Presentation to UKSA 27 March 2007 Francis Salway Agenda
Financial summary
Achievements of the last 12 months
Market background
Land Securities as a REIT
Business update Retail Portfolio London Portfolio Land Securities Trillium Interim financial highlights
Key statistics change % Pre-tax profit £1,178.2m -0.5% Revenue profit(1) £193.1m -1.4% Adjusted diluted earnings per share(2) 32.84p -4.4% Interim dividend per share 19.00p +4.7% Property investment business valuation surplus(3) £962.1m +7.3% Adjusted diluted NAV per share(3)(4) 2121p +10.9%
(1) Profit before tax, excluding profits on sale of non-current and trading assets, profits on long-term contracts, revaluation surpluses, mark-to- market adjustments on interest rate swaps and similar instruments used for hedging purposes, debt restructuring charges, the adjustment to interest payable resulting from the amortisation of the bond exchange de-recognition and any exceptional items (2) Based on revenue profit. Excludes deferred tax on investment properties (3) Compared to 31 March 2006 (4) Add back deferred tax on investment properties and bond exchange de-recognition
Over 10% growth in net assets in six months Movement in adjusted diluted NAV
£m
10,500
23.3 154.7 133.8 4.4 31.4 10,000 250.2
9,500 712.2 9982.7
(2121p)
9,000 9011.9 (1912p)
8,500 NAV at 31 March Revaluation Revaluation Profit on disposal Adjusted earnings Dividends Non revenue profit Other reserve Adj. diluted NAV at 06 surplus surplus of non-current interest charges movements 30 Sept 06 (Investments) (Developments) properties
Adjusted diluted net asset value per share +10.9% Achievements – winning new business for LST
SMIF DTR Accor c. £2bn of potential capital investment Achievements – leasing progress – Retail developments
Exeter Livingston Bristol Successfully secured / agreed £15.7m of annual income* *LS share, year to date Achievements – leasing progress – London developments
Cardinal Place, SW1 New Street Square, EC2 One Wood Street, EC2 Successfully let 650,000 ft2 with £14.9m of annual income* *year to date Achievements – leasing success – Property outsourcing
222-236 Grays Inn Road, London, WC1
Over 670,000 ft2 let, assigned or surrendered from DWP contract Achievements – a broader perspective
East Kilbride image being sourced
Mixed use Sustainability Customer service
Anticipating future trends, future customer needs Market background Market outlook and strategic response
2003/04 Initiate large London office development programme
2004/05 Acquire low-rented London office investments
2005 Increase gearing – net investors by £1bn (Tops Estates & Lxb)
2006
2007
Taking action in response to market outlook Market background – capital growth in the 2000s
14
12
10
8
6
4
2 capital growth- % per annum 0
-2
-4 2000 2001 2002 2003 2004 2005 2006 Source: IPD Annual Index 2000-2005, IPD Quarterly Index 2006
A ‘feel good’ factor for the property sector 12 Market background – disaggregation of property returns UK property performance - 3 years to December 2006
Total return
Income return
Capital growth
Rental value growth
Yield impact
Residual
-2 0 2 4 6 8 10 12 14 16 18 20 % per annum Source: IPD Quarterly Index – 3 years to 31 December 2006
Yield re-pricing significant driver of direct property returns Market background – disaggregation by sector
UK rental value growth – 3 years to December 2006
10
9
8
7
6
5
4 rental value growth % - annum per 3
2
1
0 Retail Office Industrial All property
Source: IPD Quarterly Index – 3 years to 31 December 2006 No bubble in rents – stable / good outlook Land Securities’ strategy
One New Change, EC4 RAF St Athan, Wales Erdington
Princesshay, Exeter Falkirk Hospital Devonshire House, W1 £0.5bn sold since £3.7bn pipeline £2.0bn committed 01/01/07 Development Property Outsourcing Sales Increase capital invested in higher return activities, more sales Land Securities as a REIT Land Securities as a REIT
Market % change in US shareholders base Rank REIT cap £m 1. Westfield Group 14,862 2. Simon Property Group 11,958 Inc 10 3. Land Securities 9,462 9 8 4. Vornado Realty Trust 9,219 7 5. Public Storage 8,352 6 5 6. Prologis 7,867 4 7. British Land 7,665 3 2 8. General Growth Props. 7,333 1 9. Equity Residential Trust 7,401 0 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Properties Source: JPMorgan Cazenove Shareholder Analysis 10. Boston Properties 7,009 Changing shareholder base Impact on our operations limited to considerations around qualifying / non- qualifying Land Securities – balance of business tests
6 months to / as at 30/09/06 Balance of business test Tax exempt Taxable 75% profits test: 88.1% 11.9%
75% assets test: 93.4% 6.6%
Interest cover ratio: > 2.0x
Prepared to use 25% non-qualifying profits for higher returns REIT dividend policy
70p
+c.30% 60p
50p 46.70p 48.10p 43.25p mandatory dividend(2) 40p 37.10p 35.50p 34.00p 32.50p
30p
20p 2001 2002 2003 2004 2005 2006 REIT (1)
(1) REIT dividend uplift will be split over two financial periods (2) Assuming the Group had been a REIT for the year ended 31 March 2006
Stepped progression in dividend Business Update Retail Portfolio
£7.3bn portfolio UK retail sales growth
30 shopping centres and 29 retail 12 parks 10 8 12.9% net reversionary potential(1) 6 4 2 (1) 4.1% voids 0 -2 £1.1bn (3 million ft2) retail -4 development pipeline sales grow th, 3m rolling ave, %
Lettings agreed or concluded on Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 £29.1m annual rental income in Like for like sales Total sales H1 2006/7
(1) on like-for-like portfolio at 30 September 2006 Source: BRC – KPMG
Substantial volume of lettings across retail portfolio London Portfolio
£7.0bn portfolio London office supply – development completions 2 2 10 million ft office and 860,000 ft 10 retail floor space 8 £32 per ft2 (£346 per m2) average 6 office passing rent 4
2
£2.6bn (3.9 million ft2) development feet) square (million space 0 pipeline 1997 1996 1998 1999 2001 2007 2002 2005 2003 2006 2008 2009 2000 2004 Largest or second largest letting in West End City each of West End, mid-town and City market in H1 2006/07
Large development pipeline with substantial schemes completing in 2007/08 Future opportunities – development Contribution to earnings growth and valuation surplus
Park House, London Bristol City Centre London Portfolio Retail £2.6bn pipeline £1.1bn pipeline Headline yield: 7.2% / P&L yield: 6.5% on total development cost Land Securities Trillium - Context
Property outsourcing BBC deal DWP “PRIME” BT deal signed DWP “TIES” deal signed signed deal extended
1990-93 1994-97 1998-00 2001-03 2004-05 2006 →
Inland Revenue Norwich Union “STEPS” deal signed deal signed PPP/PFI PFI policy First schemes SMIF Canary deal Land announced signed (health is first in Securities by UK govt & prisons) secondary market BSF launched acquires SMIF
1990-93 1994-97 1998-00 2001-03 2004-05 2006 →
Value of signed OGC PFI CO is PFI funds deals reaches refinancing first listed listed by HSBC £10 billion code issued PFI investor and Babcock
LST- £120m profit and 19.5% return on capital employed (year to 30.09.06) LST: strategic progress
Existing portfolio by use Existing and potential portfolio by floor area
Other PPP NICE Health Education DTR
Royal Mail
Accor LGS DWP
PPP SMIF
Accommodation D N B Te IIC V U a L l r e c A
r l e a
a y s l
Total 51 million ft2 Total 61 million ft2
Accessing Community Infrastructure and MoD markets Performance 5 ‘majors’ in UK quoted property sector (1) Total shareholder return Direct property returns – to 31 December 2006 Valuation surplus 12
300 10 s
250 8 200
% 150 6
100 % p.a. to June 2006 June to p.a. % 4 adjusted valuation surplu valuation adjusted 50 2
0 0 3 years Land Securities 1 year 3 years 5 years Land Securities FTSE 350 Real Estate Index Other 4 property “majors” FTSE 100 Index Average for 5 property “majors”
Source: UBS Datastream Source: Land Securities – from company results with valuation (1) Share price appreciation plus reinvested dividends timing differences adjusted on a straight line basis Presentation to UKSA