We are investors in UK property and our focus is on actively managing, financing and developing prime commercial property to Investor Roadshow create the environment in which modern business can thrive. Results Presentation Year ended 31 31 March 2004
CONTENTS! BRITISH LAND TODAY! STRATEGY! INVESTMENT CASE SUPERIOR GROWTH WITH SECURITY! MARKET OUTLOOK! CONCLUSION
British Land Today BUILDING ON STRONG RECORD OF VALUE CREATION 18% Profits Growth 1 2 26% Total Return 2 1 Average Annual Growth 14% 10% 6% 2% 2 1 5 YRS 3 YRS 1 YR Average Annual Return 30% 25% 20% 15% 10% 5% Total Shareholder Return 3 2 3 2 5 YRS 3 YRS 1 YR Average Annual Return 22% 18% 14% 10% 6% 1 1 5 YRS 3 YRS 1 YR British Land Major Peers 4 FTSE Real Estate 1 1 Underlying profits excludes exceptional items and profits on asset disposals 2 Total return represents the growth in adjusted, diluted net asset value per share plus dividends per share (underlying in 2004/5) 3 Total shareholder return represents the growth in share price plus dividends per share 4 Average of major peers - Land Securities, Hammerson, Liberty International and Slough Estates Number represent British Land s ranking compared to our major peers
British Land Today 13,807M TOTAL ASSETS 1 58% Retail: 37% Offices: 71% Out of Town 95% Central London Retail Warehouses 20% Superstores 11% Central London 33% Out of Town Shopping Centres 10% In Town Shopping Centres 8% High Street 9% Provincial 2% Development Other 2% 5% 2 1 Proforma for the proposed acquisition of Pillar announced post year end
British Land Today SUSTAINABLE INCOME: LONG LEASES & LOW VACANCY Total Portfolio Average lease term to first break, years 1 2005 15.9 2004 15.8 2005 2004 3.5 Vacancy rate 1 % 3.1 City Offices 11.9 12.0 6.8 3.7 West End Offices 9.8 10.1 1.0 10.0 Retail Warehouses 16.0 17.0 1.5 1.0 Superstores 21.8 22.7 - - Shopping Centres 14.8 16.0 3.2 3.3 High Street 25.6 24.7 0.6 1.3 3 1 Excluding developments and residential (predominately let on short leases)
British Land Today 2004/5: A YEAR OF SUCCESSFUL ASSET ACTIVITY Portfolio Reshaping! 1,361m attractive property acquisitions, already increased in value by 7%! 344m disposals, 8% in excess of valuation & more to come Active Asset Management! Over 3m sq ft new letting/development success! 226 rent reviews concluded at average 7% over ERV! Excellent asset management results across the business 4
British Land Today A STRONG FINANCIAL PERFORMANCE IN 2004/5 March 2005 March 2004 Increase Net rental income 572m 523m 9.3% Underlying profit before tax 1 175m 149m 17.0% Underlying EPS 1,2 34.3p 31.2p 9.9% Dividend per share (cover 2.2 times 3 ) 15.7p 14.5p 8.3% Total properties 12,507m 10,639m 17.6% Net assets 2 5,824m 5,035m 15.7% NAV per share 2 1111p 966p 15.0% Underlying total return 4,5 22.4% 14.1% 5 1 Underlying profits and EPS exclude profits on asset disposals and exceptional item 2 Adjusted, diluted 3 Dividend is covered 2.2 times by underlying EPS 4 Underlying total return represents the growth in adjusted, diluted net asset value per share plus dividends per share 5 Excluding the exceptional item and the removal of stamp duty exemption for disadvantaged areas
Strategy HOW BRITISH LAND WILL EVOLVE! Bedrock Focus on areas of competitive advantage Bias to high quality assets, long lease profiles, favourable demand/supply characteristics complemented by efficient capital structure Distinctive ability to add value through purchases, disposals and partnerships Excellent integrated risk management skills - blending leasing, development, asset and liability risk into a single attractive and secure growth proposition for shareholders focus on superior long-term income/cash flow growth confident, entrepreneurial and, where justified, contrarian culture 6
Strategy HOW BRITISH LAND WILL EVOLVE! Further develop Pro-active asset management, customer focus & flexibility Disciplined and dispassionate asset review process Outstanding human capital, focused on performance for shareholders Positioning at forefront of investor friendly behaviour And by so doing, produce superior, sustained and secure long-term shareholder returns 7
Strategy INVESTOR FRIENDLY PROPOSITION! Fundamental value! Business performance, with security! Strong corporate governance! Most liquid stock in sector! Well balanced share register! 2005 Initiatives quarterly reporting from December change of valuers from September early adoption of OFR early disclosure of IAS! Best in class disclosure 8
Investment Case POSITIONED FOR GROWTH WITH SECURITY PMA Forecast Total Property Returns Next 5 Years Retail Warehouses Shopping Centres High Street Central London Offices Provincial Offices Industrial BL Proforma 1 Weighting 31% (including Superstores) 18% 9% 35% 2% 1%! Protected against downside prime, low voids, long leases fully underpinning gearing! Positioned for fundamental growth 41% 1 Out of Town retail! Positioned for cyclical growth 35% 1 Central London offices plus development pipeline leverage! Strong rental hedge 1.6bn with rental uplift guarantees! Extensive opportunities to sweat the assets 9 12 2 4 6 8 10 Average Total Return % pa 1 Proforma for the proposed acquisition of Pillar announced post year end Source: Property Market Analysis (PMA)! Attractive new income streams from Funds
Investment Case STRONG GROWTH IN CASH RENTS Annualised net rents Net reversions 1 Committed developments Increase Total Development prospects March 2005 m 625.6 103.5 31.3 134.8 760.4 151.1 Of which contracted m 625.6 66.9 23.5 90.4 716.0 10 1 Reversions include rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over next 5 years (as determined by independent valuers). Excluding voids the reversion is 77m
Investment Case RECOMMENDED ACQUISITION OF PILLAR Makes Sense in its Own Right Excellent Fit & Wider Relevance! Attractive Assets with good growth prospects! Fund Management adds income growth and future options! Management comes over to assure continuity & performance! Pricing clearly fair! Value creating! Synergy with existing assets & business! Accelerates strategy evolution active asset & portfolio management & human capital build! Demonstrates British Land successfully positioning for the future 11
Market Outlook SUMMARY! Rents affordable in most sectors across the economy! But global competiveness issues may restrain occupancy and rental growth except where supply/demand imbalances exist! Yield shift supported by fundamentals of comparison to alternative asset class risk vs real returns Yield correction slower but continuing! Investor demand still exceeding supply as property reweighting in progress REITs can only help 12
Market Outlook PROPERTY STILL OFFERS RELATIVE VALUE 20 15 2004 Real Income Return 20 Year Average 4.1% 3.3% % 10 5 6.3% 2.2% 0 1976 1980 1984 1988 1992 1996 2000 2004 Property Income Returns Inflation (RPIX) Gilt Yield FTSE All Share Yield 13 Source: IPD, National Statistics, Datastream
Market Outlook IPD: SHARP NARROWING OF YIELDS SPREAD 2001-2004 Standard Shops Shopping Centres Range in Equivalent Yields Lower to upper quartile spreads, 2001 and 2004 Retail Warehouses Offices - City Offices - West End Offices - Rest of South East 2004 spread 2001 spread Offices - Rest of UK Standard Industrials Distribution Warehouses 0 1 2 3 percent equivalent yield spreads % 14 Source: IPD
Conclusion Real Estate Market is in good shape! British Land s portfolio is well positioned for the next 5 years but more to do! Management transition is working well Company is active and confident! Expect the focus on growth, quality & security to continue to produce attractive, risk adjusted returns! Sweating the assets will intensify! The portfolio will be actively managed! Human capital enhanced! Investor friendly positioning remains a priority British Land is in good shape 15
We are investors in UK property and our focus is on actively managing, financing and developing prime Appendix commercial property to create the environment in which modern business can thrive. Results Presentation Year ended 31 31 March 2004
Market Fundamentals PROPERTY STILL OFFERS RELATIVE VALUE Asset Yields Prime Property Initial Yields RPIX 10 Yr Gilts Equities Office Retail Industrial 1980 16.90 14.20 6.10 4.50 3.50 6.90 1990 8.10 11.00 5.50 5.25 5.00 7.75 2000 2.10 4.90 2.20 5.75 5.00 6.50 Jan 2005 2.10 4.60 3.00 5.00 4.25 6.25 16 Source: IPD, Datastream, National Statistics, ING REIM
Retail Sector Drivers OUT OF TOWN: INCREASING SHARE OF RETAIL SALES Growth % 12 10 8 6 4 2 0 Out of Town vs Total Retail Sales 1995 1997 1999 2001 2003 2005 2007 2009 36 34 32 30 28 26 24 22 20 % OOT Share of Total Sales Out of Town (left hand axis) Total All Stores (left hand axis) Out of Town % Share of Total Sales (right hand axis) Estimated share of clothing and footwear sales Out of Town Share of Fashion Sales 20% 16% 12% 8% 4% 0% 1999 2000 2001 2002 2003 2004 retail warehousing superstores e-tailing 17 Source: Verdict on Out of town Retailing 2005 Source: Property Market Analysis (PMA)
Office Sector Drivers CITY: DEMAND FUNDAMENTALS SOLID '000 400 350 300 250 200 150 100 50 0 City Employment Set to Rise 140 120 100 80 60 40 20 0 Index (2000 = 100) Rent as % of salary Office Rent are a Low % of Salary Costs 60% 50% 40% 30% 20% 10% 1991 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 City Employment (left hand axis) Financial Services Output (right hand axis) 0% 68 73 78 83 88 93 98 03 18 Source: centre for economics and business research (cebr) Spring 2005 Source: Property Market Analysis (PMA)
Office Sector Drivers CITY: CYCLICAL RECOVERY 80 70 Headline and Effective Rents Agents Consensus Range psf Average Increase BL City Rent Reviews % of rent roll 60 2005 45.00 48.00 + 1.9% 14% psf 50 40 2006 47.50 50.40 + 5.1% 19% 30 2007 52.50 55.40 + 9.3% 14% 20 10 2008 57.00-59.00 + 8.3% 23% 0 80 84 88 92 96 00 04 08 2009 59.75 63.00 + 5.1% 28% Headline Effective 19 Source: Property Market Analysis (PMA)
Income and Cash Flow Year Ended 31 March 2005 SUSTAINABLE INCOME: STRONG TENANT COVENANTS Top 10 Retail Tenants 1. J Sainsbury 2. Tesco 3. Debenhams 4. Great Universal Stores 5. House of Fraser 6. Dixons Group 7. Bhs/Arcadia Group 8. Next 9. Somerfield 10. Boots Top 10 Office Tenants 1. UBS 2. Lehman Brothers 3. Accenture 4. EBRD 5. Herbert Smith 6. Royal Bank of Scotland 7. Government 8. Henderson Global Investors 9. Calyon 10. Deutsche Bank 29% of total rent and 51% of retail rents 21% of total rent and 55% of office rents 20
Income and Cash Flow Year Ended 31 March 2005 LONG TERM INCOME PROFILE m 1000 900 800 700 600 500 400 300 200 100 0 Plus Rental Growth 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Development programme (committed and prospective) Reversionary income (not contracted) Renewal of leases on expiry or break Annualised net rents plus contracted reversions 21
Income and Cash Flow Year Ended 31 March 2005 LONG TERM INCOME PROFILE ASSUMPTIONS Annualised net rents of 625.6m at 31 March 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 66.9m 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 103.5m is based upon estimated rental values (ERV) by our external valuers at 31 March 2005. Reversions have been reduced for the contracted reversions of 66.9m as the rent is received over the next five years* Development programme committed and prospective when completed and let has an estimated rent at 31 March 2005 of 182.4m*, 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 31 March 2005, including our share of joint ventures. 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. 22
The information contained in this presentation has been extracted largely from the Preliminary Announcement for the year ended 31 March 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). Figures include our share of joint ventures, unless otherwise stated. Adjusted diluted net asset value includes the external valuation surplus on development and trading properties and excludes the capital allowances effects of FRS 19. Adjusted earnings per share similarly excludes the capital allowances effects of FRS 19. 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 British Land 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. British Land does not undertake to update forward-looking statements to reflect any changes in British Land 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 2001 ('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 under FSMA; and (ii) a person who invests, or can reasonably be expected to invest, on a professional basis; 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. Persons to whom this presentation is made who may, or intend to, vote in respect of the resolutions to be proposed in respect of the scheme of arrangement relating to the proposed acquisition of Pillar Property PLC are reminded that any decision to vote must be made solely on the basis of the information contained in the scheme document to be issued by Pillar Property plc subsequent to the date hereof. 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. The Directors of The British Land Company PLC accept responsibility for the information contained in this presentation relating to the offer for Pillar Property PLC. To the best of the knowledge and belief of the Directors of The British Land Company PLC (who have taken all reasonable care to ensure that such is the case), the information contained in this presentation relating to the offer for Pillar Property PLC for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information. All opinions expressed in this presentation are subject to change without notice and may differ from opinions expressed elsewhere. 23