British Land A Flagship for UK REITs

Transcription

1 Stephen Hester, Chief Executive 6 September 2007 We are real estate investors and create value by actively managing, financing and developing prime commercial property to provide the environment in which modern business can thrive. The Broadgate Tower

2 Contents Introduction to Demand Flows from London s Competitive Strengths 21 What We Are 1 London Rents Affordable 22 Portfolio Focus Out of Town Retail and London Offices 2 Vacancy Rates 23 Activist Strategy, Focused on Delivering Outperformance 3 Assessing Market Balance 24 Financial Overview 4-7.5bn Leadership in London Offices 25 Strong Record of Outperformance 5 Investment in Canary Wharf 26 UK Property Market Development UK Real Estate s Main Attractions 6 Development Strategy 27 Market Size and Ownership 7 Carefully Timed & Customer Focused Development 28 Uniquely Favourable Lease Structure 8 Prospective Unbooked Development Profits 29 s Long Leases & High Occupancy The UK Property Sectors 9 UK REITs 16 UK REITs with Total Market Capitalisation 31bn 30 UK Commercial Property Market 10 UK REITs Overview 31 Assessing Customer Trends 11 REIT Opportunity 32 UK Property Returns & Rental Growth 12 Investment Return Considerations s Sectoral Moves & Rationale 13 Property Return Prospects 33 Retail Net Asset Value 34 Retail Market Overview 14 s Investment Case Retail Sales and Sector Demand 15 Record of Value Creation 35 Retail Space 16 Portfolio Positioned for Rental Growth 36 Supply & Demand Dynamics Favour Out of Town 17 Value Creation from 4bn Development Programme bn Leadership on Retail 18 Extra Performance from Pro-active Asset Management 38 Added European Out of Town Retail Dimension 19 Cheap to NAV 39 Offices Summary Office Market Overview 20 40

3 Introduction to

4 Introduction to What We Are Largest European REIT by assets ( 16.3bn) 3 rd largest Global REIT by assets 8 th largest by equity market capitalisation 6.5bn 1 Total assets under management 20.4bn Market leadership in Office & Retail Focus on growth sectors Out of Town retail and London Offices High quality assets (96% in the UK) Pro-active management style Driven by customer needs Attractive upside from development & asset management Strong record of outperformance We are real estate investors and create value by actively managing, financing and developing prime commercial property to provide the environment in which modern business can thrive. 1 As at close 31 August

5 Introduction to Portfolio Focus Out of Town Retail & London Offices 55% Retail 1 42% Offices 1 80% Out of Town 97% London Retail Warehouses (23%) Superstores (13%) 45% Central London Offices (41%) 10% Meadowhall (9%) Business Parks & Provincial (1%) In Town Other (3%) Department High Shopping Stores (5%) Street Centres (4%) (2%) Concentration on markets where we have or can build competitive advantage 1 Proforma for committed developments (classified by end use) at external valuers estimated end value at completion 2

6 Introduction to Activist Strategy Focused on Delivering Outperformance Building the business around customer needs and so capturing superior, cash flow driven total return arising from high occupancy and rental growth Seeking to add-value at each level of the business Sector and market selection Asset selection and creation Asset management Balance sheet management Deal-doing Concentrating on markets where we have or can build competitive advantage 3

7 Introduction to Financial Overview Net asset value per share 1 (p) Secure & attractive income/risk profile Long average leases (14.6 years to break) and High occupancy rates (98.6%) Gearing 43% LTV 3 Average interest rate submarket at 5.3% Interest profile 100% fixed rate with average debt maturity of 13.1 years Returns enhanced by rental growth Like for like rental income growth 3.5% ahead of market (IPD) at 2.5% Estimated rental value (ERV) growth of 6.9% like for like (IPD 4.3%) to drive future rental income growth Mark to market rental growth potential of 20% Q Underlying profit before tax 2 ( m) Q EPRA (European Public Real Estate Association) basis 2 Underlying pre-tax profit and EPS excludes gains on property revaluations and disposals, intangible asset movements, refinancing charges, 13m of administrative expenses relating to REIT conversion and 33m special Songbird dividend 3 Debt to property and investments 2007 Proforma for payment of REIT conversion charge in July

8 Strong Record of Outperformance Introduction to 25% 20% 15% Earnings Growth 1 Total Shareholder Return 2 Total Return % 30% % 25% 40% 20% % 2 30% 15% % 10% 5% 10% 5% 0% 0% 0% 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR Major Peers 4 FTSE Real Estate Index 1 Adjusted, diluted earnings per share (excluding exceptional items, profits on asset disposals and revaluation gains) 2 Total shareholder return represents the growth in share price plus dividends per share (assuming reinvested) 3 Total return (pre-exceptional) 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 SEGRO (some differences in year ends) Based on financial period ends - Number represents s ranking compared to our major peers 5

9 UK Property Market

10 UK Property Market UK Real Estate s Main Attractions Density and population growth drive values UK 8 times denser than the US Restrictive planning regime leads to limited availability of land Highly transparent asset valuation Property valued regularly by external professionals according to a Red Book Valuations constantly market-tested Landlord-friendly lease structure Typically year terms - upward-only with mark-to-market every 5 years Tenant fully liable for repairing and insuring High degree of control with landlords limited break options and conditions for assignment Arbitration procedures Australia UK Population density create supply/demand imbalances 1 Growth 2 Japan -0.1% UK +2.1% Europe +1.4% USA +5.0% +5.2% Population per km 2 1 United Nations Population Division 2 United Nations Population Division estimated population growth

11 UK Property Market Market Size and Ownership Major Global Real Estate Markets 1 UK Property Market Ownership 3 Total Real Estate $bn Investable Real Estate 2 $bn Listed Real Estate Estates & Charities 5% US 5,616 3, Limited Partnerships 7% $bn UK Private Investors 3% Other Investors 5% UK Institutions 28% Europe 5,050 2, Japan 2, UK 1, Australia Unlisted & Pooled Funds 8% UK Unlisted Property Companies 15% Overseas Investors 15% Total 14,252 7,044 1,234 UK Listed Property Companies 14% 3 Investment Property Forum (IPF), July UBS Global Real Estate Analyzer, June Real Estate held for investment purposes 7

12 UK Property Market Uniquely Favourable Lease Structure Typical Lease Length (yrs) Rent Review Basis Rent Review Frequency Europe UK 5-25 Open market 5 yrs France 9-15 Index Annual Germany 5-10 Index Annual/Index Change Spain 5 CPI Annual Poland 3-7 US/Eurozone CPI Annual Americas United States 5-10 Fixed/CPI 1, 3 or 5 yrs Brazil Asia Pacific Australia Japan Hong Kong Singapore China India Annual inflation/open market Open market rent or Fixed Open market Open market Open market Open market Fixed Annual Annual Renewal Renewal or 3yrs Renewal Renewal 3 yrs Source: Jones Lang LaSalle 8

13 UK Property Market s Long Leases & High Occupancy Total Portfolio Average lease term to first break, years 14.6 Occupancy Rate 1 % 98.6 Retail Warehouses Superstores Shopping Centres Department Stores High Street All Retail City Offices West End Offices Business Parks & Provincial All Offices Underlying occupancy rate including asset management initiatives and units under offer 9

14 The UK Property Sectors

15 34% The UK Property Sectors UK Commercial Property Market Industrial 15% UK Investable Real Estate Market Breakdown 1 Other 4% Retail 47% Total Value c. 300bn 2 Offices 1 Based on IPD 2 Jones Lang LaSalle 10

16 The UK Property Sectors 1996 UK GDP Growth = 100 Assessing Customer Trends Output and Spending Relative to UK GDP Growth F&BS Output Retail Sales Industrial Output Office Service industries are fastest growing sector London has a unique global competitive strength as a service centre Market in cyclical upswing Retail Long-term fundamental growth prospects Greater asset management potential Retail spending growth resilient Industrial Weaker occupier trends and limited supply constraints Ability to pick between sectors a key performance advantage for BL 1 PMA and Verdict 11

17 UK Property Returns & Rental Growth The UK Property Sectors Retail Office Industrial 3.7 (22% of total) -1.3 (-9% of total) 1.2 (8% of total) Last 5 years Next 5 years 2.6 (34% of total) 3.3 (38% of total) 1.1 (15% of total) (assuming yields constant 2 ) Estimated Rental Growth % pa Total Property Return % pa In the Post Yield Shift environment, occupier appeal and rental growth prospects will be the key driver for future property returns 1 PMA 2 Equivalent Yield plus PMA average ERV Growth (next 5 years) 12

18 European Out of Town Retail In Town Retail All Retail London Offices Business Parks & Provincial Offices - (660) (1,804) (1,669) (166) , (450) 1,206 (638) (108) The UK Property Sectors s Sectoral Moves & Rationale Disciplined asset reviews to improve risk Last 2 financial Disposals Acquisitions Development Net adjusted growth prospects years ( ) Spend Investment 1 Sharpen sectoral focus m m m m Recycling capital within advantaged sectors Out of Town Retail (1,144) 2, ,257 Expand new initiatives ; Europe & Indexed leases 2 Retail activity Built dominant position in Out of Town retail UK and Europe Repositioning In Town portfolio Office activity Concentration on London s service industries Sale of mature assets and recycling capital into development All Offices Residential Other Total (1,835) (300) (232) (4,171) , (746) (265) (80) 115 Disposals from weaker rental growth markets: high street, provincial offices, industrial Over 1.6bn of sales and 419m purchases agreed since year end 1 Net property investment 1 April 2005 to 31 March Indexed-linked portfolio is valued at 1.6bn, principally high street retail, superstores and leisure 13

19 Retail

20 Retail Retail Market Overview Investment market mixed, adjusting to reflect relative growth prospects. Occupier market remains resilient Retail sales up 3.8% year on year 1 ; forecast to grow at 2.9% pa over next 5 years 2 OOT sales expected to grow 3.4% pa 2 vs In Town 1.1% pa 2 Average Town Centre store size 2,100 sq ft 2 Average Out of Town Retail store size 21,000 sq ft 2 Retailers are net acquirers of space. Good demand continues for Open A1 retail parks and superstores BL leadership in Open A1 Out of Town Retail positioned to reflect customer demand 1 ONS Total sales volume in the 3 months to June 2007 compared to the 3 months to June Verdict 14

21 Retail Retail Sales and Sector Demand Retail Sales positive 1 Out of Town Share Increasing 1 6% 60% Growth % pa 5% 50% 50% 42% 4% 40% 32% 3% 30% 26% 2% 20% 19% 15% 1% 10% 0% 0% Total Retail Sales Neighbourhood Town Centre Out-of-town Non-store 5% 11% Out of Town appeal growing with larger and more flexible units sizes, convenience of comparison shopping and lower overall costs of occupation 1 Verdict 15

22 Retail Retail Space Out of Town 32% of UK retail space 1 and Limited supply of new space being created Out of Town 2 only 3% of the total number of retail stores 1 14 N hood (83m sq ft) High Street Shops (137m sq ft) 4 Out of Town (180m sq ft) m sq ft Shopping Centres (170m sq ft) Out of Town Shopping Centre Increasingly constrained supply of new space in Out of Town locations In Town shopping centre development expected to be more than double Out of Town 1 Verdict 2 Verdict and Colliers CRE 16

23 Supply & Demand Dynamics Favour Out of Town Retail Rental Growth - Last 5 years 1 PMA Forecast Rental Growth Next 5 years 1 Average Average Retail Parks Retail Parks Solus Units Solus Units Superstores Superstores Big Shopping Centres Big Shopping Centres Secondary Shopping Centres Secondary Shopping Centres High Street Shops High Street Shops Average ERV Growth % pa (last 5 years) Average ERV Growth % pa (next 5 years) Expect lower sector growth rates overall future rental growth likely to be more discriminating depending on retailer and location appeal 1 PMA 17

24 High Street Shops 0.3bn (3%) Retail bn 1 Leadership in Retail Retail Assets 1 In Town Retail 1.9bn (20%) Out of Town Retail 8.0bn (80%) Retail Warehouses 4.1bn (41%) Superstores 2.3bn (22%) Meadowhall 1.6bn (17%) In Town Shopping Centres 0.7bn (7%) Department Stores 0.9bn (10%) Distinctive portfolio of over 30m sq ft with leadership positions in Retail parks Superstores Department stores 80% of retail assets located Out of Town 85%+ with Open A1 use 2 20 psf average retail rent Retail warehouses 20 psf Superstores 21 psf Department stores 9 psf Shopping centres 35 psf 14% reversionary Average lease length 16 years High occupancy rate of 98.8% 3 1 Properties owned and managed. Proforma for committed developments at external valuers estimated end value at completion 2 Including Open Restricted 3 Underlying retail occupancy rate including asset management initiatives and units under offer 18

25 Retail UK Added European Out of Town Retail Dimension Assets now owned or managed total 1.7bn 1 Retail Warehouse Parks Under-represented in Europe 2 Attractive capital value of 163 psf, gross initial yield to BL of 6.6% and low average ERV of 8 psf Logical extension of UK market leadership Under provision of out of town shopping in many Eurozone markets Attractive supply/demand dynamics, similar to UK, however much less mature Good value compared with in town shopping Retail warehouse rents on average 85-90% 2 3,000 less than rents In Town and c.50% 2 less than UK fashion park Export UK intellectual capital and know how BL European team now 18 people Whilst competition strengthening, still not as strong as in the UK m sq m psm pa 20 Shopping Centres <5% Retail Warehouses 15 58% <5% % of which Retail Parks % 0 2,500 2,000 1,500 1, France Spain Italy 27% Germany 3% 18% 36% Belgium Portugal Lots of Scope for Rental Growth Out of Town 3 UK France Spain Italy Retail Warehouses Shopping Centres High Street 1 Estimated end capital value when complete (including assets contracted) 2 Cushman & Wakefield: Shopping Centre versus Retail Warehouse Stock 3 Cushman & Wakefield: Indicative European Retail Rents Rental values (on overall basis) refer to absolute prime property for each-sector (except UK and France high street rents which are averages of the top ten locations to avoid direct comparison with exceptionally high rents of London West End and Paris Champs Elysees) Germany Belgium Portugal Poland Poland Average UK Fashion Park 19

26 Offices

27 Offices low Office Market Overview Investment market healthy. Favourable rental growth expectations keeping yields City Offices 88m sq ft London s international service industry strength driving occupancy and rents Docklands 18m sq ft Strong City take up of 2.1m sq ft in Q2 2007;28% higher than long-term average 1 Vacancy rates reduced to 5.5%, Grade A 2.7% 1 8.8m sq ft 1 of speculative supply currently under construction in London between now and 2009, but with good occupier demand, no sign yet of cycle peaking BL leadership in London offices a key asset, and leveraging cycle well through development West End Offices 102m sq ft 1 Jones Lang LaSalle 20

28 Offices Demand Flows from London s Competitive Strengths 6% Financial & Business Services set to outperform 1 F&BS employment to grow by 150,000 jobs by % 5% 4% 8% 6% 4% 3% 2% 2% 1% 0% -2% -4% 0% -6% UK GDP London F&BS GDP UK Employment London F&BS Employment Cyclical upturn in London offices is underway with good occupier demand London economy strong with GDP growth outstripping the UK average and employment continuing to rise, led by Financial and Business Services sectors 1 CEBR and PMA 21

29 Offices London Rents Affordable Nominal vs Real London Office Rents 1 Rents vs Salaries Rent psf Indexed to 1990 = Nominal Real West End City Salaries London rents affordable - both in historical terms and compared to other costs 1 Jones Lang LaSalle 2 PMA 22

30 Offices Vacancy Rates City vacancy now 5.5% (Grade A 2.7%) 1 West End vacancy now 3.2% (Grade A 1.8%) Vacancy Rate % Vacancy Rate % All City Grade A All West End Grade A London Grade A vacancy rates now at lowest levels for 6 years 1 Jones Lang LaSalle 23

31 Offices Assessing Market Balance m sq ft m sq ft of speculative supply currently under construction between now and 2009 in the City Average Agents forecast City rental growth 4.6% pa and West End 7% pa over next 5 years Under construction Likely to proceed Pre-let City (LHS) West End (RHS) Requiring pre-let Possible Key judgement is with what pace new supply is delivered to meet or exceed demand in the coming years but forecasts partially self-regulating and economics challenging with high existing land use values and construction cost inflation 1 Jones Lang LaSalle 2 Jones Lang LaSalle historic and Agent s consensus forecasts 24

32 Offices - 7.5bn 1 Leadership in London Offices Office Assets 1 London Offices 7.3bn (97%) City Offices 5.9bn (79%) West End Offices 1.4bn (18%) Business Parks & Provincial 0.2bn (3%) 11m sq ft London portfolio 6.4m sq ft of prime London office investments 3.2m sq ft developments 0.8m sq ft look-through in Canary Wharf (10.8%) Positive rental growth outlook 44 psf average London rent 2 Headline ERV now 46 psf Average lease length 11 years High occupancy rate of 97.8% 3 Continuing intensification of asset management and focus on customer demand 1 Proforma for committed developments at external valuers estimated end value at completion 2 Average contracted passing rent (post expiry of rent free periods) 3 Underlying office occupancy rate including asset management initiatives and units under offer 25

33 Offices Investment in Canary Wharf 17.8% ownership of Songbird 10.8% of Canary Wharf plc 6.7bn of office and retail properties High occupancy rate of 95.6%, leased to high quality tenants 4 new buildings (1.3m sq ft) under construction Canary Wharf 10 office buildings and 6 retail properties totalling 8m sq ft 98m initial investment Already received 113m in dividends Independently valued at 225m Current market value c. 280m 245% return on investment to date 26

34 Development

35 Development Development Strategy Understand occupier needs Location: transport, infrastructure and environment The Leadenhall Building existing building will be more than tripled in size and height to create Quality of specification a new 601,000 sq ft (736ft high) City office tower Space requirements: size, configuration and flexibility Architecture: developing quality buildings with profile Cost: whole cost of occupancy Timing: ability to deliver when market requires Develop highly specified and flexible buildings that meet occupiers needs Develop in a controlled manner Current development programme 5.0m sq ft Focused on London offices and European out of town retail Further 3.3m sq ft of prospective developments 27

36 Development Carefully Timed & Customer Focused Development Building & One West Tower & 201 (593,000 sq ft) Place - Leadenhall Place - (491,000 sq ft) Coleman (127,000 sq ft) Bishopsgate Osnaburgh Building North East Street (822,000 sq ft) Street (612,000 sq ft) Quadrant (379,000 sq ft) (490,000 sq ft) (508,000 sq ft) 1 Completed with 89% Let or Under offer 2 Completed and Fully Pre-let Both Pre-sold 69% Under Offer 2 39% Under Offer 2 100% Let or Under Offer 2 Euston Station & Broadgate (0.1m sq ft) 2007 (1.0m sq ft) 2008 (0.8m sq ft) 2009 (1.1m sq ft) 2011 (1.1m sq ft) 1 Planning application submitted 2 Based on office space only (includes space under option) 28

37 Development Prospective Unbooked Development Profits Developments m March 2007 Valuation 1 1,037 Illustrative sensitivity of potential development surpluses 6 to yield shift and rental growth ( m) Average valuation yield % Costs to Complete 2 1,957 Tenant Incentives 301 Estimated Current Headline Rent 207 Development Yield 3 6.3% Estimated End Value 4 3,988 Estimated headline rent m pa m +25bp 5.27% -25bp -50bp -5% m ,087 +5% ,077 1,294 Valuers Estimated Future Profit % 880 1,067 1,273 1, m of the valuation is cost and 169m is profit booked to date 5 Of which London Office development prospective returns represent 2 Including notional interest 579m, based on average valuation yield of 5.16% & ERV of 154m pa 3 Yield on current valuation plus costs to complete, notional interest 6 Estimated remaining valuation surpluses on committed and to PC and tenant incentives prospective developments (excluding residential, Blythe Valley, 4 4 Net of purchasers costs and including developments (or parts) Broadgate, Euston & Canada Water), based on external valuers to be sold March 2007 assumptions (sensitised for movements in yields & headline rents) 29

38 UK REITs

39 UK REITs 16 UK REITS with Total Market Capitalisation 31bn of which, 8 UK REITs have a Market Capitalisation of more than 1bn Company Market Capitalisation bn Portfolio Size bn Sectors Discount to NAV % Dividend Yield % Land Securities Retail/Office Retail/Office Liberty International Retail/Office Hammerson Retail/Office SEGRO Industrial Derwent London Office Great Portland Estates Retail/Office Brixton Industrial UK REITs with Market Cap > 1bn Mixed Source: UBS, August

40 UK REITs UK REITs Overview became a REIT on 1 Jan 2007 UK rental income & capital profits now largely tax free Dividends to be paid quarterly first full year REIT dividend will total 35p, 106% increase on 2005/6 REIT entry charge of 325m, releasing 1.6bn deferred tax liability 1 UK REITs are a tax election with light regulation Restore competitive fiscal position of UK quoted companies in the property market Provide investor reassurance on dividends, gearing and business focus without constraining existing business models NPV positive for shareholders in tax terms May improve industry capital efficiency as asset buy/sell decisions freer of fiscal distortion The UK REIT regime does not: Discriminate between types of real estate Place limits on development Substantially change the way investors will make money Remove responsibility from management and investors to design and pursue real estate based value creation 1 Net of goodwill 31

41 UK REITs REIT Opportunity Expect investors to re-look at: Allocations to property, and quoted vs unquoted/direct holdings Valuations relative to NAV, free of historic fiscal drag and with higher dividend payouts Opportunity to: Buy/sell where previously inhibited by tax Increase dividends with capital growth reducing as yield shift ends But, freed of tax distortion, companies have an unchanged goal to make money for shareholders out of real estate REITs support s property led strategy, focused on total return underpinned by secure, growing cash flows 32

42 Investment Return Considerations

43 Investment Return Considerations Property Return Prospects 1 Return Prospects - Property Market Equivalent Yield 2 5.2% Market Rental Growth 3 2.7% Return Prospects Indexed Gilts Return Prospects - UK Equities Yield 5 1.6% Dividend Yield 7 2.9% Asset Total 7.9% + gearing, development & asset management - expenses & depreciation + + -? Growth Prospects 6 3.4% Dividend Growth 8 6.6% Company Total Total 5.0% Total 9.5% Weighted Average Cost of Capital (WACC) 4 Real estate s growing cash flows and strong downside protection position it between bonds and equities in Cost of Equity 8.7% hierarchy of total return prospects. Plus added benefits Cost of Debt 6.0% of active management, development and gearing to WACC 7.4% produce good value equity returns 2 IPD Quarterly Index to June 2007 All Property Net Nominal 5 20 year Indexed Gilt 1 This is not a forecast and is for illustrative purposes only, with 4 UBS - CAPM approach based on market risk premium of 5.29% no change in required returns assumed (no yield shift) and beta of 0.66 at June 2007 Equivalent Yield 6 As implied from 20 year Inflation Swap Rate 3 PMA forecast average ERV growth pa (next 5 years) 7 FTSE 100 Dividend Yield 8 Dividend growth forecast by UBS (average of 2007/2008) 33

44 Investment Return Considerations Net Asset Values Properties valued quarterly by external professionals according to the Red Book Valuations mark assets to market Quality of the asset and possible alternative uses Quality of the tenant, security of income and lease length Local area, catchment, competing schemes and planning Current market sentiment, weight of money and similar transactions Valuations provide proxies for property risk characteristics UK NAVs provide a starting point upon which investors can apply their own perceptions of the market; return expectations; and views of the company s strategy & prospects 34

45 s Investment Case

46 s Investment Case Record of Value Creation 25% 20% 15% Earnings Growth 1 Total Shareholder Return 2 Total Return % 30% % 25% 40% 20% % 2 30% 15% % 10% 5% 10% 5% 0% 0% 0% 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR 5 YRS 3 YRS 1 YR Major Peers 4 FTSE Real Estate Index 1 Adjusted, diluted earnings per share (excluding exceptional items, profits on asset disposals and revaluation gains) 2 Total shareholder return represents the growth in share price plus dividends per share (assuming reinvested) 3 Total return (pre-exceptional) 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 SEGRO (some differences in year ends) Based on financial period ends - Number represents s ranking compared to our major peers 35

47 Portfolio Positioned for Rental Growth s Investment Case 55% Retail 1 42% Offices 1 PMA Forecast Market ERV Growth pa 2 80% Out of Town 97% London Retail Warehouses Retail Warehouses (23%) Superstores (13%) Meadowhall (9%) 45% In Town Shopping Centres (4%) 10% Department Stores (5%) High Street (2%) Central London Offices (41%) Business Parks & Provincial (1%) Other (3%) Superstores Shopping Centres High Street London Offices Provincial Offices Industrial All Property Forecast ERV Growth % pa - next 5 years As well as capturing mark to market rental growth potential of 124m 3 1 Proforma for committed developments (classified by end use) at external valuers estimated end value at completion 2 PMA 3 Includes rent reviews and lease break/expiry and letting of vacant space at current ERV (as determined by external valuers) within 5 years, plus expiry of rent free periods 36

48 s Investment Case Value Creation from 4bn Development Programme A key differentiator Over 10m sq ft of developments Of which 5.2m sq ft committed 201 Bishopsgate & The Broadgate Tower (0.8m sq ft) Projects include Puerto Venecia, Zaragoza (2.2m sq ft) Excellent progress to date Construction & costs on plan Capturing customer demand as expected 1.9m sq ft of committed developments already let/under offer Potential for highly profitable development programme Current development yield of 6.3% 1 Base case unbooked profits of 693m 2, even with no rental growth and conservative 5.27% yield Profits highly geared to rents and end yield e.g. at current yields 3 potential profit +57% (c. 1bn) Ropemaker (0.6m sq ft) The Leadenhall Building (0.6m sq ft) 3 Assumes blended yield on completion of 4.77% 1 Yield on current valuation plus costs to complete, notional interest to PC and tenant incentives 2 Valuers current estimates 37

49 s Investment Case Extra Performance from Pro-active Asset Management 10bn of asset turnover since March 2005 refocusing portfolio to concentrate on markets where we have or can build competitive advantage 3.6m sq ft of new lettings and renewals adding 47m of new rent since March 2005 Like for like ERV Growth 6.9% ahead of Market (IPD) 4.3% in 2006/7 Lead by retail warehouses and London offices ERV growth of 2.2% in the 3 months to June 2007, ahead of market (IPD) 1.1% HUT ERV growth of 4.2% in the year, ahead of IPD benchmark (2.2%) New high rents agreed at Broadgate average ERV up 13% in 12 months York House completed Q already 89% let or under offer 1 1 c.40,000 sq ft occupied by as new Head Office 38

50 s Investment Case Cheap to NAV Shares currently at 26% discount to NAV Investor concerns on the macro-environment are reflected in industry stock prices but not, to date, in actual business results 250m share buyback programme announced and underway ( 84m to date) Current price too gloomy in its implied view of s future prospects Company s resilience excellent with exceptional occupancy rates, lease lengths and balance sheet strength Average Premium/(Discount) to NAV Global REITs 1 Japan 45 Australia 33 Europe 15 US -13 UK % 1 UBS, August

51 Summary

52 Summary Distinctive leadership in the two sectors most favoured for growth over next 5 years London Offices Out of Town Open A1 Retail Outstanding development programme Greatest downside protection in the market Longest leases, most prime, advantaged portfolio Leveraging OOT Retail expertise in Europe UK Property Market UK most landlord-friendly market Occupier markets strongest in London offices and Out of Town Retail Macro concerns reflected in industry stock prices but not in actual business to date Issues around interest rate outlook and impact on property important going forward Company resilience excellent with high occupancy rates and long leases 40

53 Disclaimer The information contained in this presentation has been extracted largely from the First Quarter Results Announcement for the three months ended 30 June 2007 and the Preliminary Results Announcement for the year ended 31 March 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 principally exclude gains on disposal of assets and revaluations. EPRA NAV excludes the deferred tax on revaluations and mark to market on effective cash flow hedges and related debt adjustments. This presentation may contain certain forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. does not undertake to update forward-looking statements to reflect any changes in s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. This presentation is made only to investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ('the FP Order'). The content of this presentation has not been approved by a person authorised under the Financial Services and Markets Act 2000 ( FSMA ). Accordingly, this presentation may only be communicated in the UK with the benefit of an exemption set out in the FP Order. An investment professional includes: (i) a person who is authorised or exempt under FSMA; and (ii) a person who invests, or can reasonably be expected to invest, on a professional basis for the purposes of a business carried on by him; and (iii) a government, local authority (whether in the United Kingdom or elsewhere) or an international organisation; and (iv) any director, officer, executive or employee of any such person when acting in that capacity. This presentation is published solely for information purposes. This presentation does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any security, nor a solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of the securities referred to in this presentation in any jurisdiction in contravention of applicable law. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. The distribution of this presentation in jurisdictions other than the UK may be restricted by law and therefore any persons who are subject to the laws of any jurisdiction other than the UK should inform themselves about, and observe, any applicable requirements. This presentation has been prepared for the purpose of complying with English law and the City Code and the information disclosed may not be the same as that which would have been disclosed if this presentation had been prepared in accordance with the laws of jurisdictions outside the UK. All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere.