Interim Results Presentation
Six months ended 30 September 2005 Contents
Introduction 4.9% Uplift in 6 Months (5.2% adjusted) 16 Financial Highlights 1 Benchmarking of Performance 17 Business Highlights 2 Assets & Markets Financial Review Portfolio Reshaping & Asset Management A Strong Performance 3 Outline 18 2.7% Like for Like Income Growth 4 St Stephen’s Shopping Centre, Hull - £135m 19 Underlying Profit before Tax up by £30m (42%) 5 Investment in Europe 20 22% Underlying Tax Rate 6 Value Enhancing Disposals 21 Secure & Attractive Risk Profile 7 £806m of Sales - 13% above Valuation 22 Strategy & Operational Review Value Enhancing Disposals 23 Delivering on our Promises 8 Rent reviews 3.6% higher than ERV 25 Strong Record of Value Creation Continues 9 150 lettings generating £8.6m pa of new rent 26 Intensified Portfolio Reshaping 10 Lease Re-gears and Recycling Capital 27 Positioned for Growth with Security 11 Meadowhall Shopping Centre 28 Proactive Asset Management 12 Meadowhall - Sainsbury’s/Allders Reconfiguration 29 Management and Cultural Renewal 13 Portfolio Values, Office Outlook & Developments Investor Friendly Positioning 14 Property Continues to Offer Relative Value Overall 31 Pillar - £1.5bn of Top Quality Real Estate 15 PMA Rental Growth Forecasts 32 Six months ended 30 September 2005 Contents continued
£11.6bn Retail Portfolio (BL Share £8.4bn) 33 Summary Retail - Principal Valuation Movements 34 Delivering on our Promises 49 £5.9bn Office Portfolio (BL Share £5.5bn) 35 Offices - Principal Valuation Movements 36 City Office Outlook Positive 37 Developments Adding Value 38 Committed Developments 39 Broadgate Tower & 201 Bishopsgate Going Up 40 City Office Development Pipeline 41 Out of Town Retail & Funds Out of Town Retail at British Land 42 Why we like Out of Town Retail 43 Out of Town Retail Rents more Affordable 44 UK Retail Warehouse Market 45 Migration of High Street Retailers 46 HUT Performance - 19.7% Return Year to Date 47 Portfolio Opportunities 48
Six months ended 30 September 2005 Introduction
Agenda Introduction Stephen Hester
Financial Review Graham Roberts
Strategy & Operational Review Stephen Hester
Assets & Markets Tim Roberts / Bob Bowden / Andrew Jones
Summary Stephen Hester Six months ended 30 September 2005 Introduction
Financial Highlights1 ! NAV2 per share 1,256p - up 11.3% – Valuation up 4.9% (5.2% including Pillar and disposals), under new valuers
! Properties owned and managed up 32% to £18.3bn
! Underlying profit up 42% to £102m, headline pre-tax profit3 up 66% to £777m – Underlying EPS2 up 32% to 15.4p (48% on a restated basis), headline EPS 118.3p – Dividends up 8.3% to 5.2p
! Investment market for property remains strong, underlying conditions moving to favour prime
1 See rest of presentation for definitions of financial measures Six months ended 30 September 2005 2 Adjusted, diluted 3 Proportional consolidation of JVs & Funds 1 Introduction
Business Highlights
! Delivering on our promises to renew and work the business hard
! Pillar acquisition integrated. Combination going well
! Over £800m value enhancing disposals, March to date
! Now starting 822,000 sq ft 201 Bishopsgate development
! Like for like rental growth of 2.7% underlines value of BL’s prime space, when yield shift subsides
! Management & culture renewal also going well
Six months ended 30 September 2005 2 Financial Review
Financial Review Graham Roberts, Finance Director
Six months ended 30 September 2005 Financial Highlights
A Strong Performance
Sept 2005 Sept 2004 Increase Net Rental Income1 £351m £270m 30.0% Underlying Profit before Tax2 £102m £72m 41.7% Profit before Tax1 £777m £468m 66.0% Underlying Earnings per Share2 15.4p 10.4p4 48.0% Dividend per Share 5.2p 4.8p 8.3% Total Return3 12.3% 9.0%
March 2005 Increase Net Assets2 £6,595m £5,913m 11.5% NAV per Share2 1,256p 1,128p 11.3%
1 Proportional consolidation of JVs & Funds Six months ended 30 September 2005 2 Adjusted, diluted – see appendix for reconciliation to IFRS NAV, EPS and profit before tax 3 Total return represents the growth in adjusted, diluted net asset value plus prior period dividend per share 4 Restated to exclude prior year tax adjustments 3 Underlying Performance
2.7% Like for Like Income Growth
! Overall gross rental income up 28.0% Sept Sept Gross rental income % 2005 £m 2004 £m ! 2.7% like for like income growth: Properties owned throughout1 Retail + 3.5 150 145 – Retail uplift of 5.1% stripping out asset management voids Offices + 1.7 127 125 Other + 4.7 13 12 – Offices up 1.7% due to lettings + 2.7 290 282 Surrender premiums 7 5 Acquisitions 60 2 Disposals 2 7 Developments 14 3 Accounting basis adjustments2 2 (6) Total + 28.0 375 293
1 Investment properties owned throughout the current and prior period Six months ended 30 September 2005 2 Revised allocation of rental income between first and second half and new approach to rent review recognition 4 Underlying Performance
Underlying Profit before Tax up by £30m (42%)
Movement in Underlying Profit £m Sept 20052 Sept 20042 Net rental income growth £m £m Net rent and related income 351 270 New lettings (net of lease expiries) 11 Fees and other income 9 4 Rent reviews 4
15 Administrative expenses (40) (24)
Effect of purchases and sales4 11 Net financing costs (218) (178)
Broadgate refinancing interest saving 7 Underlying profit before tax 102 72
Non recurring exceptional costs1 (8) Gains on asset disposals 37 6
365 day rental apportionment3 6 Net revaluation gains 641 390
Other (1) Amortisation of intangible asset (3) -
Increase 30 Profit before tax 777 468
1 Closure of Pillar offices, several small business units, redundancies Six months ended 30 September 2005 2 Proportional consolidation of JVs & Funds 3 Revised allocation of rental income between first and second half 4 Including £10m of guaranteed minimum uplifts principally from Debenhams and Spirit acquired in H2 2004/5 5 Underlying Performance
22% Underlying Tax Rate
1 1 ! Corporation tax reduced by losses arising from Sept 2005 Sept 2004 Broadgate refinancing and capital allowances £m £m Corporation tax 8 15 Deferred tax 14 3 ! Tax charge significantly higher than tax paid of Underlying tax charge 21.6% 22 25.0% 18 £6m due to release of Broadgate refinancing deferred tax asset Corporation tax: - fixed asset disposals 10 1 - prior year items (5) (6) ! Changed basis for calculating underlying EPS to exclude effect of prior year tax items Deferred tax - capital allowances 2 1 – On this basis restated prior period EPS - revaluation gains 133 82 is 10.4p vs 11.7p Total tax charge 20.8% 162 20.5% 96 Tax paid 6 7
Six months ended 30 September 2005 1 Proportional consolidation of JVs & Funds 6 Risk Profile
Secure & Attractive Risk Profile
! Prudent financial ratios, especially Key Financial Ratios given our low income risk Sept 20051 March 20051
Average lease length 15.4 yrs 15.9 yrs ! Leverage back within 45-55% target Vacancy rate 3.7%3 3.5% range, despite Pillar LTV – Group 51% 50%
LTV – inc. share of JVs & Funds 54% 52%
! Average rental income profile of over Interest cover2 1.6x 1.6x 15 yrs to first break Average interest rate 5.9% 6.0%
Weighted average debt maturity 11.8 yrs 13.5 yrs
! Long average debt term of 11.8 yrs Cash and undrawn facilities - Group £1,215m £969m with a spread of maturities
1 Proportional consolidation of JVs & Funds (unless stated as Group) Six months ended 30 September 2005 2 Net rents/net interest 3 The majority of vacancies in shopping centres and retail warehouses are due to asset management initiatives, reducing the underlying vacancy rate to 2.4% 7 Strategy & Operational Review
Strategy & Operational Review Stephen Hester, Chief Executive
Six months ended 30 September 2005 Strategy & Operational Review
Delivering on our Promises
! Intensified Portfolio Reshaping – Capital recycling to further improve risk adjusted returns
! Pro-active Asset Management – Sweating the assets for outperformance
! Management and Culture Renewal – Delivering the capability to outperform
! Investor Friendly Positioning – Helping to clarify and enhance valuation potential And by so doing, produce superior, sustained and secure long-term shareholder returns
Six months ended 30 September 2005 8 Delivering on our Promises
Strong Record of Value Creation Continues
Profits Growth1 Total Shareholder Return2 Total Return3
42% 1 30% 18% 2 2 24% 25% 1
2 20% 2 14% 3 1 16% 1 2
2 15% 1 10% 8% 10%
0% 5% 6% 5 YRS 3 YRS 1 YR Last 6 5 YRS 3 YRS 1 YR Last 6 5 YRS 3 YRS 1 YR Last 6 5 5 MTHS MTHS MT HS 5 4 British Land Major Peers FTSE Real Estate
1 Underlying profits excludes exceptional items, profits on asset disposals and revaluation gains Six months ended 30 September 2005 2 Total shareholder return represents the growth in share price plus dividends per share 3 Total return represents the growth in adjusted, diluted net asset value per share plus dividends per share 4 Average of major peers - Land Securities, Hammerson, Liberty and Slough (some differences in year ends) 9 5 IFRS (previously numbers based on UK GAAP) Number represents British Land’s ranking compared to our major peers Delivering on our Promises
Intensified Portfolio Reshaping
! £1.8bn of attractive property acquisitions
– already increased in value by 2.6% (5% including Pillar for full 6 months) – over last 12 months, £2.9bn of acquisitions
! £806m of value enhancing disposals completed since March
– 12.6% in excess of valuation – of which £414m announced since September – Over previous 6 months to 31 March, £64m of disposals
! More disposals or Fund injections to come
And by so doing, improving our risk adjusted returns
Six months ended 30 September 2005 10 Delivering on our Promises
Positioned for Growth with Security PMA1 Forecast Total Property Returns BL Weighting British Land Portfolio Next 5 Years Sept 2005 ! Protected against downside Retail Warehouses 32% – prime, low voids, long leases fully (inc. superstores) underpinning gearing
Shopping Centres 17% ! Positioned for fundamental growth – 42%2 Out of Town retail High Street 8% ! Positioned for cyclical growth Central London Offices 35% – 35% Central London offices plus development pipeline leverage Business Parks & 2% Provincial Offices ! Strong rental hedge – £1.6bn with rental uplift guarantees Industrial 2% ! Extensive opportunities to ‘sweat the Total assets’
036 9 12 ! Attractive new income streams from Average Total Return % pa Funds
1 Property Market Analysis (PMA), September 2005 Six months ended 30 September 2005 2 Includes retail warehouses, superstores and Meadowhall Shopping Centre 11 Delivering on our Promises
Proactive Asset Management
! Over 473,000 sq ft of letting/development success generating £8.6m pa of new rent
! 124 rent reviews concluded at average 3.6% over ERV
! 35 surrenders/refurbishments/extensions/relocations and lease re-gears committed at total estimated cost of £42m
! Received planning consent on 1.4m sq ft. Started on site at 201 Bishopsgate
Six months ended 30 September 2005 12 Delivering on our Promises
Management and Culture Renewal
! New team firmly ‘in the saddle’
! Resourcing for more intense ‘sweating the assets’
– Asset Management and Investment team doubled in a year – Property representation at Executive Committee level quadrupled
! Management and culture renewal
– Executive succession plans in place and happening – Tougher targets, greater pay differentiation, senior team building – Head office move planned
A key building block to work the business harder & outperform for shareholders
Six months ended 30 September 2005 13 Delivering on our Promises
Investor Friendly Positioning
! Clear and focused strategy set out, implementation well underway
! Management transition done, governance in good order
! New valuers in place
! 1st quarterly valuation to be announced Feb 2006
! A leader on disclosure
! Proactive and transparent communication
Helping to clarify and enhance valuation potential
Six months ended 30 September 2005 14 Pillar Update
Pillar - £1.5bn1 of Top Quality Real Estate
! Acquisition rationale validated £3.6bn Assets Under Management - £1.3bn1 of ‘the best’ retail warehouse assets (76% Open A1), expected to offer the most attractive continuing growth in the retail sector
- Talented management team and attractive Fund Management business HUT (£2,721m2) CLOUT (£582m2) ! Deal closed & going well - Integration completed - 11% return from HUT over last 6 months - Revenue & cost synergies in place - Fund activity continues apace - Expanding in Europe via PREF PREF (€240m3) HIF (£145m2)
Confident that Pillar will enhance shareholder value and support accelerated change at BL
Six months ended 30 September 2005 1 Direct and share of indirect gross asset value 2 As at September 2005 3 As at June 2005 15 Valuation
4.9% Uplift in 6 Months (5.2% adjusted2)
All Retail 4.3 4.8% Retail Warehouses 2.2 3.4% (HUT Growth 6.4%) Superstores 5.4 5.4%
Shopping Centres 4.2 4.4% 8.1 Seamless Department Stores 8.1% change in High Street 7.1 7.3% valuers, though All Offices 6.1 6.3% comparability City Offices 6.0 6.2% impacted West End Offices 6.0 6.0% Business Parks & Provincial 9.3 9.3% Development 10.5 10.5% Residential/Other 1.7 2.3%
% Change by sector since March 20051 Including effect of Pillar and disposals2 Six months ended 30 September 2005 1 Including valuation movements in developments, purchases and capital expenditure, and excluding sales 2 Including Pillar uplift booked as goodwill reduction and valuation surplus realised on sales 16 Valuation
Benchmarking of Performance
! IPD index exceeded portfolio growth by 1%, though BL outperformed at NAV level
! Change in valuers distorts metrics of attribution analysis
! Primary issue was secondary yield compression vs prime
! Asset specific action plans in place
! Weighting in City Offices now a positive
Portfolio positioned in sectors expected to outperform over next 5 years
Six months ended 30 September 2005 17 Assets & Markets
Portfolio Reshaping & Asset Management Tim Roberts, Joint Head of Asset Management
Six months ended 30 September 2005 Portfolio Reshaping & Asset Management
Outline
! Refocusing and reshaping the portfolio for improved performance
! Value enhancing sales into a strong investment market
! Proactive asset management
Six months ended 30 September 2005 18 Portfolio Reshaping
St Stephen’s Shopping Centre, Hull - £135m
! Forward commitment with ING to acquire upon completion of construction - expected mid 2007
! Freehold edge of town Shopping Centre comprising over 500,000 sq ft of retail and leisure
! 68% of the accommodation already pre-let/pre-sold, or under offer
! Attractive 6% initial buyout yield and low ERV of £19.50 psf on retail units
Attractive risk adjusted IRR
Six months ended 30 September 2005 19 Portfolio Reshaping
Investment in Europe
! Post Sept, PREF raised €214m to fund future acquisitions Nassica Retail & Leisure Park, Madrid of out of town retail parks in Eurozone – BL committed €124m – 3 new institutional investors committed €90m
! Core countries include Spain, Italy, France, Portugal and Benelux
! Current gross assets contracted/acquired of over €418m – Average net yield 6.1% Sintra Retail Park, Lisbon – Average rents €13.70 psf
! Further properties identified, with target portfolio size of €1bn
Attractive IRRs and building on UK expertise
Six months ended 30 September 2005 20 Portfolio Reshaping
Value Enhancing Disposals ! On-going performance review. Sales where forecast risk adjusted returns below our targets
– Covers both: Sectors with lower growth prospects and no critical mass Assets with specific issues
! Capitalises on strong investment market
! Risk factors often being discounted by market – Fringe locations, short leases, covenant strength, capex requirements and over-renting
! Increases BL focus on areas of competitive advantage
! Recycles capital and reduces leverage Improving Portfolio Returns
Six months ended 30 September 2005 21 Portfolio Reshaping
£806m of Sales – 13% above Valuation1
Price £m BL Share £m Gain %1 10 Fleet Place 109 109 15.6% ILAC Shopping Centre, Dublin 85 85 25.0% Daventry (Plots E4 & C1)2 76 38 19.8% 9 High Street Retail 52 52 11.6% Others 109 108 2.4% Total 6 months to Sept 2005 431 392 13.3% Post Sept 2005 - 1 Fleet Place 120 120 21.0% Heathrow Gateway (Units 1 & 2) 66 66 16.6% 2-16 Baker Street 57 57 31.6% Others 174 171 0.3% Total completed since March 2005 848 806 12.6%
Six months ended 30 September 2005 1 Sale price above latest year end valuation 2 International Rail Freight Terminal – BL Rosemond (JV) 22 Portfolio Reshaping
Value Enhancing Disposals
10 Fleet Place, EC4 2 –16 Baker Street, W1 ILAC Centre, Dublin
! Sold for £109.1m, profit of £14.7m ! Sold for £57.2m, 32% above valuation ! Bought in 2001 for €56.6m ! Weighted average lease term 4 yrs ! Received 14 bids ! Intense asset management adding ! 25% over-rented ! Weighted average lease term 4 yrs substantial value ! Void and capex risks ! 40% over-rented ! Sold for €121.3m, 25% above valuation ! Recycles capital at opportune moment
Six months ended 30 September 2005 23 Portfolio Reshaping
Value Enhancing Disposals
High Street DIRFT, Daventry Heathrow Gateway, Feltham
! 9 high street properties sold for ! Forward sale of 2 buildings for £76m, ! 3 distribution units totalling 440,000 £52m, 12% above valuation showing 20% above valuation sq ft sold for £81m, 17% above ! Sub 4% yield achieved on prime ! 1,050,000 sq ft of distribution valuation shops warehouses completed since March ! Developed in 3 phases since 2002 ! £140m further High Street sales ! Pre-let to Tesco and Exel/Mothercare ! Sales price some 94% above the planned original cost of development
Six months ended 30 September 2005 24 Proactive Asset Management
Rent reviews 3.6% higher than ERV
Number BL Increase CAGR1 pa over New rent Rent £m 5 years % above ERV2 % Retail Warehouses 31 1.4 6.8 0.1
Superstores 7 0.7 1.8 4.6
Shopping Centres 49 0.7 2.2 7.2
High Street 12 0.3 6.1 13.1
City Offices 3 - - -
West End Offices 5 0.3 0.6 3.3
Other 17 0.5 2.9 -
Total 124 3.9 2.1 3.6
Six months ended 30 September 2005 1 Compound Average Growth Rate 2 ERV at valuation date prior to rent review 25 Proactive Asset Management
150 lettings generating £8.6m pa of new rent
Number Sq ft Total Rent1,2 BL Share BL Increase ‘000 £m Rent £m Rent £m3 Retail Warehouses 9 111 2.9 1.9 1.3
Shopping Centres 53 100 5.0 4.7 2.2
High Street 7 8 0.5 0.5 0.3
City Offices 15 112 4.6 4.6 4.3
West End Offices 12 28 0.8 0.6 0.1
Other 54 114 1.2 0.8 0.4
Total 150 473 15.0 13.1 8.6
Six months ended 30 September 2005 1 Including 100% of JVs & Funds 2 Total annual rent ignoring rent free periods 3 Above previous passing rent 26 Proactive Asset Management
Lease Re-gears and Recycling Capital
Kingswood, Surrey 1 Fleet Place, EC4
! 259,000 sq ft Business Park let to Legal & General ! 171,000 sq ft offices let to Denton, Wilde Sapte ! Removed tenants break in 2008 ! Acquired other 50% interest in April 2005 ! Negotiated new 20 year lease from Aug 2005 ! Lease term of 4.75 years and 27% over-rented ! Value significantly enhanced ! Negotiated a lease re-gear to 20 years ! Sold for £119.5m post Sept 2005, 21% above valuation (including cost of lease regear)
Six months ended 30 September 2005 27 Proactive Asset Management
Meadowhall Shopping Centre
! 50 rent reviews pending and 9 up to March 2006, 29% of total rents
– Zone A’s on units range from £150 to £400 psf
! 13 lettings creating rental evidence and improving tenant mix
– Including River Island, Apple, Adams, Republic, Poundland and Jack & Jones
! New letting at rent reflecting £440 psf Zone A achieved post Sept valuation
! Working closely with Sheffield City Council regarding masterplanning of 900 acres of Lower Don Valley
! Exploring unitisation options for Meadowhall on the back of current activity
Six months ended 30 September 2005 28 Proactive Asset Management
Meadowhall – Sainsbury’s/Allders Reconfiguration
Lower Mall - Before Lower Mall - After
Six months ended 30 September 2005 29 Proactive Asset Management
Meadowhall – Sainsbury’s/Allders Reconfiguration
Upper Mall - Before Upper Mall - After
• Increase space by 40,000 sq ft • £3.5m pa estimated increase in rent • Negotiations to introduce new tenants • Improved draw for Upper High Street • Estimated cost £48m
Six months ended 30 September 2005 30 Assets & Markets
Portfolio Values, Office Outlook & Developments Bob Bowden, Property Investment Director
Six months ended 30 September 2005 Market Fundamentals
Property Continues to Offer Relative Value Overall
20 Sept 2005 Real Income Return 3.4% 20 Year Average 3.3%
15
% 10
5
0 1980 1985 1990 1995 2000 Sep- 05 Property I ncome Returns Inflation (RPI X) Gilt Yie ld FT SE All Share Yield
Six months ended 30 September 2005 Source: IPD & ONS 31 Market Fundamentals
PMA Rental Growth Forecasts
11 10 Central London Offices 5.8% pa1 9
8
a 7 p h t 6 w o r 5 V G 4 Retail Warehouses 3.3% pa1 ER
% 3
2 Provincial Offices 1.9% pa1 1 1 Industrial 0.7% pa 1 0 Shopping Centres 0.8% pa High Street 0.5% pa1 2005 2006 2007 2008 2009 -1
1 Average ERV growth pa over next 5 years Six months ended 30 September 2005 Source: Property Market Analysis (PMA), September 2005 32 Portfolio Values
£11.6bn Retail Portfolio (BL Share £8.4bn)
! Largest UK portfolio 64 Retail parks 69 Superstores 38 Standalone units ! 27m sq ft of retail accommodation ! 57% of BL portfolio ! 0.5m sq ft development pipeline out of town
High Street Department Retail 5% Stores Warehouses 10% 36% In Town 26% Shopping Out of Town Centres In Town 12% 73%
Out of Town Shopping Superstores Centres 18% 19% 10 Shopping Centres 39 Department stores 84 Shops An advantaged portfolio with distinctive leadership positions
Six months ended 30 September 2005 33 Portfolio Values
Retail – Principal Valuation Movements1
Retail Warehouses Superstores Meadowhall In Town 6 mths 12 mths 6 mths 12 mths 6 mths 12 mths 6 mths 12 mths to Sept2 to March to Sept to March to Sept to March to Sept to March
Valuation £3,087m £1,678m £1,580m £1,549m £1,500m £1,430m £2,212m £2,187m
Valuation change 2.2%3 13.7% 5.4% 4.2% 3.9% 1.6% 6.3% 9.5%
Rent £psf/£m pa £15.97 £16.17 £20.39 £20.19 £69.0m4 £72.2m £116.4m £119.5m
£10.77 £8.85 ERV £psf/£m pa £21.62 £19.04 £79.0m £76.1m £130.8m £135.0m - £29.22 -£30.25
Reversionary yield 5.7% 5.5% 5.4% 5.6% 5.3% 5.3% 5.9% 6.2% to British Land
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 2 Includes the acquisition of Pillar wholly owned retail warehouses and share of funds completed on 28 July 2005 3 Only includes 2 months of Pillar, however including Pillar for the full 6 months, the uplift would have been 3.4% (HUT capital growth over last 6 months 6.4%) 34 4 Meadowhall passing rent has temporarily reduced as a result of the take back of Sainsbury’s and Allders space for re-letting Portfolio Values
£5.9bn Office Portfolio (BL Share £5.5bn)
! 8m sq ft of office accommodation Broadgate Plantation Place (4m sq ft) (0.7m sq ft) ! 37% of BL portfolio ! Exceptional development pipeline
Business Parks & Provincial Office Development 6% 6%
West End 13%
95%Central Central London London 94%
City 75%
3.6m sq ft of Central London Regent’s Place office developments1 (1.3m sq ft)
Six months ended 30 September 2005 1 Committed and prospective projects 35 Portfolio Values
Offices – Principal Valuation Movements1
Broadgate Regent’s Place 6 mths 12 mths 6 mths 12 mths to Sept to March to Sept3 to March Valuation £2,974m £2,838m £536m £547m Valuation Change 4.7% 3.6% 5.2% 0.8% Average Contracted Rent psf £46.74 £46.75 £34.05 £33.57 Headline ERV psf £37.50 £45.00 £21.55 £22.75 2 - £45.00 - £42.50 - £38.50 Net Initial Yield 5.70% 5.85% 5.54% 5.33%
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 2 New valuers have taken a different basis for headline rental values to our previous valuers, as they do not assume capital expenditure on breaks or end of leases 3 Excludes Osnaburgh Street and NEQ which are now held as developments 36 Office Outlook
City Office Outlook Positive
! Headline rents increased for first time in over 4 yrs to £47.50 psf1 Rent Rent Lease – Agent’s consensus for 2010 £60.90-£69.10 psf Free Term psf – Recent lettings show incentives eroding 41 Lothbury Islandsbanki £55.00 12 mths 10 yrs
! Active demand totals 4.4m sq ft, despite 4.1m Citipoint Vinson & Elkins £51.50 9 mths 5 yrs sq ft of take up in year to date2 Plantation Place Ascot £50.00 18 mths 15 yrs
! Grade A availability fallen to lowest level Moor House u/o Citadel £49.50 36 mths 15 yrs since 2003 at 6.1%2 – 3m sq ft of Grade A take up in Q1 – Q3 Capital House u/o CWH&B £48.50 24 mths 15 yrs 2005, 73% of total take up2 Juxon House BMCE £47.00 24 mths 10 yrs ! Employment in business and financial services predicted to grow by 136,000 jobs by 20083 10 Exchange Western Asset £48.00 33 mths 15 yrs
! Vacancy to fall to 4.9% by end 20084
1 CCRE Q3 2005 Six months ended 30 September 2005 2 Jones Lang LaSalle Q3 2005 3 Oxford Economic Forecasting November 2005 4 British Land forecast – see Appendix for detailed forecast 37 Developments
Developments adding Value
Sq ft March Costs Surplus Sept Costs to Notional Rent m Valuation £m Since £m Since £m Valuation £m Complete £m2 Interest £m3 £m4
Completed 1.0 15 15 8 381 N/A1 N/A1 N/A1
Committed5 1.2 192 48 6 246 204 22 40
Prospective 4.8 289 17 32 338 1,327 132 159
Total 7.0 496 80 46 622 1,531 154 199
1 Daventry Plot C1 (completed post Sept) and Plot E1 were pre-let and forward sold. Sept valuation represents the sales price Six months ended 30 September 2005 2 Estimated construction costs, excluding land and interest 3 Notional interest at 6.25% for construction period 4 Estimated headline rent 38 5 Including 0.4m sq ft of CLOUT developments which are both forward sold and included at purchase price at 28 July 2005 Developments
Committed Developments
Willis Building, EC3 York Building, W1 One Coleman Street, EC2 35 Basinghall Street, EC2
! 475,000 sq ft office and retail ! 138,100 sq ft of office, retail and ! 2 office developments in CLOUT ! 465,000 sq ft pre-let to Willis for 25 yrs hi gh quality residential apartments totalling 380,000 sq ft without breaks ! ERV at current rents £6.6m pa ! Coleman Street forward funded by DIFA, ! Contracted income £21.0m pa ! Estimated construction cost £56m 70% pre-let to Legal & General ! Estimated construction cost £191m ! Construction on time and budget for ! Basinghall Street forward sold to Standard ! Construction on time and budget for completion Q4 2006 Chartered Bank as new headquarters completion in 2007 ! Construction on time and budget for completions in 2007
Six months ended 30 September 2005 39 Developments
Broadgate Tower & 201 Bishopsgate Going Up
! Planning consent for 822,000 sq ft of offices
! Designed to meet the needs of both financial and professional occupiers
! Two buildings to form the next phase of Broadgate – 35-storey Tower – 13-storey Building
! Estimated construction cost £291m Estimated ERV £40m pa at current rents
! Enabling works commenced - delivery to market in 2008
Six months ended 30 September 2005 40 Developments
City Office Development Pipeline
Supply by Grade Development pipeline 201 Bishopsgate - Competing Projects Sq ft
Stock Exchange Tower 320,000 14 Royex House, Aldermanbury Square 260,000 12 150 Cheapside 190,000 10 Finsbury Circus 185,000 ft q 8
1 Wood Street 160,000 s m
Milton Gate, Silk Street 160,000 6 3.9 14 Cornhill 146,000 4 Bow Bells House, Bread Street 140,000 2.1 2 0.8 Total 1,561,000 0 Dec Mar Jun Sept 2006 2007 2008 2004 2005 2005 2005 Limited competing projects 201 Bishopsgate for delivery in 2008 Grade A Grade B Grade C BL Estimate Six months ended 30 September 2005 41 Assets & Markets
Out of Town Retail & Funds Andrew Jones, Joint Head of Asset Management
Six months ended 30 September 2005 Out of Town Retail
Out of Town Retail at British Land
! 64 Retail parks, 38 Solus units and 69 Superstores Superstores Retail Warehouses ! Over 17m sq ft and 1,031 retail units
! 240 tenants
! Flexible unit sizes – 1,000 to 100,000 sq ft
! Retail Warehouses 70% Open A1 and 12% Open Restricted1
! Long lease lengths - Retail warehouses 14.8 years - Superstores 21.5 years
Economies of scale and presence amongst retailers
Six months ended 30 September 2005 1 BL and JVs & Funds (100% by value) 42 Out of Town Retail
Why we like Out of Town Retail
! Growing share of consumer spending
– Over next 5 years, Out of Town sales predicted to grow at 4.3% pa vs 2.4% pa In Town1
! Cost/accommodation advantages for retailers
! Healthy retailer demand as migration from High Street continues
! Increasingly constrained supply of new space
! Defensive lease and property characteristics
EQUALS Continuing prospect of superior risk adjusted returns
Six months ended 30 September 2005 1 Verdict Sept 2005 43 Out of Town Retail
Out of Town Rents more Affordable
In Town Out of Town Prime rent Prime rent As a % of psf1 psf2 In Town Rent
Edinburgh £74 £49.5 67%
Glasgow £77 £40 52%
Leeds £82 £53 65%
Newcastle £84 £34 40%
Speke, Liverpool £79 £42 53%
Watford £80 £52.5 66%
Average £79 £45 57%
Out of Town sales densities for fashion retailers reaching c.80% of In Town3
1 CCRE Prime rent psf based on a 5,000 sq ft store (ground & first floors trading 2,500 sq ft each; store width 30 ft; 1/3 of Six months ended 30 September 2005 first floor as storage; 20 ft zones except Edinburgh & Glasgow based on 30ft zones) 2 BL & Funds top rents on retail warehouse units of 10,000 sq ft 3 Verdict Sept 2005 44 Out of Town Retail
UK Retail Warehouse Market
1 ! Rental growth disparity increasing according to Open A1 Retail Parks Expected to Outperform planning consents and unit sizes 8 % of BL & Funds Portfolio2 7 48% ! Healthy retailer demand as migration from high 6 a
street continues p th 5 11% w o r 4 ! Large Open A1 parks with flexible planning V G 20% 3 enjoying strong rental growth ER % 2 12% 9% ! Retailer demand for traditional bulky parks 1 slowed, leading to a two-speed occupational 0 market 2006 2007 2008 2009 2010 Key Hybrid & Shopping Parks Other Hybrid Parks ! Retailers ‘right sizing’ own portfolios to reflect All Parks Key Traditional Parks increasing occupational cost Large and Other Traditional Parks Solus Units Six months ended 30 September 2005 1 Source: Property Market Analysis (PMA), September 2005 2 Retail Warehouses, BL and JVs & Funds (100% by value) 45 Out of Town Retail
Migration of High Street Retailers
British Land & Funds Lettings – last 12 mths Sq ft1 British Land & Funds Top 15 Tenants % Rent1 GUS (Argos, Homebase) 11.5% Marks & Spencer 67,750 DSG (Dixons, Currys, PC World) 7.5% Next 48,385 Kingfisher Group (B&Q) 4.4% Next 4.0% Arcadia 47,000 Boots 3.5% Kesa Electricals (Comet) 3.0% JJB Sports 31,000 Matalan 2.8% Tesco 2.7% Tesco 30,000 Arcadia 2.4%
Boots 28,660 TK Maxx 2.3% JJB Sports 2.2% Argos 26,850 Carpetright 2.2% Sports Soccer 2.2% Borders 20,285 Borders 1.8% Toys R Us 1.6% Total 299,930 Total 54.1%
Six months ended 30 September 2005 1 Retail Warehouses,BL and JVs & Funds (100%) 46 Fund Management
HUT Performance – 19.7% Return Year to Date Year to date1 Ungeared Return IPD2 Geared Return Total Return 14.1% 14.5% 19.7% Capital Growth 10.4% 10.0% Of which ERV Growth 8.3% 4.2%
HUT ERV Growth vs IPD HUT Rent vs ERV 2.0% HUT ERV Growth vs IPD £ 160,000 1.6% 150,000 140,000 130,000 1.2% 120,000 110,000 0.8% 100,000 90,000 0.4% 80,000 70,000 0.0% 60,000 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Q1 03 Q3 03 Q1 04 Q3 04 Q1 05 Q3 05 HUT ERV Growth IPD ERV Growth Passing Contracted ERV
Six months ended 30 September 2005 1 Jan to Oct 2005. HUT operates to calendar year ends 2 IPD monthly Retail Warehouse benchmark excluding HUT 47 Out of Town Retail
Portfolio Opportunities
Deepdale Shopping Park, Preston ! Increasing focus across entire portfolio on Open A1 – 20% of Open A1 space currently occupied by bulky goods retailers
! Continuing adoption of HUT occupier led strategy
! Will be some sales from enlarged portfolio Birstall Shopping Park, Leeds ! Continued reconfiguration of units and mezzanine programme
! Park enhancement through additional development
Six months ended 30 September 2005 48 Summary
Delivering on our Promises
! Intensified Portfolio Reshaping – Capital recycling to further improve risk adjusted returns
! Pro-active Asset Management – Sweating the assets for outperformance
! Management and Culture Renewal – Delivering the capability to outperform
! Investor Friendly Positioning – Helping to clarify and enhance valuation potential And by so doing, produce superior, sustained and secure long-term shareholder returns
Six months ended 30 September 2005 49 Financial Review
Appendix
Six months ended 30 September 2005 Contents
Today’s British Land 1 Sustainable Income: Long Leases & Low Vacancy 18 Positioned for Growth with Security 2 Sustainable Income: Strong Tenant Covenants 19 Portfolio Analysis: 57% Retail, 37% Offices 3 Reversionary Income: £109m 20 £1.8bn Acquisitions - 2.6% Uplift in Value 4 Yield Profile 21 £2.9bn Acquisitions over last 12 months 5 Annualised Net Rents and ERV Analysis 22 £870m Sales over last 12 months 6 Strong Growth in Cash Rents in Prospect 23 Balance Sheet (proportional consolidation) 7 Long Term Income Profile 24 Pillar Balance Sheet 8 Long Term Income Profile Assumptions 25 Reconciliation of Adjusted Diluted Net Assets 9 102 Retail Warehouses £3,087m: Up 2.2% 26 Adjusted Diluted Net Assets Analysis 10 69 Superstores £1,580m: Up 5.4% 27 Income Statement (proportional consolidation) 11 Meadowhall £1,500m: Up 3.9% 28 Reconciliation of Underlying Profit after Tax 12 In Town Retail £2,212m: Up 6.3% 29 Strong Operating Cash Flow 13 Broadgate £2,974m: Up 4.7% 30 Contracted Rental Increases from Rent Free Periods 14 Regent’s Place £536m: Up 5.2% 31 Contracted Rental Increases from Fixed Uplifts 15 1.2m sq ft Committed Projects 32 Portfolio Valuation by Sector 16 4.8m sq ft of Prospects - 71% with planning approval 33 Portfolio Valuation Analysis 17 Prime Property Yields vs. Other Asset Classes 34 Six months ended 30 September 2005 Contents continued
IPD: Yields Compression Discounts Risk Factors 35 Rents Represent ‘Good Value’ to Occupiers 36 City Supply vs. Demand Improving 37 Upturn in City Rents Predicted 38 City: Forecast 39 Out of Town: Growing Share of Consumer Spending 40 Out of Town: Increasingly Constrained Supply 41 £3.6bn Assets Under Management in Funds 42
Six months ended 30 September 2005 Strategy & Positioning
Today’s British Land is;
! About Growth, Quality and Security
! Facing the market in Confident and Pro-active mood
! Actively and Successfully ‘Adding Value’ to real estate
! Focused, with Good Portfolio Positioning and Active Portfolio Management
! At the Forefront of Investor Friendly Behaviour … and Ready for REITs
Six months ended 30 September 2005 1 Strategy & Positioning
Positioned for Growth with Security PMA1 Forecast Total Property Returns
BL Weighting 32% 17% 8% 35% 2% 2% (Inc. Superstores) 12
10
8 % 6
4
2 Retail Shopping High Street Central London Business Parks Industrial Total Warehouses Centres Offices & Provincial Offices
Next 5 yrs Next 10 yrs
Six months ended 30 September 2005 1 Property Market Analysis (PMA), September 2005 2 Portfolio Reshaping
Positioned for Growth with Security 57% Retail: 37% Offices: Retail Warehouses 73% Out of Town 94% Central London increased to 21% (March 2005 13%) Retail W are houses £6.2bn 21% Central Lon don Out of Town retail offices Largest owner by a 33% factor of over 2 times Super stores 11% Exposure to Business P arks & Central London Provincial 2% enhanced Out of Town Office through significant Shoppi ng Centres Developm ent 10% In Town Hi g h Other development leverage Depa rtment 2% Shoppi ng Centres Street 6% Stores 7% 3% 5%
Six months ended 30 September 2005 3 Portfolio Reshaping
£1.8bn Acquisitions – 2.6% Uplift in Value
Price £m BL Share £m % Uplift in Value2
Pillar 1,5661 1,5661 2.1%2
St Stephen’s Shopping Centre, Hull3 135 135 -
Other4 127 114 12.5%
Total 1,828 1,815 2.6%
1 Direct and share of indirect gross asset value at 28 July 2005, including Manchester Fort and Farnborough wholly owned Six months ended 30 September 2005 retail parks with a value of £215m which were exchanged for sale at that date and have completed since 2 From purchase price on completion to 30 Sept – for Pillar only 2 mths since 28 July , however over 6 mths 5% uplift in value 3 Forward purchase, expected completion mid 2007 4 4 Other largely relates to buyout of other 50% interest in BL West JV (1 and 10 Fleet Place, EC4) Portfolio Reshaping
£2.9bn Acquisitions over last 12 months
Price £m BL Share £m % Uplift in Value2
Pillar 1,5661 1,5661 2.1%2
24 Debenhams Stores 516 516 13.9%
Queensmere & Observatory Shopping Centres 192 192 1.3%
65 Freehold pubs 174 174 10.0%
St Stephen’s Shopping Centre, Hull3 135 135 -
6 Homebase stores and Crawley, Sainsbury’s 102 102 6.0%
4 retail parks and 1 industrial unit (BLD) 122 30 4.1%
11 interests at East Kilbride and Aberdeen (SRPLP) 71 36 (0.5)%
Other4 150 150 10.2%
Total 3,028 2,901 5.1%
1 Direct and share of indirect gross asset value Six months ended 30 September 2005 2 From purchase price on completion to 30 Sept – for Pillar only 2 mths since 28 July , however over 6 mths 5% uplift in value 3 Forward purchase, expected completion mid 2007 4 Other largely relates to buyout of other 50% interest in BL West (1 and 10 Fleet Place, EC4) 5 Purchases in 6 months to 30 Sept 2005 highlighted in bold Portfolio Reshaping
£870m Sales over last 12 months
Price £m BL Share £m % Gain1
10 Fleet Place 109 109 15.6%
ILAC Shopping Centre, Dublin 85 85 25.0%
Daventry (Plot E4 & C1)2 76 38 19.8%
13 High Street Retail 67 67 10.0%
Swiss Centre 47 47 34.3%
Other 112 110 2.6%
Total 496 456 14.8%
Completed post Sept 2005 417 414 12.0%
Total completed since Sept 2004 913 870 13.6%
Six months ended 30 September 2005 1 Sale price above latest year end valuation 2 International Rail Freight Terminal – BL Rosemound (JV) Sales in 6 months to 30 Sept 2005 highlighted in bold 6 Results
Balance Sheet (proportional consolidation)
Group JVs & Funds Sept 2005 March 2005 £m £m £m £m Total properties 12,077 2,574 14,651 12,507
Net debt2 (6,870) (1,234) (8,104) (6,563)
Other net assets/liabilities 102 (13) 89 (35) Deferred tax liabilities (1,133) (131) (1,264) (1,063)
Net Assets 4,176 1,196 5,3721 4,8461
Adjusted Diluted Net Assets 6,595 5,913
Adjusted, Diluted NAV per share 1,256p 1,128p
Loan to value ratio 54% 52%
Six months ended 30 September 2005 1 Includes external valuation surplus on trading and finance lease properties 2 Including fair value of derivatives 7 Results
Pillar Balance Sheet
28 July 20051 £m Properties 311
Investment in funds 680
Intangible asset – fund management contracts 75
Net debt (271)
Deferred tax liabilities (62)
Other net assets/liabilities (23)
Goodwill 1072
Net assets 817
Six months ended 30 September 2005 1 Date of completion of acquisition 2 Of which £62m relates to deferred tax 8 Results
Reconciliation of Adjusted Diluted Net Assets
Sept 2005 March 2005 £m £m Net assets 5,299 4,783 Contingent tax on revaluation gains 1,170 963 IAS12 capital allowance effects 132 130 Goodwill (180) (73) Fair value adjustments for debt & derivatives, net of deferred tax 63 17 Total external valuation surplus on trading & finance lease properties 73 63 Adjusted net assets 6,557 5,883 Adjust to fully diluted on exercise of share options 38 30 Adjusted diluted net assets 6,595 5,913
Six months ended 30 September 2005 9 Results
Adjusted Diluted Net Assets Analysis
£m Pence per Share At 31 March 2005 5,913 1,128
Revaluation surpluses 668 127
Underlying profit after tax 80 15
Gains on asset disposals 37 7
Dividends paid (57) (11)
Goodwill on acquisition of Pillar (net of deferred tax) (45) (9)
Other (1) (1)
At 30 September 2005 6,595 1,256
Six months ended 30 September 2005 10 Results
Income Statement (proportional consolidation)
Group JVs & Funds Sept 2005 Sept 2004 £m £m £m £m Net rent and related income 305 46 351 270 Fees and other income 9 - 9 4 Administrative expenses (36) (4) (40) (24) Net financing costs (190) (28) (218) (178) Underlying profit before tax 88 14 102 72 Gains on asset disposals 34 3 37 5 Net valuation gains 562 79 641 391 Amortisation of intangible asset (3) - (3) -
Tax - Tax credit (charge) relating to underlying activities (18) (4) (22) (18) - Deferred tax arising on revaluation movements (128) (12) (140) (78) Profit for the period after tax 535 80 615 372 Underlying EPS 15.4p 10.4p1
Six months ended 30 September 2005 1 Restated to exclude prior year tax adjustments 11 Results
Reconciliation of Underlying Profit after Tax
Sept 2005 £m Sept 2004 £m Profit before tax 761 446 Net valuation gains (641) (390) Gains on asset disposals (37) (6) Deferred and current taxation of joint ventures 16 22 Amortisation of intangible asset 3 - Underlying profit before tax 102 72 Tax on underlying profit (22) (18) Underlying profit after tax 80 54
Six months ended 30 September 2005 12 Results
Strong Operating Cash Flow
Sept 2005 Sept 2004 £m £m Cash generated from operations 242 230
Net interest (174) (158)
Tax paid (6) (7)
Net cash inflow from operating activities after interest and tax 62 65
Operating cash flow per share 12p 13p
Six months ended 30 September 2005 13 Results
Contracted Rental Increases 1 FromL Lettings with Rent Free Periods
£m 6 mths to 6 mths to Year ending 31 March Contracted Gross Rental Income Sept 2005 March 2006 2007 2008 2009 2010 City Offices 22.5 22.7 50.4 64.7 64.5 64.5 West End Offices 5.9 7.2 14.7 14.7 14.5 14.4 Retail 15.8 17.2 34.9 34.6 34.4 34.0 Other 0.5 0.5 1.2 1.2 1.2 1.2 Total rent (accounting basis) 44.7 47.6 101.2 115.2 114.6 114.1 Of which total cash flow 27.1 33.2 77.3 97.6 105.4 108.6 Of which SIC 15 rent free adj. 17.6 14.4 23.9 17.6 9.2 5.5
Six months ended 30 September 2005 1 Under IFRS contracted rent and cash flows will differ – during rent free periods, IFRS requires rent to be recognised ahead of the related cash flow and allocated evenly over the lease term to the earliest termination date 14 Results
Contracted Rental Increases From Fixed and Minimum Uplifts1
£m 6 mths to 6 mths to Year ending 31 March
Contracted Gross Rental Income Sept 2005 March 2006 2007 2008 2009 2010 Debenhams 20.2 20.2 40.2 40.2 40.2 40.2
Spirit Pubs 6.9 6.9 13.9 13.9 13.9 13.9
Other 15.9 15.9 32.4 31.9 31.9 31.9
Total rent (accounting basis) 43.0 43.0 86.5 86.0 86.0 86.0
Of which total cash flow 33.1 33.1 69.0 70.7 72.0 73.1
Of which IAS17 fixed uplift adj. 9.9 9.9 17.5 15.3 14.0 12.9
Six months ended 30 September 2005 1 Under IFRS contracted rent and cash flows will differ – IFRS requires the total rental income relating to fixed and minimum guaranteed rent reviews to be recognised ahead of the related cash flow and allocated evenly over the lease term to the earliest termination date 15 Valuation
Portfolio Valuation By Sector
£m1 % Uplift1 Adj.Uplift2 Retail: Retail Warehouses 3,087 21.1 2.2% 3.4% Superstores 1,580 10.8 5.4% 5.4% Shopping Centres 2,481 16.9 4.2% 4.4% Department Stores 815 5.6 8.1% 8.1% High Street 416 2.8 7.1% 7.3% All Retail 8,379 57.2 4.3% 4.8% Offices: City 4,122 28.1 6.0% 6.2% West End 692 4.7 6.0% 6.0% Business Parks & Provincial 270 1.9 9.3% 9.3% Development 374 2.6 10.5% 10.5% All Offices 5,458 37.3 6.1% 6.3% Other: Residential, Industrial and Distribution, Leisure 814 5.5 1.7% 2.3% Total Valuation 14,651 100.0 4.9% 5.2%
Six months ended 30 September 2005 1 Including valuation movements in developments, purchases and capital expenditure, and excluding sales 2 Including Pillar uplift booked as goodwill reduction and valuation surplus realised in sales 16 Valuation
Portfolio Valuation Analysis
Group £m JVs & Funds £m Total £m Retail Warehouses 1,714 1,373 3,087 Superstores 1,378 202 1,580 Shopping Centres 2,001 480 2,481 Department Stores 680 135 815 High Street 384 32 416 All Retail 6,157 2,222 8,379 City 3,908 214 4,122 West End 653 39 692 Business Parks & Provincial 261 9 270 Development 370 4 374 All Offices 5,192 266 5,458 Other: Residential, Industrial and Distribution, Leisure 728 86 814 Total Valuation 12,077 2,574 14,651
Six months ended 30 September 2005 17 Assets
Sustainable Income: Long Leases & Low Vacancy
Average lease term to Vacancy Rate1 % first break, years1
Sept 2005 March 2005 Adj.Sept 20052 Sept 2005 March 2005 Total Portfolio 15.4 15.9 2.4 3.7 3.5 Retail Warehouses 14.8 16.0 1.0 3.4 1.0 Superstores 21.5 21.8 - - - Shopping Centres 13.8 14.8 2.2 5.9 3.3 Department Stores 31.6 30.3 - - - High Street 12.9 25.6 0.6 0.6 1.3 All retail 17.7 18.5 1.1 3.2 1.8 City Offices 11.6 11.9 5.2 5.2 6.8 West End Offices 9.9 9.8 0.6 0.6 1.0 Business Parks & Provincial 8.2 8.4 1.8 1.8 2.9 All offices 11.2 11.4 4.3 4.3 5.7
Six months ended 30 September 2005 1 Excludes developments and residential (predominantly let on short leases) 2 Vacancy excluding space taken back in shopping centres and retail warehouses under asset management initiatives 18 Assets
Sustainable Income: Strong Tenant Covenants
Top 10 Retail Tenants1 Top 10 Office Tenants1 1 J Sainsbury 1 UBS 2 Debenhams 2 Lehman Brothers 3 Great Universal Stores 3 Accenture 4 Tesco 4 EBRD 5 House of Fraser 5 Royal Bank of Scotland 6 Dixons Group 6 Herbert Smith 7 Bhs/Arcadia Group 7 Henderson Global Investors 8 Next 8 Government 9 Somerfield 9 Deutsche Bank 10 TK Maxx 10 Calyon 28% of total rent and 50% of retail rents 22% of total rent and 56% of office rents
Six months ended 30 September 2005 1 Group plus share of JVs & Funds 19 Assets
Reversionary Income: £109m
Annualised net Net reversion Reversionary rents £m £m (5 yrs)1 Yield (5 yrs)3 129 34 Retail Retail Warehouses 5.7% 83 2 Superstores 5.4% 123 19 Shopping Centres 5.7% 40 5 Department Stores 5.5% 21 2 High Street 5.6% 396 62 All Retail 5.6% 210 39 Offices: City 6.1% 36 3 West End 5.6% 14 2 Business Parks & Provincial 5.8% 260 44 All Offices 6.0% 40 3 Residential/Other 5.3% 696 1092 Total 5.7%
Six months ended 30 September 2005 1 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years 2 £62m contracted under expiry of rent free periods and minimum rental increases 3 Reversionary yield to British Land (5 years) 20 Assets
Yield Profile
Initial Yield Reversionary Net Nominal %1 Yield (5 yrs) %1 Equivalent Yield %2 Retail Warehouses 4.5 5.7 5.1 Superstores 5.3 5.4 4.9 Shopping Centres 5.0 5.7 5.3 Department Stores 4.8 5.5 5.1 High Street 5.2 5.6 5.6 All Retail 4.9 5.6 5.2 City 5.1 6.1 5.4 West End 5.2 5.6 5.4 Business Parks & Provincial 5.2 5.8 6.1 All Offices 5.1 6.0 5.4 Industrial & Distribution/Leisure 5.6 6.2 6.2 Total 5.0 5.7 5.3
Six months ended 30 September 2005 1 Yield to British Land 2 Including purchasers’ costs 21 Assets
Annualised Net Rents and ERV Analysis
Annualised net rents £m1 Estimated rental value £m2 Group JVs & Trusts Total Group JVs & Trusts Total £m £m £m £m £m £m Retail Warehouses 67 62 129 85 78 163 Superstores 72 11 83 74 11 85 Shopping Centres 97 26 123 112 30 142 Department stores 33 7 40 37 8 45 High Street 19 2 21 21 2 23 All Retail 288 108 396 329 129 458 City 195 15 210 237 12 249 West End 34 2 36 36 3 39 Business Parks & Provincial 14 - 14 15 1 16 All Offices 243 17 260 288 16 304 Other 38 2 40 39 4 43 Total 569 127 696 656 149 805
Six months ended 30 September 2005 1 Annualised net rents are gross rents plus, where rent reviews are outstanding, any increases to estimated rental value (as determined by the Group’s external valuers), less any ground rents payable under head leases 2 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years 22 Assets
Strong Growth in Cash Rents in Prospect
Sept 2005 Of which £m contracted £m
Annualised Net Rents 696 696
Net Reversions1 109 62
Committed Developments 40 28
Increase 149 90
Total 845 786
Development prospects 159 -
Plus ERV Growth
Six months ended 30 September 2005 1 Reversions include rent reviews, expiry of rent free periods (£45m), lease break/expiry and letting of vacant space at ERV (£29m) over next 5 years (as determined by independent valuers). 23 Assets
Long Term Income Profile
Plus Rental Growth 1100 1000 900 800 700 600
£m 500 400 300 200 100 0 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Year ending 30 September Development programme (committed and prospective) Reversionary income (not contracted) Renewal of leases on expiry or break Annualised net rents plus contracted reversions
Six months ended 30 September 2005 24 Assets
Long Term Income Profile Assumptions
• Annualised net rents of £695.9m at 30 September 2005 are shown to decrease on the first to occur of lease expiry or tenant’s break. Annualised net rents are increased for the contracted reversions of £61.8m receivable over the next 5 years
• Renewal of leases on expiry or break. Leases are assumed to renew on the date of expiry/break at the present annualised net rent*
• Reversionary income (5 years) of £108.7m is based upon estimated rental values (ERV) by our external valuers at 30 September 2005. Reversions have been reduced for the contracted reversions of £61.8m as the rent is received over the next five years*
• Development programme committed and prospective when completed and let has an estimated rent at 30 September 2005 of £198.7m*, assumed to be realised evenly over the next 7 years * No rental value growth is assumed
The graph provides a snapshot of committed income and estimated income based on ERV at 30 September 2005, including our share of joint ventures and funds. Upward only rent reviews across the portfolio protect rental income from falling below passing rent (prior to expiry/break). In addition, no account is taken of future acquisitions, disposals, expenditures or other events. Rental income will be affected by such transactions and future opportunities; the graph is not a forecast.
Annualised net rents are gross rents plus, where rent reviews are outstanding, any increases to estimated rental value (as determined by the Group’s external valuers), less any ground rents payable under head leases.
Six months ended 30 September 2005 25 Assets
102 Retail Warehouses £3,087m: Up 2.2%
Sept 20051,2 March 2005
Valuation £3,087m £1,678m
Rent pa £129m £77m
Total Reversionary Income pa £163m £93m
Average Rent psf £15.97 £16.17
Average ERV psf £21.62 £19.04
Vacancy Rate 3.4%3 1.5%
Initial Yield 4.5% 4.6%
Reversionary Yield 5.7% 5.5%
Weighted Average Lease Term to First Break 14.8 yrs 16.0 yrs
Six months ended 30 September 2005 1 Includes our share of Pillar retail parks (indirect & direct) completed on 28 July 2005. Thus uplift in value only includes 2 mths for Pillar, however including for a full 6 mths, the uplift in value would be 3.4% 2 Due to change of valuers,valuation metric changes since March 2005 not strictly comparable 3 Of which 2.4% relates to space take back under asset management initiatives 26 Assets
69 Superstores £1,580m: Up 5.4%
Sept 20051 March 2005
Valuation £1,580m £1,549m
Rent pa £83m £85m
Total Reversionary Income pa £85m £87m
Average Rent psf £20.39 £20.19
ERV Range psf £10.77-£29.22 £8.85-£30.25
Vacancy Rate - -
Initial Yield 5.3% 5.5%
Reversionary Yield 5.4% 5.6%
Weighted Average Lease Term to First Break 21.5 yrs 21.8 yrs
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 27 Assets
Meadowhall £1,500m: Up 3.9%
Sept 20051 March 2005
Valuation £1,500m £1,430m
Rent pa £69m2 £72m
Estimated Rental Value pa £79m £76m
Average Rent psf £59.603 £56.16
Vacancy Rate 6.8%2 1.8%
Net Equivalent Yield 4.86% 5.00%
Weighted Average Lease Term to First Break 15.4 yrs 16.1 yrs
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 2 Reflects take back of Sainsbury’s and Allders space for re-letting. Voids excluding asset management initiatives only 0.3% 3 Excluding Sainsbury’s and Allders space taken back for re-letting 28 Assets
In Town Retail £2,212m: Up 6.3%
Sept 20051 March 2005 Valuation £2,212m £2,187m - Shopping Centres £981m £990m - Department Stores £815m £782m - High Street £416m £415m Rent pa £116m £119m Total Reversionary Income pa £131m £135m Vacancy Rate 2.5% 2.8% Initial Yield 5.3% 5.5% Reversionary Yield 5.9% 6.2% Weighted Average Lease Term to First Break 17.1 yrs 19.1 yrs
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 29 Assets
Broadgate £2,974m: Up 4.7%
Sept 20051 March 2005
Valuation £2,974m £2,838m
Rent pa £151m £151m
Contracted Reversionary Income pa £177m £177m
Average Contracted Rent psf £46.74 £46.75
£37.50 Headline ERV Range psf £45.00 - £45.00 Vacancy Rate 2.6% 2.7%
Net Initial Yield 5.7% 5.85%
Weighted Average Lease Term to First Break 11.2 yrs 11.8 yrs
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 30 Assets
Regent’s Place £536m: Up 5.2%
Sept 20051 March 2005
Valuation £536m2 £547m
Rent pa £28m £29m
Contracted Reversionary Income pa £31m £31m
Average Contracted Rent psf £34.05 £33.57
Headline ERV Range psf £21.55-£42.50 £22.75-£38.50
Vacancy Rate 0.9% 0.9%
Net Initial Yield 5.54% 5.33%
Weighted Average Lease Term to First Break 11.2 yrs 11.0 yrs
Six months ended 30 September 2005 1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable 2 Excludes Osnaburgh Street and NEQ which are now held as developments 31 Developments
1.2m sq ft Committed Projects
PC Sq ft Sept Valuation Total Costs to Notional Rent Income
‘000 £m Cost £m1 Complete £m1 Interest £m £m2 Contracted £m
Willis Building, EC3 Q1 2007 475 120 191 115 11 21 21
The York Building, W1 Q4 2006 138 38 56 40 2 7 -
Blythe Valley Q4 2005/ 88 8 15 8 1 2 1 (Plot A1 & G2) Q4 2006
Nugent Retail Park Q1 2006 118 51 32 6 2 4 -
Basinghall Street, EC23 Q2 2007 199 16 21 16 4 3 3
Coleman Street, EC23 Q2 2007 180 13 22 19 2 3 3
Total 1,198 246 337 204 22 40 28
Six months ended 30 September 2005 1 Costs of construction excluding land and interest costs 2 Estimated headline rent pa 3 Share of CLOUT developments which are forward sold Based on Group and proportional share of JVs & Funds (except areas which are at 100%) 32 Developments
4.8m sq ft of Prospects – 71% with planning approval
Sq ft Total Cost to Notional Rent Planning
‘000 Costs £m Complete £m1 Interest £m £m2
201 Bishopsgate City Office 822 291 275 26 40 Detailed
The Leadenhall Buliding City Office 601 271 265 36 32 Detailed West End Regent’s Place 1,020 384 371 29 39 Submitted/Pending Office/Residential Ludgate West City Office 127 46 37 15 6 Detailed Blythe Valley Park Business Park 716 108 107 6 14 Outline/Detailed
New Century Park Business Park/Distribution 582 84 81 6 8 Outline
Booker Site, Preston Retail Park 67 14 14 - 1 Submitted
Gallions Reach Ph 2 Retail Park 58 16 16 1 2 Submitted
Meadowhall Casino Leisure 409 124 123 9 12 Submitted
Theale Residential 204 35 34 4 4 Submitted
Redditch (BLG) Distribution 227 4 4 - 1 Detailed
Total 4,833 1,377 1,327 132 159
Six months ended 30 September 2005 1 Costs of construction excluding land and interest costs 2 Estimated headline rent pa Based on Group and proportional share of JVs & Funds (except areas which are at 100%) 33 Market Fundamentals
Prime Property Yields vs. Other Asset Classes
10
8
6 % 4
2
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Sep-05 Gilt Yield FTSE All Share Yield Prime Office Yield Prime Retail Yield Mid Office Yield Mid Retail Yield
Six months ended 30 September 2005 Source: IPD 34 Market Fundamentals
IPD: Yield Compression Discounts Risk Factors
Range in Equivalent Yields Lower to Upper Quartile Spreads
Sept 2005 spread1 Retail Warehouses 2002 spread Shopping Centres 2000 spread
Standard Retail
City Offices
West End Offices
Industrial
0 0.5 1 1.5 2 2.5 Spread of equivalent yields %
Six months ended 30 September 2005 Source: IPD 1 Sept 2005 based on quarterly index 35 Market Fundamentals
Rents Represent ‘Good Value’ to Occupiers
450
400
350
300
x 250 e d
In 200
150
100
50
0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1991 1993 1995 1997 1999 2001 2003 2005 ERV RPI
Six months ended 30 September 2005 Source: Jones Lang LaSalle 36 Office Outlook
City Supply vs. Demand Improving
Take Up (Rolling Annual) Vacant Space Vs Take Up
14 10
12 BL Forecast 8 10 t
f 6 8 t q f m s
m sq 6 4
4
2 2
0 0 1 1 2 3 4 4 5 6 7 7 8 9 0 0 1 2 3 3 4 5
9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 2003 2004 2005 2006 2007 2008
1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q Vacant Space Total Take Up Take Up excluding Pre-lets Six months ended 30 September 2005 Source: Jones Lang LaSalle and BL Forecast 37 Office Outlook
Upturn in City Rents Predicted
Headline and Effective Rents1 BL City 80 Agents’ Consensus Rent Reviews 70 Range Average % of Rent Roll 60 £psf Increase 50 2006 47.30-50.60 5.7% 20%
£ psf 40 2007 52.00-55.40 8.0% 15% 30 2008 56.90-62.40 9.7% 16% 20
10 2009 59.30-67.10 6.6% 32% 0 2010 60.90-69.10 7.3% 15% 80 84 88 92 96 00 04 08 Headline Effective
Six months ended 30 September 2005 1 Property Market Analysis (PMA), September 2005 38 Office Outlook
City: Forecast
Total supply Net take up End of year forecast Sq ft Sq ft Vacancy rate Sept 2005 Start 9.3m 10.7% New completions - Estimated 2nd hand releases 0.25 Total vacancy 2005 9.55m 0.75m 10.2% Year 2006 Start 8.8m New completions 0.8m Estimated 2nd hand releases 0.25m Total vacancy 2006 9.85m 3.75m 7.0% Year 2007 Start 6.1m New completions (estimated) 2.1m Estimated 2nd hand releases 0.25m Total vacancy 2007 8.45m 3.94m 5.1% Year 2008 Start 4.5m New completions (estimated) 3.9m Estimated 2nd hand releases 0.25m Total vacancy 2008 8.65m 4.12m 4.9% Six months ended 30 September 2005 39 Out of Town Retail
Out of Town: Growing Share of Consumer Spending
Out of Town vs In Town 12 36 Retail Sales In Town Out of Town 34% 34 10 Growth pa Growth pa s e 32 l a S 8 l a t
30 o 1994 – 2004 3.8% 7.2% % T th of
w 6 28 are h Gro 26 S
T H1 2005 1.4% 2.4%
4 O
24 O % 2 22 Next 5 year 2.4% 4.3% 0 20 1995 1997 1999 2001 2003 2005 2007 2009 Out of Town (left hand axis) In Town Out of Town % Share of Total Sales (right hand axis)
Six months ended 30 September 2005 Source: Verdict Sept 2005 40 Out of Town Retail
Out of Town: Increasingly Constrained Supply
9 60 8 55 7 44 6 37 ft 5 35 41 q 37 s 30 33
m 4 31 29 23 18 3 18 22 18 18 18 14 17 11 2 Trend line 1 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Six months ended 30 September 2005 Source: CCRE 41 Fund Management
£3.6bn Assets Under Management in Funds
HUT CLOUT PREF HIF £2,721m1 £582m1 €240m2 £145m1 BL Share £943m BL Share £209m BL Share €87m BL Share £38m
• £1bn securitisation • Fund Restructuring • €214m of new equity • Portfolio grown to 13 • Return of capital to unit • Forward funding of One raised properties holders Coleman Street by DIFA • €178m developments • Over £145m in value • £540m of secondary Deutsche Immobilien contracted to purchase • Over 536,000 sq ft of retail trades since March 2002 Fonds AG • Further €174m in exclusive accommodation • Over £628m of • Forward sale of 35 negotiations to purchase • 4 unit holders with new transactions achieved Basinghall Street to • Combined area of income investor reversing in (increased exposure to Standard Chartered Bank producing schemes and additional property open A1 by 5.6%) • Potential sale of CityPoint developments totals over • 116,308 sq ft of new 311,500 sq m developments/ • On target to achieve €1bn reconfiguration of units of assets under • 299,000 sq ft of potential management by end 2006 development in planning • 19 new lettings (87% to high street retailers) • Renegotiated fee basis
Six months ended 30 September 2005 1 As at September 2005 2 As at June 2005 42 Disclaimer
The information contained in this presentation has been extracted largely from the Interim Announcement for the six months ended 30 September 2005. General property market data has been extracted from Jones Lang LaSalle, PMA, Verdict and other agents’ reports (please note that their definitions may differ slightly).
Data includes share of Funds and Joint Ventures, unless otherwise stated. ‘Group’ excludes share of Funds and Joint Ventures. Underlying profit and EPS excludes gains on disposals of assets and revaluation. Adjusted NAV includes the external valuation surplus on trading and finance lease properties and excludes the contingent tax provision, any related goodwill, the fair value of debt and derivatives and the capital allowance effects of IAS12.
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Six months ended 30 September 2005