the Group s strategy in excess of 25 million. The Board of Directors is kept regularly informed of the Group s financial situation, cash position, business activities in each division, market conditions and outlook, together with any disputes that could potentially impact its financial position or business activities. 1. For comprehensive details, see the Chairman s report on the preparation and organisation of the Board s works, drawn up in accordance with the French Financial Security Act.

21 In accordance with the internal by-laws: the first appraisal of the Board s procedures took place in November and December It was carried out by the Chairman of the Nominations and Remuneration Committee on the basis of a 22-item questionnaire, which was completed by all directors except the Chairman. The answers were treated anonymously, and were analysed and summarised completely independently from Unibail s management. The overall conclusion was that Unibail s directors believe that the Board is operating very well, and that important issues are prepared and debated adequately. Conclusions and proposed improvements were presented to the Board on December 18, 2003; the Board has adopted the criteria for independent directors set out in the Bouton report, and confirms on this basis that over one half of its Board members are independent. Of the nine non-executive directors, only Jean-Claude Jolain fails to meet the report s criteria, since he has been a director for more than 12 years. Since September 1995, two specialist committees have been assisting the Board of Directors, the Audit Committee and the Nominations and Remuneration Committee. Specialist committees The Audit Committee consists of three independent directors, and is chaired by Mr Bruno Boutrouille. Besides discussing recurring issues (e.g. interim and full-year accounts, internal auditing, asset and liability risk management and Net Asset Value (NAV)), the Committee also reviewed the amount of fees paid by the Group to the Statutory Auditors and their affiliated companies, in accordance with the Bouton report s recommendations. In addition to its contact with the senior management, the Audit Committee is free to interview accounting, finance and audit managers, without the presence of the top management, and to meet regularly with the Statutory Auditors. The Committee also has access to the work of the independent valuers in charge of assessing the Group s NAV figure. The Audit Committee was kept informed of the progress of international accounting standards, which will be in applied as from 2005, and of the likely effect on the presentation of Unibail s financial statements. The Committee produces a detailed report on each meeting. The Audit Committee also receives interim activity reports from the audit and risk management division, which makes the reports on internal audit assignments available to Committee members. The Committee was also provided with the report from the Chairman of the Board of Directors as required by the French Financial Security Act relating to Corporate Governance and Internal Control. The Committee adheres to a set of internal by-laws defining its organisation, responsibilities and procedures. The Nominations and Remuneration Committee consists of three independent directors, and is chaired by Mr Roger Papaz. In 2003, the Committee focused mainly on (i) reviewing the renewal of certain directors terms of office for three years, (ii) setting the fixed and variable remuneration paid to the Chairman and CEO and the Managing Director, (iii) introducing two new stock-option plans and identifying the beneficiaries of these plans, and (iv) reviewing the Group s general wage policy. For the first time in 2003, in order to create a stronger link between the exercise of stock-options and Unibail s performance, some of the options granted to the members of Unibail s Executive Board were awarded under a specific plan. Under this plan, options can only be exercised if Unibail s Total Shareholder Return outperforms the EPRA Euro Zone Total Return index of European property companies during the reference period. Stock-option grants are detailed in the Management's Discussion and Analysis section. It should be noted that stock-option strike prices have risen constantly since the first plan was introduced in In addition, no discount has been offered on these stock-options for several years, and there is no automatic granting of options either in terms of amount or frequency. Stock-options are always allocated during the same period, mainly to the people who have performed outstandingly, taken responsibility or played a key role within the company. Like the Audit Committee, the Nominations and Remuneration Committee adheres to a set of internal by-laws defining its organisation, responsibilities and procedures. Accordingly, on 23 April 2003, the Committee discussed the independence of Unibail s directors with respect to the definition and the criteria as specified in the Bouton report. The Committee is responsible for assessing the performance of the Chairman and CEO, and discussing the future of Unibail s management structures

22 Sustainable Development Unibail signed the United Nations Global Compact With a long-term approach, Unibail strongly believes that sustainable development objectives, which have been integrated for a long time in the Group's asset enhancement policy, should be reinforced in the future. The pursuit of these objectives is expected by the tenants of Unibail s office buildings, the shoppers in its shopping centres and the visitors of its convention-exhibition spaces. This sound social trend is due to the increasing perception of the depletion of the world s natural resources, and of the vital need for economic agents to ensure environmental protection, economic efficiency and social equity, which constitute the three pillars of sustainable development. As far as the property development is concerned, making sure that new and renovated buildings comply with these principles is simply a matter of good management and sound anticipation. In that context, Unibail signed the United Nations Global Compact in The Compact aims at promoting nine principles of good governance in the fields of human rights, labour conditions and environmental practices. Environmental Quality Charter for construction-renovation projects In practical terms, Unibail s commitment to sustainable development in the construction field means striving to create more efficient buildings that offer a better quality of life and use as few natural resources as possible. Unibail s Environmental Quality Charter, drawn up in 2002, is intended to provide both asset managers and project managers with guidelines. The Charter is now attached to all contracts signed with construction companies and must therefore be endorsed by all the companies selected by Unibail to build or restructure buildings. The Charter s main objectives are as follows: systematic analysis of the interaction between buildings and their immediate surroundings (noise or odour pollution, management of incoming and outgoing trucks etc.); careful selection of construction processes and products, such as limiting the use of fibre-based fireproofing, using heavy metal-free paints and checking the provenance of exotic woods; efforts to limit site disturbances (dust, traffic, waste etc.) as much as possible; selection of technologies and equipment (air conditioning, lighting etc.) in order to achieve the optimum energy efficiency, particularly through the consistent use of a centralised technical management system; analysis of waste storage facilities in order to optimise recycling process; special attention to the thermal, acoustic and visual comfort of occupants or visitors, including making optimal use of natural light and limiting the noise of technical installations within the premises; building designs that optimise sanitary conditions, particularly through high-quality filtering of incoming air, maximally decentralised hot water production and equipment that prevents scaling in pipework. In accordance with this Charter, Unibail has taken the opportunity of its renovation and construction projects undertaken in 2003 to completely remove all asbestos from buildings as it did in previous years (renovation of 50 avenue Montaigne, replacement of lifts at 2-8 rue Ancelle) and to remove any air cooling vents that could potentially have facilitated the spread of legionella (168 avenue Charles de Gaulle). A policy of daily control over environmental impacts Every year, the teams in charge of the technical management of buildings carry out scheduled works to optimise the performance of equipment as well as to keep constant control over environmental impacts. In 2003, the Company started its plan to remove Pyralene transformers, ahead of the regulatory deadline of This will continue in the coming years.

23 In partnership with ADEME(1), Unibail has carried out energy conservation studies and works in Forum des Halles. This effort has reduced overall energy bills by 17% over three years, reducing energy use by 3.6GWh, despite a sharp increase in number of visitors. Unibail started a similar initiative at Cœur Défense in Since early 2003, for all its office buildings in La Défense, Unibail implemented a shared waste collecting process which led to 1,100 tons of waste baskets paper being reused without any effort on the part of occupants and a reduction of more than 15% of waste removal and processing costs. Similarly, more than 3,000 tons of cardboard were recycled from Unibail s shopping centres in In the same way, as part of the ongoing implementation of systems to monitor and control environmental impacts which has taken place for several years, notably Health and Safety Manuals, in 2003 Unibail carried out the analysis of more than 1,500 water samples, to ensure that the water was drinkable and free from legionella, and air samples to check for airborne infectious diseases. Furthermore, technical reports on asbestos in high-rise buildings and buildings accessed by the public (Assembly property classification), required by the decree of September 13, 2001, were completed by December 31, Economic and social development Unibail s shopping centres and convention-exhibition sites contribute to strengthen social environment as well as local economic development The development of shopping centres is intimately linked with the vast programme of territorial development that began in the late 1960s in France. For example, the main development plan for the Paris region in 1965 included the construction of approximately ten major shopping centres around the capital. These centres contributed to the construction of new towns (Villes Nouvelles). The latest of these centres Carré Sénart, opened by Unibail in August 2002 has benefited from Unibail s past experience and from new approaches to entertainment and leisure activities adopted by today s shopping centres. Regardless of their location, these centres play a major role in stimulating regional socio-economic development, such as Bab 2 in Anglet (near Biarritz), La Toison d'or in Dijon, Cité Europe in Coquelles (near Calais) and Labège 2 near Toulouse. Other centres, like Les Quatre Temps at La Défense, accompany the development of business districts. All these centres clearly play a crucial role to the benefit of their surroundings. Unibail is also concerned in social issues through the enhancement of its human resources policy This policy, through various initiatives, aimed mainly at developing the skills of Unibail s staff, enhancing their career opportunities within the Group and creating an incentive-based remuneration system. In 2003, Unibail strengthened its training programme and created its own training school. Details of these programmes can be found in the Management's Discussion and Analysis section. Carré Sénart With Carré Sénart, Unibail was the first company in the shopping centre sector in France to introduce a co-generation power supply system. This system generates both heat and electricity using a mini-turbine powered by natural gas, which is the cleanest fossil fuel. The unit does not damage the environment, since producing electricity locally means that no transport network is required. It produces as much noise as a boiler, i.e. very little, and its maintenance does not result in any environmental discharge.the system s high yield and the use of co-generation during peak periods for electricity prices, result in a substantial reduction in energy bills. At Carré Sénart, the heat produced by the co-generation unit is used to heat the mall, while the electricity is used in lighting, ventilation, lifts, escalators and the mall s rooftops. Apart from its high performance, with an overall yield of 80%, the system consumes less energy, resulting in a saving of around 37% in comparison with a traditional system. Although it was already quiet, Carré Sénart s co-generation unit was installed within a soundproofed shell; air inlets and outlets have been treated to eliminate pollution. In addition, all Unibail shopping centres have already carried out selective waste sorting for several years. 1. France s Environmental and Energy Conservation Agency

24 A portfolio of major property Le Forum des Halles Cité du Retiro assets Atrium of Cnit

25 The portfolio in floor space The portfolio in value Property Portfolio A property portfolio valued at 7.5 billion A total area of 1.7 million m 2 362,737 m 2 526,834 m 2 802,042 m m 2,679 m 4,272 m Convention and exhibition centres Shopping centres Office buildings Property portfolio breakdown by value and by floor space per sector Figures according to the scope of consolidation, at year-end 2003 OFFICE SHOPPING CONVENTION- In value ( m) BUILDINGS CENTRES ** EXHIBITION CENTRES TOTAL TOTAL IN % Paris and CBD * of West Paris outskirts 4,255 1, ,002 80% % in value 100% 44% 100% of which CBD of Paris 1,218 of which Paris-La Défense 2,283 of which Neuilly-Levallois-Boulogne-Issy 577 Other assets in the Paris Region % % in value 22% French Provinces % % in value 34% Total 4,272 2, ,513 % of the property portfolio in value 57% 36% 7% 100% In floor space (m 2 ) Paris and CBD* of West Paris outskirts 778, , ,737 1,355,172 80% % in floor space 97% 41% 100% of which CBD of Paris 194,669 of which Paris-La Défense 396,139 of which Neuilly-Levallois-Boulogne-Issy 124,198 Other assets in the Paris Region 21, , ,300 8% % in floor space 3% 22% French Provinces 2, , ,141 12% % in floor space 37% Total 802, , ,737 1,691,613 % of the property portfolio in m 2 47% 31% 22% 100% * Central Business District. ** Except the shopping centre projects under construction: Strasbourg, Ilot Bonnac, Les Docks de Rouen and Lyon Confluence

26 Office Portfolio * as at December 31, 2003 Total floor space Acquisition Refurbishment (R) Total space Parking % of according Main Tenants date Construction (C) per asset (m 2 ) spaces consolidation to consolidation (m 2 ) (in terms of rental income) PARIS AND CBD OF PARIS WESTERN OUTSKIRTS Paris , rue Cambon 2001 R , % 16,900 Euronext 34-36, rue du Louvre 1976 R , % 3,788 BNP-Paribas Paris 2 Palais du Hanovre, Bd des Italiens 1999 (2) R , % 18,115 AXA 12, rue du Mail 1985 R , % 1,622 Socpresse (Le Figaro) Paris 8 23 bis-29, avenue 2001 R , % 62,500 Under refurbishment (Monceau-Messinede Messine-Monceau-Murat Murat Projet) Cité du Retiro 1999 (2) R , % 21,188 Cartier 50, avenue Montaigne 1995 R , % 13,218 Ex-tenant: Disney 5, boulevard Malesherbes 1999 R , % 8,444 Unibail s headquaters 31, rue du Colisée 1999 (1) R , % 6,200 VUP (Vivendi Universal Publishing) 44-46, rue de Lisbonne 1999 (2) R , % 3,906 H4 Valorisation and Sofilo (EDF Group) 27-29, rue de Bassano 1978 R , % 1,615 Chantrier et Associés 52, rue de Lisbonne 1999 (2) R , % 1,514 Moët Hennessy Paris , rue Saint-Georges 1991 R , % 7,655 Groupama, 1, rue Saint-Georges 1991 R , % 2,840 St Ingenierie, Compu-mark, Pierre Lang France Paris 16 7, place du Chancelier Adenauer 1999 (2) R , % 12,048 Péchiney 42, avenue d Iéna 1998 R , % 1,749 Sun Microsystems Paris , boulevard Malesherbes 1999 (2) C , % 6,528 Compass Group 70, boulevard de Courcelles 1999 (2) R , % 4,839 Otor Participations Sub-total Paris Central Business District 194,669 m 2 92 PARIS-LA DÉFENSE Cœur Défense 1998 C ,817 (3) 2, % 181,817 Crédit Lyonnais, Société Générale, AXA, CAP GEMINI, ING Bank, CCF HSBC Espace 21 (Les Villages) 1999 (1) C , % 57,400 Société Générale, Cegetel, Degussa, Fidal, Dalkia Tour Ariane 1999 (1) R , % 56,500 Crédit Lyonnais, Société Générale Cnit (offices) 1999 (2) C , % 46,012 CFPB, Essec, Immeuble Michelet-Galilée 1999 (1) C , % 33,405 Total 70-80, avenue Charles de Gaulle 1999 (2) C , % 21,005 Wyeth Lederle, CDC Ixis, Clariant Sub-total Paris-La Défense 396,139 m 2 92 NEUILLY-SUR-SEINE 2, rue Ancelle 1996 R , % 15,570 Gras Savoye 41, rue Ybry 1990 R , % 14,847 Ernst & Young 136, avenue Charles de Gaulle 1999 (1) R , % 11,977 Ernst & Young 168, avenue Charles de Gaulle 1984 R , % 7,506 BNP-Paribas 92 LEVALLOIS 125, avenue du Président Wilson 1992 C , % 6,881 Guerlain 35, rue d Alsace Courcellor 1976 C , % 3,264 Promodès 126, rue Jules Guesde 1988 C , % 2,791 Relais H 92 BOULOGNE 40-42, quai du Point du jour ( Quai Ouest ) 1996 R , % 15,883 LD COM 92 ISSY-LES-MOULINEAUX 34-38, rue Guynemer 1999 (2) C , % 45,479 Accor, Sybase, EMAP Sub-total Neuilly-Levallois-Boulogne-Issy 124,198 m 2 OTHER OFFICE BUILDINGS IN PARIS Paris 11 99, rue du Faubourg Saint-Antoine 1995 R , % 5,000 Monoprix Paris 13 Seine Rive Gauche Tolbiac-Masséna (4) 1989 C , % 27,366 BNP-Paribas Paris 14 Gaité-Montparnasse (offices) 1998 C ,570 2,227 (5) 100% 6,570 Le Point Paris offices (other) 1 asset (for 2.9 million euros) 568 Total offices in Paris and Paris western outskirts 754,510 m 2 OTHER PARIS PROPERTY ASSETS Paris 8 23, boulevard de Courcelles 1999 (2) R , % 12,000 Showroom of Renault Paris ter, avenue de Suffren 1999 (2) R , % 11,875 Showroom of Volkswagen Total assets in Paris and Paris western outskirts 778,385 m 2 OFFICE BUILDINGS IN THE PARIS REGION 78 St-Quentin-en-Yvelines Guyancourt, Chemin des Chênes 1986 R , % 8,250 Nortel Networks Other 5 assets (for 3.4 million euros) 13,226 Sub-total of office buildings in the Paris region 21,476 m 2 FRENCH PROVINCES (1 asset for 0.1 million euros) 2,181 m 2 TOTAL 802,042 m 2 * and related : shop units in an office building, light-industrial space, apartments. (1) Acquisition from the Vivendi Group. (2) Acquisition from Crossroads Property Investors. (3) The surface given includes the conference centre (3,330 m 2 ). (4) Jointly held property. (5) The Gaité Montparnasse private parking lot is shared between the offices, the Hôtel Méridien and the Shopping Arcade Gaité. 24