Annual Annual Report 2020 Landsec Annual Report 2020 Welcome to Landsec 2020 in numbers Here are some of the Our portfolio important financial and non-financial performance figures for our year. Some of these measures are impacted by Covid-19. 23.2p Dividend, down 49.1% 55.9p Adjusted diluted earnings per share (2019: 59.7p) Office Retail Specialist Our Office segment consists of Our Retail segment includes outlets, Our Specialist segment comprises high-quality, modern offices in great retail parks, large regionally dominant 17 standalone leisure parks, 23 hotels 1,192p locations in central London. Our offer shopping centres outside London and the iconic Piccadilly Lights in EPRA net tangible assets ranges from traditional long-term and shopping centres within London. central London. per share, down 11.6% leases through to shorter-term, flexible We also have great retail space within Pages 24-29 space. We also have significant our office buildings. development opportunities. Pages 24-29 Pages 24-29 -8.2% Total business return (2019: -1.1%) A £12.8bn portfolio Chart 1 10 1. West End office 26% 9 £11.7bn 2. City office 13% 8 1 Total contribution to 3. Mid-town office 11% the UK economy each 4. Southwark and other office 4% 7 year from people based 5. London retail 11% Combined at our assets 6. Regional retail 13% 7. Outlets 7% Portfolio 6 8. Retail parks 3% 2 9. Leisure and hotels 9% £(837)m 10. Other 3% 5 Loss before tax 3 4 (2019: £(123)m) Read more on pages 174-177 Comprising 24 million sq ft Chart 2 -4.5% Ungeared total property of space return (2019: 0.4%) 1 1. West End office 12% 9 2 2. City office 4% 3 £4.8m+ 3. Mid-town office 5% Social value created 4. Southwark and other office 3% Combined 4 5. London retail 11% during the year 8 Portfolio 6. Regional retail 27% 5 7. Outlets 6% 8. Retail parks 9% 7 42% 9. Leisure and hotels 23% reduction in carbon 6 emissions (tCO2e) Read more on pages 174-177 compared with 2013/14 baseline Strategic Report 02 Our response to Covid-19 We are one of the UK’s 04 This is Landsec Strategic Report 10 Chairman’s statement 12 Chief Executive’s statement leading commercial 14 Our market 16 Our stakeholders 18 Our business model property companies. 19 Creating sustainable long-term value 20 Our strategy 22 Key performance indicators We buy, develop, manage and sell high-quality 24 Portfolio review office, retail and leisure space in London and 30 Financial review 38 Physical review vibrant regional locations. 42 Social review 48 Managing risk 50 Our response to Covid-19 – risk In this way, we create positive experiences for 51 Our principal risks and uncertainties our stakeholders in the places they work, shop, 57 Going concern and viability socialise and live. 58 Non-financial information statement Governance 60 Introduction from the Chairman Our chosen sectors offer us diverse market 61 Roles and responsibilities opportunities that we address by managing 62 Board of Directors 67 Board activity our portfolio of assets. 68 Our culture 70 The Board and our stakeholders We also have a significant pipeline of 72 Our investors 73 Report of the Nomination Committee development opportunities, with exciting new 76 Introduction from the Chairman of the Audit Committee office, retail and residential options in the capital. 78 Report of the Audit Committee 84 Directors’ Remuneration Report – Our success is based on our expert team and Chairman’s Annual Statement 86 Remuneration at a glance solid balance sheet. Together, these provide 88 Annual Report on Remuneration 99 Summary of Directors’ Remuneration resilience in uncertain conditions and the firepower Policy to address opportunities. Across the Company, 104 Directors’ Report our approach is characterised by customer Financial statements 108 Statement of Directors’ Responsibilities focus and a growing culture of innovation – 109 Independent Auditor’s Report all underpinned by an industry-leading approach 115 Income statement 115 Statement of comprehensive income to sustainability, with our ambition to be a net 116 Balance sheets 117 Statements of changes in equity zero carbon business by 2030. 118 Statement of cash flows 119 Notes to the financial statements Ultimately, our aim is to create total shareholder Additional information returns, together with significant social value 166 Business analysis – EPRA disclosures 172 Business analysis – Group and economic value for all our stakeholders. 176 Business analysis – Office 177 Business analysis – Retail Currently, we are working with our stakeholders, 177 Business analysis – Specialist 178 Sustainability performance particularly our people and our customers, to 184 Combined Portfolio analysis ensure we emerge from Covid-19 in as strong 186 Lease lengths 187 Development pipeline a position as possible. 187 Alternative performance measures 188 Reconciliation of segmental information note to statutory reporting 190 Ten year summary 192 Subsidiaries, joint ventures and associates 195 Shareholder information 198 Key contacts and advisers 199 Glossary IBC Cautionary statement Visit our website: landsec.com Landsec Annual Report 2020 1 Our response Organising our response to Covid-19 — We responded quickly to establish teams to support our priorities during the pandemic ranging from employee and customer support, operations and corporate affairs through to internal functions including finance and tech. — We have been working on plans for how Landsec and our markets will emerge from the current conditions based on a number of scenarios to ensure we are well placed to respond quickly for our customers and focus on strategic priorities. Since Covid-19 began Read more on page 50 impacting our business in March, we have responded quickly to Our people ensure our stakeholders are supported and the — The health and wellbeing of our people has always been our priority. All of our office-based staff were encouraged to work from home from resilience of the business 16 March. — We have made changes to our policies, notably our holiday policy to is maintained. ensure that staff don’t miss vital family holiday time and that our business can manage the resourcing demands placed upon it. — Our trained mental health first aiders have worked tirelessly to support all members of staff, using a range of external resources, toolkits and guides for remote working and those with caring responsibilities in the home. — Our Senior Management have acted swiftly to provide extraordinary levels of communication via weekly videos, emails, internal intranet and regular telephone and video conferences ensuring that every staff member has some form of regular, daily contact with their line manager or team. — For those staff whose work has been severely disrupted, we have created a skills hub for them to offer their time to teams with increased demand, thereby ensuring no one is unproductive or isolated during the lockdown. — We are offering support to our people who continue to work in our assets. Read more in Our stakeholders on pages 16-17 Our customers — We understand that Covid-19 has made day-to-day operations difficult and complex for our customers, and we support the Government’s view that no organisation should be left unable to survive as a result. We strongly believe that business has a role to play in delivering assistance. — We have provided support for those customers who are in genuine and immediate financial distress, establishing a support fund to provide up to £80m of rent relief for customers who need our help most to survive. — Around £15m of this fund will support our food & beverage customers, broadly equivalent to three months’ rent free. The remaining £65m will be allocated on a case-by-case basis to small and medium sized businesses with a focus on helping those with limited access to other sources of financial assistance. — Non-payment of rent has a serious impact on our business. In order for us to help those customers most in need, we expect those who can afford to pay their rent to do so. Where we are unable to offer assistance from our support fund, we will consider requests to defer rents or a move to monthly rents. — We are responding to the changing environment and investment needs. We’re committed to reducing service charge costs, not only in response to the current situation but also through the work started last year on how we run our sites in the most efficient way possible. Read more in Our stakeholders on pages 16-17 Read more online at landsec.com 2 Landsec Annual Report 2020 Strategic Report Our communities — We’re especially determined to help in the communities in which we operate. Our community employment and education programmes are continuing at this crucial time. — In addition, in response to the immediate needs of the grass roots charities we support, we are providing financial relief for the charities we know well and who are supporting individuals and communities through these unprecedented times. In the coming months, we will give grants totalling £500,000 to our existing charity partners who are most in need. This will include homeless charities and a £100,000 donation to the property industry charity, LandAid. — The Directors of the Company have waived 20% of their base salaries or fees for an initial period of three months and the money will be used to supplement the £500,000 of grants mentioned above. — Our site teams are also providing practical assistance wherever they can. For example, linking our food retailers in London to local homeless charities we work with, for food donations. In Oxford, Leeds and Cardiff we’re offering free parking to key workers to reduce the number of people who are travelling on public transport.