Unibail Rodamco Westfield : 2022 Half-year Results Financial Report

FINANCIAL REPORT - FIRST HALF 2022

Management Discussion & Analysis:

1.	Business review and H1-2022 results	p	3
2.	Investments and divestments	p	25
3.	Development projects as at June 30, 2022	p	27
4.	Property portfolio and Net Asset Value as at June 30, 2022	p	31
5.	Financial resources	p	51
6.	EPRA Performance measures	p 62
7.	EPRA and Adjusted Recurring Earnings per share	p 69

Other information:

1.	Group consolidated data	p	71
2.	Consolidated income statement by segment and region	p	74
3.	Glossary	p	75
Condensed consolidated interim financial statements as at June 30, 2022	p 78
Statutory auditors' review report on the 2022 half-yearly financial information	p 129
Update of the risk factors (Geopolitical impacts only)	p 130
Statement of the person responsible for the condensed consolidated interim financial	p 131
statements and the half-year financial report as at June 30, 2022, filed with the
French Financial Authorities (Autorité des Marchés Financiers "AMF")

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MANAGEMENT DISCUSSION & ANALYSIS1:
1.	Business review and H1-2022 results	p 3
2.	Investments and divestments	p 25
3.	Development projects as at June 30, 2022	p 27
4.	Property portfolio and Net Asset Value as at June 30, 2022	p 31
5.	Financial resources	p 51
6.	EPRA Performance measures	p 62
7.	EPRA and Adjusted Recurring Earnings per share	p 69

1 The Management Discussion & Analysis (MD&A) is based on the Financial statements prepared on a proportionate basis.

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1. BUSINESS REVIEW AND H1-2022 RESULTS

I. ACCOUNTING PRINCIPLES AND SCOPE OF CONSOLIDATION

Accounting principles

Unibail-Rodamco-Westfield's ("URW" or "the Group") consolidated financial statements as at June 30, 2022, were prepared in accordance with International Financial Reporting Standards ("IFRS") as applicable in the European Union as at that date.

The Group also prepares financial statements in a proportionate format, in which the joint-controlled entities are accounted for on a proportionate basis, instead of being accounted for using the equity method under IFRS. The business review and results are presented based on the financial statements on a proportionate basis, with no impact on the net results.

For rent relief granted to tenants in relation to the COVID-19 pandemic and where such relief qualifies as a lease modification because the tenant agrees concessions (e.g. extension of a lease term or higher Sales Based Rent ("SBR")), IFRS 16 applies. Under IFRS 16, the relief is treated as a lease incentive which is straight-lined over the expected term of the lease as a reduction of the Gross Rental Income ("GRI").

Rent relief signed or expected to be signed, granted without any counterpart from the tenants is considered as a reduction of the receivables and is charged to the income statement as a reduction of the GRI.

Certain amounts recorded in the consolidated financial statements reflect estimates and assumptions made by the management in the current context, including higher inflation, higher interest rates, uncertain geopolitical environment, the aftermath of the COVID-19 pandemic and difficulties in assessing their impacts and future prospects. In this context, management has taken into account these uncertainties on the basis of reliable information available at the date of the preparation of the consolidated financial statements, particularly with regards to the fair value of investment properties and financial instruments, the estimation of the provision for doubtful debtors, as well as the testing of goodwill and intangible assets.

Due to inherent uncertainties associated with estimates, the Group reviews those estimates based on regularly updated information. Actual results might eventually differ from estimates made at the date of the preparation of the consolidated financial statements. In particular, no further lockdowns or activity reduction due to energy shortage have been assumed, post June 2022.

94% of URW's property portfolio and intangible assets related to the Shopping Centres, Offices & Others, Convention & Exhibition and Services segments were valued by independent appraisers as at June 30, 2022.

Scope of consolidation

The principal changes in the scope of consolidation since December 31, 2021, are:

• The disposal of Solna Centrum in February 2022;
• The disposal of a 45% stake in Westfield Carré Sénart in February 2022, still fully consolidated;
• The disposal of 2 residential buildings at Westfield Hamburg in January and March 2022; and
• The disposal of the Promenade development parcel in March 2022.

Operational reporting

URW operates in 9 regions: France, the United States of America ("US"), Central Europe, Spain, the United Kingdom ("UK"), the Nordics, Austria, Germany and The Netherlands. These regions were operationally grouped in 5 main regions, i.e. Southern Europe (France, Spain, Italy), Northern Europe (Sweden, Denmark, The Netherlands), Central and Eastern Europe (Germany, Austria, Poland, Czech Republic, Slovakia), UK and US.

As Southern Europe (France) has substantial activities in all 3 business lines of the Group, this region is itself divided into 3 segments: Shopping Centres, Offices & Others and Convention & Exhibition ("C&E")2. The other regions operate almost exclusively in the Shopping Centres segment. In the US, the Group also operates an airport terminal commercial management business.

2 C&E includes the Les Boutiques du Palais retail asset.

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1. POST COVID-19RECOVERY

This section provides a brief overview of post COVID-19 recovery and the remaining impact of the COVID-19 crisis on URW's operations in H1-2022. Over the period, the economic situation has evolved rapidly with the conflict in Ukraine, an increase in energy costs and higher inflation leading Central Banks to increase interest rates.

Overview of restrictions in H1-2022

The operations in URW shopping centres remained impacted by restrictions in the first few months of 2022. In Q1, the Omicron wave, with a record high number of COVID-19 cases, led to restrictions in all the countries where the Group operates, including guidance to work from home, capacity restrictions, reduced opening hours for F&B and leisure, restrictions for non-vaccinated persons and mask mandates, holding back the recovery.

In The Netherlands, this led to a full lockdown at the beginning of the year; all non-essential stores were allowed to reopen on January 16, 2022, while F&B and leisure reopened on January 26, 2022. Operations in Germany and Austria were also impacted by stringent restrictions. Proof of vaccination or negative test was required to visit shopping centres until February 18 in Germany and March 4 in Austria, and for F&B and leisure until April 3 in Germany and April 15 in Austria.

From May 2022 onwards, no restrictions are applicable anymore in any of the regions in which the Group operates.

Footfall3 and tenant sales4

Overall, in Q1-2022 the Group footfall and sales figures remained impacted by the restrictions in Europe. They both improved in Q2, with footfall reaching 91% of 2019 levels and sales levels for the Group coming back to 2019 levels and even exceeding them, which was earlier than expected. Sales levels also continue to outperform footfall, due to higher conversion rates and longer dwell times.

European footfall

In Europe, H1-2022 overall footfall reached 85% of 2019 levels, still impacted by the remaining restrictions during the first few months of the year but improved compared to H2-2021 (81%). France and Spain outperformed other countries, with footfall at 88% and 87% of 2019 levels, respectively, while Germany, Austria and The Netherlands were below due to more severe restrictions during Q1-2022.

In Q1-2022, footfall reached 80% of 2019 levels, with The Netherlands, Austria and Germany underperforming at 68%, 74% and 74%, respectively, while Spain at 83% and France at 84% showed strong resilience.

During the Q2-2022, footfall continued to improve, reaching 90% of 2019 levels, with France, Nordics and Spain reaching 91%, 91% and 90% of 2019 levels, respectively, while Germany, Austria and The Netherlands showed a recovery compared to Q1 at respectively, 87%, 86% and 82% of 2019 levels.

UK footfall reached 86% of 2019 levels in H1-2022, ahead of the H2-2021 levels of 78%, with an improvement in Q2 (91%) compared to Q1 (81%).

US footfall

In the US, footfall in H1-2022 reached 89% of 2019 levels and 91% excluding Westfield San Francisco Centre in which footfall remains affected by work from home policies, and security issues. During the first half, footfall continued to improve, from 86% in Q1-2022 to 92% in Q2-2022.

European tenant sales

H1-2022 sales were at 96% of 2019 levels, with Continental Europe at 97% and the UK at 91% to be compared with 90% in H2-2021, including 92% for Continental Europe and 83% for the UK. Tenant sales improved between Q1 and Q2, exceeding in Q2 the 2019 sales levels in Continental Europe, ahead of the Group's expectation.

1. Footfall for all centres in operation, including extensions of existing assets, but excluding deliveries of new brownfield projects, newly acquired assets and assets under heavy refurbishment (Ursynów, Westfield La Part-Dieu, Les Ateliers Gaîté, CNIT, Gropius Passagen, Garbera, Westfield Mall of the Netherlands and Westfield Valley Fair). Excludes Carrousel du Louvre. Excludes Zlote Tarasy as this centre is not managed by URW. For the US, footfall only includes the 23 centres for which at least one year of comparable data is available.
2. Tenant sales for all centres (except The Netherlands) in operation, including extensions of existing assets, but excluding deliveries of new brownfield projects, newly acquired assets and assets under heavy refurbishment (Ursynów, Westfield La Part-Dieu, Les Ateliers Gaîté, CNIT, Gropius Passagen, Garbera and Westfield Valley Fair). Excludes Zlote Tarasy as this centre is not managed by URW. Excludes Carrousel du Louvre. Excludes Auto category for Europe and Auto and Department Stores for the US.

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In Q1-2022, the Group's European tenant sales reached 89% of 2019 levels, with Germany and Austria being the most impacted at 83% and 84%, respectively due to restrictions. Central Europe performed very well at 96%. In France, sales reached 89%, performing in line with the Group's average. UK saw an improvement from 84% in Q4-2021 to 89% in Q1- 2022.

In Q2-2022, tenant sales improved significantly, reaching 102% of 2019 levels, including 104% for Continental Europe and 94% for the UK. All regions in Continental Europe, except Austria (97%), were above 2019 levels, with Central Europe, Spain and Nordics reaching 114%, 110% and 106% of 2019 levels, respectively.

The performances of the main categories in H1-2022 were 107% for Health and Beauty, 106% for Sports, 96% for F&B, 91% for Fashion and 85% for Entertainment, with an improvement in Q2 reaching respectively 110%, 114%, 103%, 99% and 97%.

US tenant sales

In the US, tenant sales had already reached 2019 levels during the second half of 2021, and they continue to consistently outperform pre-COVID levels. In Q1-2022, sales reached 102% of 2019 levels, while in Q2 this improved to 110%.

Overall, H1-2022 sales came to 106% of 2019 levels, driven by the Flagships at 114%, partly offset by the Regionals and Central Business District ("CBD")5 assets at 100% and 80%, respectively.

The strong recovery in the US continued to be broad-based with almost all categories performing above 2019 levels. In particular Luxury (175%), Home (138%), F&B (102%) and Fashion (100%) with an improvement in Q2 reaching respectively 182%, 142%, 106% and 104%. Entertainment remains the most affected at 77% but improved from 72% in Q1 to 80% in Q2.

Group tenant sales summary

The table below summarises the Group's tenant sales growth during H1-2022:

		Tenant Sales Levels (%)
Region
Q1-2022	Q2-2022	H1-2022	H1-2022
	vs. Q1-2019	vs. Q2-2019	vs. H1-2019	vs. H1-2021
France	89%	100%	95%	199%
Spain	86%	110%	98%	135%
Central Europe	96%	114%	106%	185%
Austria	84%	97%	91%	156%
Germany	83%	101%	92%	231%
Nordics	93%	106%	100%	136%
The Netherlands	NA	NA	NA	NA
Total Continental Europe	89%	104%	97%	178%
UK	89%	94%	91%	223%
Total Europe	89%	102%	96%	184%
US	102%	110%	106%	121%
Total Group	93%	105%	99%	157%

Rent relief and government support

Throughout the COVID-19 crisis, URW recognised the issues the Group's tenants faced due to administrative closures or trading restrictions and the need to provide relief, generally limited to the period of closure and based on the principle of a fair sharing of the burden. These negotiations were focused on providing a one-off rent relief, not on permanently changing lease terms or structures.

With all major restrictions being lifted, URW did not provide any COVID-19 rent relief in H1-2022 regarding 2022 for its shopping centre activity. The 2022 P&L remained impacted by the straightlining of rent relief granted in 2020 and 2021 with a counterparty. In H1-2022, URW recorded for its retail activities a remaining total cash impact from COVID-19-related rent relief of -€0.7 Mn (vs. -€196.3 Mn in H1-2021, due to the high level of restrictions over this period), while the impact of reversals and straightlining of rent relief granted in 2020 and 2021 was -€3.2 Mn (vs. +€19.1 Mn in H1-2021), resulting in a total P&L impact of -€3.9 Mn (vs. -€177.3 Mn in H1-2021).

5 Westfield World Trade Center and Westfield San Francisco Centre.

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