Results Presentation/media/Files/B/British-Land-V4/reports-and... · Year ended 31 March 2006 1 EPRA diluted 2 Proforma for Pillar from April – July 2005 (i.e. full 12 mths) 3 Before

Year Ended 31 March 2006

Results Presentation

Year ended 31 March 2006

ContentsIntroduction

Financial Review

REIT Conversion 17REIT Implications for British Land 18Assets & Markets

Market Conditions 19Property Return Prospects still in “Fair Value” Zone 20

Portfolio Positioned for Rental Growth 21

Market Fundamentals & Portfolio Reshaping

A Strong Performance 3

Net Asset Value up 358p to 1,486p (32%) 6Secure & Attractive Risk Profile 7Illustrative “REIT” Financials – Balance Sheet 8Illustrative “REIT” Financials – Income Statement 9

Financial Highlights 1Business Highlights 2

Attractive Rental Growth 4Underlying Profit before Tax up by £47m (26%) 5

Strategy & Operational ReviewDelivering on our Promises 10Strong Record of Value Creation 1213.5% Uplift in 12 Months (13.9% adjusted) 13£14.4bn Total Assets 14Portfolio Positioned for Growth with Security 15Pillar Acquisition 16

£0.7bn Disposals – Tightened Sectoral Focus 22

£2bn Purchases Re-deploy Capital to Primary Markets 24

Retail

Offices

£5.0bn Prime London Offices 37

3.5m sq ft of Well Timed London Office Developments 38

Office Development Prospects 39

Summary

Well Placed for the “Post Yield Shift” Environment 40

London Office Market 35

Office Activity 36

Investment in European Out of Town Retail 25

£12.4bn Retail Portfolio (BL Share £8.8bn) 26

Retail Rental Growth 27

£1.5bn Disposals – Capital Recycling 23

UK Retail Market 28

£6.5bn Dominant Out of Town Retail Portfolio 29

£2.3bn In Town Retail Portfolio 30

Retail Activity 31

Increasing Retail Development 32

£5.4bn Office Portfolio (BL Share £5.2bn) 33

10m sq ft of London Investments & Developments 34


IntroductionStephen Hester, Chief Executive

Year ended 31 March 2006 1 EPRA diluted2 Proforma for Pillar from April – July 2005 (i.e. full 12 mths)3 Before debt refinancing cost in 2005/64 Proportional consolidation of JVs & Funds

Introduction

Financial HighlightsNAV per share1 1,486p – up 32%

– Total return1,3 of 35%– Valuation up 13.5% (13.9% proforma for Pillar2), under new valuers

Properties owned or managed up 33% to £18.5bn

– Net assets1 £7.8bn

Underlying profit up 26% to £228m, Headline pre-tax profit4 of £1,696m

– Gross rental income4 up 19% to £751m– Underlying EPS up 33% to 36p, Headline EPS 240p– Dividends up 8% to 17p

1


Delivering on our promises to renew and work the business hard

– Pillar acquisition integrated; already a success – Over £2.2bn of value enhancing disposals; improving growth prospects,

tightening focus– Development programme accelerating; excellent prospects and timing

Yield shift unlikely to go much further, but like for like rental growth of 2.7% (IPD 2.1%)1 underlines growth prospects for British Land’s prime space

Decision “in principle” to convert to REIT status from early 2007

Clear market leadership in prime London Offices and Out of Town Retail; a great platform for outperformance

Business Highlights

Introduction

2

1 IPD Quarterly Index to end March 2006 like for like gross income growth


Financial ReviewGraham Roberts, Finance Director


A Strong Performance

Financial Highlights

1 Proportional consolidation of JVs & Funds 2 Underlying profits exclude debt refinancing costs, gains on asset revaluations & disposals and related tax, and the capital

allowances effects of IAS 12 – see appendix for full reconciliation to IFRS EPS and profits 3 EPRA diluted NAV (principally to add back contingent CGT) – see appendix for reconciliation to IFRS NAV 4 Total return represents the growth in adjusted, diluted net asset value per share plus dividends paid in year and excludes the

debt refinancing costs in 2004/5 and 2005/6

March 2006 March 2005 Increase

Gross Rental Income1 £751m £630m 19.2%

Profit before Tax1 £1,696m £780m 117.4%

Dividend per Share 17.0p 15.7p 8.3%

NAV per Share3 1,486p 1,128p 31.7%

Total Return4 34.6% 18.8%

Underlying Profit before Tax2 £228m £181m 26.0%

Underlying Earnings per Share2 36p 27p 33.3%

3


Attractive Rental Growth

Financial Performance

Gross rents up 19.2%

2.7% like for like rental growth:

– Retail uplift of 4.0% stripping out

asset management voids

– Offices up 1.1% due to lettings

Market rental growth4 of 2.1%

Gross rental income %March

2006 £mMarch

2005 £m

Properties owned throughout1

+ 4.0%

+ 1.1%

+ 2.6%

+ 2.7%

Disposals 56 57

19.2%

Offices 231 229

Other 12 11

542

Retail 299 288

528

18

18

Other2 19 9

Total 7513 630

Acquisitions 118

Developments 16

1 Investment properties owned throughout the current and prior year2 Includes surrender premiums, new approach to rent review recognition and realignment of JV year ends3 Annualised accounting gross rental income at March 2006 is £677m 4 IPD Quarterly Index to end March 2006 like for like gross income growth 4


Underlying Profit before Tax up by £47m (26%)

£mMarch 20061

March 20051

701 585

9

(53)

(360)

181

780

27p

51

(88)

(436)

228

Profit before tax 1,696

Underlying EPS - diluted 36p

Net rent and related income

Fees and other income

Administrative expenses

Net financing costs

Underlying profit before tax

1 Proportional consolidation of JVs & Funds2 Net of £6m management and £20m third party performance fees (£14m deferred as subject to claw back in event of

underperformance) 3 IFRS requires the 2.5% pa guaranteed rental increases over the lease terms to be recognised immediately4 Closure of Pillar offices, several small business units, redundancies and pension costs, net of new approach to rent review

recognition and realignment of JV year ends


Movement in Underlying Profit £m

Songbird dividend 16

Pillar (8 mths)2 (3)

Debenhams and Spirit purchases3 14

New lettings & rent reviews (net of lease expiries) 15

Effect of other purchases and sales 7

Non recurring items4 (7)

Other (8)

Increase 47

Broadgate & Sainsburys refinancings 13

5


Net Asset Value up 358p to 1,486p (32%)NAV rose to 1,486p driven by strong portfoliovaluation and increased profits

Movements in NAV were:

– £1,679m (320p) portfolio valuation uplifts

– £92m (18p) revaluation of 15.8% investment in Songbird (representing 9.6% of Canary Wharf)2

– £182m (35p) gains on asset disposals

– £185m (35p) underlying profits after tax

– Less £85m (16p) post-tax exceptional charge on Superstore securitisation and derivativeclose-out costs

Total return 34.6%3


March 2006 March 2005

1,486p 1,128p

904p

£5.9bn

IFRS net assets £6.0bn £4.8bn

£12.5bn

£13.9bn

NNNAV per share 1,139p

£7.8bn

Total properties £14.4bn

£18.5bn

NAV per share1

Net assets1

Total properties under management

1 EPRA diluted2 Effective valuation of 195p per share for A&B shares against 233p for AIM listed shares at 31 March 2006 plus accrued

dividend of £18m and D share of £25m3 Total return represents the growth in adjusted, diluted net asset value per share plus dividends paid in year and excludes the

debt refinancing cost in 2005/66


Prudent financial ratios, especiallygiven low income risk

– Leases average 15 yrs to first break

– Vacancy rate remains low

Gearing fell as a result of asset salesand valuation growth (LTV 59%1 post Pillar3, now 46%)

Average interest rate reduced to 5.7%

Long average debt term at 13.4 yrs

Key Financial Ratios1

LTV – Group 42% 50%


46%

1.5x

5.7%

13.4 yrs

£2,415m

52%

1.5x

6.0%

13.5 yrs

£969m

LTV – inc. share of JVs & Funds

Interest cover2

Average interest rate

Weighted average debt maturity

Cash and undrawn facilities - Group

1 Proportional consolidation of JVs & Funds (unless stated as Group)2 Underlying profit before interest and tax (UPBIT) / net interest payable3 Proforma

Secure & Attractive Risk Profile

Finance and Capital Structure

7


March 2006 Proforma

Ring-fence

£m

Non Ring-fence

£m

11,753 -

69

Other investments - 315 315

Remaining deferred tax (122) (41) (163)

(336)

-

(7)

NNNAV per share1 1,320p

Gearing (LTV) 48%

Balance of Business Test 98% 2% 100%

2,592

(6,381)

(287)

7,281

Total

£m

Properties 11,753

Share of Funds/JVs 2,661

Exit charge (2% of gross assets)

(287)

(6,717)

Net assets 7,274

1,431p

Net debt (95:5)

NAV per share

REITs

Illustrative“REIT” Financials – Balance Sheet

By way of illustration, the above proforma balance sheet shows what the effect of REIT conversion would have been based on 31 March 2006 - See detailed list of assumptions in appendix 1 Proforma REIT NAV less deferred tax on Funds & non-ring fenced properties of 31p and mark to market of debt (gross)

of 80p

Conversion charge on March 2006 values is £287m vs contingent tax released of £1.3bn

Based on current interpretation of legislation, key assumptions to note:

– JVs qualify for ring-fence– Units Trust are semi-tax transparent

with rental income tax-free but gains on units (including returns of capital) subject to tax

– Overseas investments are outside REIT ring-fence, although qualify for ‘balance of business tests’ and taxed in same way as now

– Investment in Songbird will not qualify as is a corporate investment

8


Year to March 2006 Proforma1

Ring-fence £m

Non Ring-fence £m

Total £m

Net rent and related income 699-

(84)(414)

Financing of REIT conversion charge (16) - (16)

Tax on underlying profits - (7) (7)Underlying profit after tax 185 20 205

Underlying profit before tax 185 27 212

Interest cover 1.39x 1.43xBalance of Business Test 88% 12% 100%

(12)(30)143

£129m

Fees and other income7012

51(4)

(22)

51Administrative expenses (95:5) (88)Net financing costs (95:5) (436)

Capitalised interestCapital allowances

Earnings yield2 3.1%£129mMinimum dividend payout (90%)

Profits for PID calculation

REITs

Illustrative“REIT” Financials – Income Statement

By way of illustration, the above proforma income statement shows what the effect of REIT conversion would have been based on year ended 31 March 2006 - See detailed list of assumptions in appendix 1 Proportional consolidation of JVs & Funds2 Underlying profit after tax \ share price at 31 March 2006 of 1,241p

Minimum dividend payout (90%) based on March 2006 profits would result in 45% increase in dividend

Over the last 5 years capital allowances have ranged from £14m to £31m

– 11% to 22% of underlying profits

Non ring-fence income includes:– Overseas rents– Fees from Funds and JVs– Songbird dividends

Allocation of admin expenses and financing costs to be determined; for simplicity assumed 95:5 split

9


Strategy & Operational ReviewStephen Hester, Chief Executive


Delivering on our Promises

And focused on producing superior, sustained and secure long-term shareholder returns


Intensified Portfolio Reshaping Management and Culture Renewal

Investor Friendly PositioningPro-active Asset Management

– Sweating the assets foroutperformance

– Helping to clarify andenhance valuation potential

– Capital recycling to further improve risk adjusted returns

– Delivering the capability to outperform

10




Intensified Portfolio Reshaping Management and Culture Renewal

Investor Friendly PositioningPro-active Asset Management

– £2.0bn acquired, £2.2bn sold– Average valuation gain of 7.8% to

date on purchases, 11.5% on disposals

– Sector focus sharpened, growth prospects improved

– 1.2m sq ft new lettings, 229 rent reviews concluded 5.3% over ERV, rents up ahead of market

– Record level of Fund performance fees

– Development programme also at a record level (6.3m sq ft)

– Clear and focused strategy Execution going well

– Change of valuers, quarterly reporting, market leading disclosure

– Focused on outperformance

– Four new Board members(2 Executive, 2 Non-Executive)

– Property facing teams doubled– Significant cultural change and

Head Office move

11


5%

10%

15%

20%

25%

30%

35%

5 YRS 3 YRS 1 YR

Strong Record of Value Creation

British Land1 Underlying profits excludes exceptional items, profits on asset disposals and revaluation gains2 Total shareholder return represents the growth in share price plus dividends per share (assuming reinvested)3 Total return represents the growth in adjusted, diluted net asset value per share plus dividends per share4 Average of major peers - Land Securities, Hammerson, Liberty and Slough (some differences in year ends)5 IFRS (previously numbers based on UK GAAP) Number represents British Land’s ranking compared to our major peers

Major Peers FTSE Real Estate Index

10%

20%

30%

40%

50%

60%

5 YRS 3 YRS 1 YR0%

5%

10%

15%

20%

25%

30%

5 YRS 3 YRS 1 YR

Profits Growth1 Total Shareholder Return2 Total Return3

11

2

1

1

1

1

11

4

5 5 5


12

Year ended 31 March 2006 1 Includes valuation movements in developments, purchases and capital expenditure, and excludes sales 2 Pro-forma for Pillar from April – July 2005 (i.e. full 12 mths)3 Reversionary yield to BL at Year 5

Portfolio yields now 4.9% net equivalent, 4.6% gross initial yield (4.8% adding back rent frees) and 5.3% gross reversionary yield3

23.7%

14.9%13.1%

14.3%

15.5%12.2%

17.7%

7.1%16.0%

14.4%12.6% All Retail

Superstores

Shopping Centres

High Street Shops

All Offices

City Offices

Business Parks & Provincial

Development

Retail Warehouses

West End Offices

Department Stores

(13.3% adjusted2)

13.5%1 Uplift in 12 Months (13.9% adjusted2)

(16.3% adjusted2)

Valuation

13


61% Retail: 36% Offices1:73% Out of Town 96% Central London

Other3%High

Street3%

Office Development5%

Business Parks & Provincial 1%

Central London Offices30%

Department Stores

6%

In Town Shopping Centres

7%

Meadowhall11%

Superstores12%

Retail Warehouses22%

£14.4bn Total Assets

Portfolio Positioning

Offices 37%

Development 2%Other

6%In Town Retail 19%

Out of Town Retail 36%

55% Retail: 39% Offices:68% Out of Town 94% Central London

March 2005

45%

16%

1

1 As at 31 March 2006, costs to complete all office developments would increase their proportion of the Total Portfolio to 14%and Offices overall from 36% to 42% (of which London represents 40%)

14


0 2 4 6 8 10

British Land Portfolio

Positioned for fundamental growth– 45%2 Out of Town retail

Positioned for cyclical growth– 35% Central London offices plus

outstanding development pipelineleverage

Protected against downside– prime, low vacancy, long leases

Strong rental hedge – £1.6bn with rental uplift guarantees

Extensive opportunities to ‘sweat theassets’

Attractive income streams from Funds

PMA1 Forecast Total Property ReturnsNext 5 Years

Average Total Return % pa

1%

1%

35%

9%

18%(11% out of town)

34%(inc. superstores)

BL WeightingMarch 2006

Retail Warehouses

Shopping Centres

High Street

Central London Offices

Business Parks & Provincial Offices

Industrial

Total

1 Property Market Analysis (PMA), April 2006 2 Includes retail warehouses, superstores and Meadowhall Shopping Centre

Portfolio Positioning

Positioned for Growth with Security

15


£3.6bn Assets Under

ManagementHUT £3,113m2 CLOUT £102m2 HIF £157m2PREF €289m3

Pillar has enhanced shareholder value and accelerated change at BL

Pillar Acquisition rationale validated

- £1.3bn1 of ‘the best’ retail warehouse assets (76% Open A1), expected to offer the most attractive continuing growth in the retail sector plus benefits of creating market leadership

- Strong management team - Attractive Fund Management business

(earnings plus strategic options for other assets)

Integrated and going well- 35.5% HUT return, 24.1% ungeared -

2.5% above IPD4 for 2005- Rental growth (ERV) in HUT 10.2% for

2005, double the ‘sector’4 average- £50m5 performance fees from record

outperformance- Fund activity continues apace – new

residential contract- Expanding in Europe via PREF

1 Direct and share of indirect gross asset value at date of acquisition2 As at March 20063 As at December 2005 (plus Montgeron retail park acquired in January 2006)

Pillar Acquisition

4 IPD Retail Warehouse Index for 20055 Of which British Land’s share eliminated is £17m and 50% subject to clawback risk so not yet booked

16


Decision “in principle” to convert to REIT status “as is”, from early 2007

Rationale– Attracted by increased freedom to compete and “make the right property

decisions” with less fiscal distortion– HMT’s chosen conversion charge basis and relaxation of interest cover test

helpful to British Land– Positive NPV of tax arrangements (2% Conversion charge vs NPV of future tax

on capital gains and profits)– Comfortable that “operating restrictions” do not impose competitive

disadvantage– Comfortable paying increased dividends given sector leading income security

Intend to provide for any related liabilities/charges in 2006/7

REITs

UK REIT levels the “playing field” vs. other non-REIT players –but the “game” remains the same: creating value from actively managed and efficiently financed real estate

REIT Conversion

17


Facilitates value creation from active management of our real estate activities – less tax, market and “decision” distortions

Sector selection not impacted, development programme not materially impacted

Income valuable for its certainty and growth prospects, but average UK REITdividend yield likely below 3%

Total Return still the key measure

Debt still “cheaper” than equity (though less so)

British Land as a single REIT the favoured option on conversion

REITs

Implications for British Land

18


Market Fundamentals & Portfolio ReshapingBob Bowden, Property Director


Range in Equivalent YieldsLower to Upper Quartile Spreads1

0 0.5 1 1.5 2 2.5

Industrial

West EndOffices

City Offices

Standard Retail

ShoppingCentres

RetailWarehouses

Spread of equivalent yields %

2000 spread March 2006 Spread

Market ConditionsReal estate markets offered another year ofstrong gains driven by yield shift & compression

– Secondary yields at lows vs prime

Overall markets fairly reflect value of property’s rental growth prospects and ‘bond-like’ downside protection

– Expect growth rates to reduce, but returnscompetitive with other asset classes

Economy’s growth prospects support modest rental growth but

1 IPD

Market Fundamentals

Greater differentiation in relative performance in future

– Outperformance requires correct portfoliopositioning, intense asset management &effective risk-reward assessments

19


0

3

6

9

12

15

1985 1988 1991 1994 1997 2000 2003 March2006

%

Property Income Returns Inflation (RPIX)Gilt Yield FTSE All Share Yield

March 2006 Real Income Return2 2.9%2005 3.4%20 Year Average 3.4%

1 IPD & ONS2 Current spot real income return based on IPD Quarterly Index to March 2006 Property Income Return (annualised)3 IPD Quarterly Index to March 2006 All Property Initial Yield4 Property Market Analysis (PMA), April 2006 All Property average rental growth pa over next 5 years

Market Fundamentals

Property Return Prospects still in “Fair Value” Zone

Return Prospects

Initial Yield 5%3

Rental Growth 2%4

Total 7%

+ gearing & asset management

- expenses & depreciation

Real Property Income Returns vs Other Asset Classes1

20


Portfolio Positioned for Rental Growth

Market Fundamentals

0

1

2

3

4

5

6

CentralLondonOffices

BusinessParks &

ProvincialOffices

RetailWarehouses

ShoppingCentres

High Street Industrial

% p

a

1 Property Market Analysis (PMA), April 2006

PMA Forecast Average ERV Growth pa 2006-20101

Real estate fundamentals likely to play more important role going forward than yield shift

Portfolio has leadership positions in two sectors with best prospects for rental growth over next 5 years

– Central London early signs of upturn

– Retail warehouses/superstores fundamental supply & demand imbalance

However stock selection within sectors will play a much more important role going forward

All Property

21


Sales Price£m

BL Share£m

Gain1

%Residential Portfolio 300 300 -High Street Retail:

Legal & General House, Kingswood 74 74 30.4

Daventry (Plots E1,E3,E4&C1)2 83 42 19.0

Heathrow Gateway (Units 1-3) 81 81 17.2

16 retail units 86 86 14.1

6 in-town supermarkets 49 49 3.8

135 135 10.2Provincial Offices:

Microsoft Campus, Reading 52 52 9.8

126 126 21.0

164 123 17.8

Industrial & Distribution

Others 44 35 -

Total 769 719 7.9

Portfolio Reshaping

£0.7bn Disposals – Tightened Sectoral Focus

Kingswood £74m

Residential £300m

High Street Retail £135m

Heathrow Gateway £81m

1 Sale price above last year end valuation (March 2005) / fair value on acquisition2 International Rail Freight Terminal – BL Rosemound (JV)

22


Price £m

BL Share £m

Gain1

%Offices:Plantation Place, EC3 527 527 20.2CityPoint, EC23 520 187 8.31 Fleet Place, EC4 120 120 21.0

Banbury Cross Retail Park, Banbury4 69 12 0.4

10 Fleet Place, EC4 109 109 15.62-16 Baker Street, W1 57 57 31.6

1,333 1,000 18.0

Auldhouse Retail Park, Glasgow 40 40 4.5Matalan Unit, Romford5 12 3 10.8

595 486 4.9Total 1,928 1,486 13.3

Retail:ILAC Shopping Centre, Dublin 85 85 25.0Manchester Fort Shopping Park 167 167 -2

Greyhound Retail Park, Chester 66 66 -Palace Grounds Retail Park, Hamilton4 65 22 4.1Solarton Retail Park, Farnborough 48 48 -2

Priory Retail Park, Merton 43 43 6.8

Retail Warehouses £510m

1 & 10 Fleet Place, EC4 £229m

£1.5bn Disposals – Capital Recycling

Portfolio Reshaping

Plantation Place, EC3 £527m

CityPoint, EC2 £520m

1 Sale price above last year end valuation (March 2005) / fair value on acquisition2 Sale contracted by Pillar prior to British Land acquisition3 City of London Office Unit Trust (CLOUT)4 Hercules Unit Trust (HUT) – Banbury 50% owned 5 Hercules Income Fund (HIF)

23


Portfolio Reshaping

Ropemaker Place, EC2 £131m

Pillar Property PLC £1.5bn

• £1.5bn of top quality assets, principally Open A1 retail parks

• Attractive fund management business• Strong management team

• Forward commitment to acquire upon completion of construction in mid 2007

• 500,000 sq ft freehold edge of town Shopping Centre

• Attractive 6% initial yield and low ERV

St Stephen’s Centre, Hull £135m

• Development site with consent for 505,000 sq ft of offices

• Consented design being reviewed to maximise efficiency and floor area

• Construction will start later this year for completion mid 2009

£2bn Purchases Re-deploy Capital to Primary Markets

24


Investment in European Out of Town Retail“PREF” targeting €1bn of out of town retail parks in Eurozone by end 2006

– 40%1 BL ownership– 14 assets acquired and contracted €628m

(3.6m sq ft) and others in “pipeline”– Geared total return of 18.7% in 2005

British Land taken first significant step into JVdevelopment at Puerto Venecia, Spain

– €500m2 (2.1m sq ft) retail development– Anchors committing to scheme include IKEA,

Leroy Merlin, Decathlon, Porcelanosa, Conforama& Boulanger

– Construction commenced with completion expected end 2008

New Initiatives

Attractive IRRs and building on UK expertise

Sintra Retail Park, Lisbon

1 When €214m of new equity fully contributed 2 Estimated end capital value of whole scheme when complete

25

Puerto Venecia, Spain


RetailAndrew Jones, Co-Head of Asset Management


£12.4bn Retail Portfolio (BL Share £8.8bn)

Overview

Superstores£1.8bn (20%)

Meadowhall£1.6bn (18%)

High Street Shops£0.4bn (5%) Department Stores

£0.9bn (10%)

In Town Shopping Centres

£1.0bn (12%)

Retail Warehouses£3.1bn (35%)

Out of Town£6.4bn (73%)

An Advantaged Portfolio of 30m sq ft with Distinctive Leadership Positions

9 In Town Shopping Centres

78 High Street Units

39 Department Stores

109 Retail Warehouses

71 Superstores Meadowhall

26


Retail Rental Growth

Rental Value Growth (ERV) British Land1

%

Retail warehouses 6.12

Superstores 4.4

2.2

High street 1.9

3.9

Shopping centres

All Retail

Performance

1 Like for like ERV growth (IPD)2 Includes HUT for full 12 mths

27


Retail trading highly competitive but far from ‘doom and gloom’

Retailers paying increasing attention to total occupancy costs

Retail property market increasingly discerning

Continuing migration of high street retailers out of town

Rental growth disparity according to planningconsents and unit sizes

– Large Open A1 space continues to enjoy strong rental growth

Increasing focus on unit size & flexibility

Out of town continues to take an increasing share of total retail sales

1 Verdict, May 2006

Forecast Sales Growth - next 5 yrsOut of Town 3.1% paIn Town 1.7% pa

UK Retail Market

Market

Out of Town vs In Town Retail Sales1

0

2

4

6

8

10

12

1995 1997 1999 2001 2003 2005 2007 2009G

row

th %

202224262830323436

% O

OT

Sha

re o

f Tot

al S

ales

Out of Town (LHS)Total (LHS)In Town (LHS)Out of Town % Share of Total Sales (RHS)

28


Strategy & Positioning

Focus on prime Open A1 Shopping parks over 100,000 sq ft & Superstores which dominate catchment area

Market competitive – focusing on off market transactions, increasing development and Europe

Portfolio well positioned for performance:– 71% Open A1 and 10% Open Restricted – Average ERV of £21 psf – Mezzanines protected for over 1m sq ft– 21% of Open A1 space let to bulky retailers– Adoption of “customer focused model” to provide

retailers with optimum sizes and environment

Active management to enhance retailer mix & environment to attract high street retailers

– 7 out of top 15 retailers on retail parks now high street retailers

1 Property Market Analysis (PMA), April 20062 British Land and JVs and Funds (100% by value)

£6.5bn Dominant Out of Town Retail Portfolio

0

1

2

3

4

5

6

Solus TraditionalParks

Other HybridParks

Key Hybrid& Shopping

Parks

% P

MA

Ave

rage

ER

V G

row

th p

a (N

ext 5

yea

rs)

Open A1 Shopping Parks Expected to Outperform1

9% 26% 11% 49%BL Properties Owned & Managed2

Average

29



£2.3bn In Town Retail PortfolioConcentrate on best towns & high streets

Continued divestment from high street shops and selective acquisitions - St Stephen’s Shopping Centre, Hull

Reposition shopping centre portfolio towards those with asset management opportunities

– Refurbishment of Eastgate Centre, Basildon – Redevelopment of Bon Accord Centre, Aberdeen

Portfolio offers opportunities for growth underpinned by a secure rising income stream:

– £0.9bn with minimum/fixed rental uplifts– Gross initial yield of 5% rising to 5.6% reversionary – Low vacancy of only 3.5%– Long lease length of 18 years– Strong covenants

• Principally let to Debenhams and House of Fraser for over 30 years

• Debenhams portfolio has 2.5% pa minimum rental increases

• Reversionary average rents of £8.70 psf

39 Department Stores

• 3.3m sq ft of retail space• Specific asset management

initiatives including refurbishments,extensions and developments

9 In Town Shopping Centres

• Located principally in prime retail positions across the UK

• 65% by value located within a Top 20 Centre as defined by CACI

• Further disposals planned

78 High Street Units

30


Retail Activity£621m of sales: £220m in town shopping and £401m of “bulky goods” retail warehouses

Invested £1.6bn mainly in Open A1 retail:– Pillar £1.3bn of top quality retail parks– Forward commitment to acquire St Stephen’s Centre, Hull– HUT acquired 4 retail parks in Lincoln, Bristol, Glasgow

and Hayle – PREF acquired 2 retail parks located in France– Completed development of Nugent Shopping Park– In April, increased ownership of HUT from 34.6% to 36.3%

Achieved 3.9% rental value growth across retail portfolio– Rental growth (ERV) in HUT 10.2% for 2005

192 rent reviews concluded 5.8% above ERV

179 lettings & renewals increasing rents by £9m pa

Received planning consents for over 570,000 sq ft1 of retail

Asset Management

1 Gross lettable area. Including 3 planning consents received in April 2006

Eastgate Retail Park, Bristol

31


• 94,000 sq ft Open A1 planning consent for Phase 2

• Adjacent to 200,000 sq ft existing HUT scheme let to occupiers including Tesco, HMV, Arcadia, New Look, Borders, Boots & Next

• Currently seeking pre-lets before commencement of construction

• 197,000 Open A1 planning consent– Pre-sale to M&S of 90,000 sq ft– Extension to Tesco of 28,000 sq ft– 55,000 sq ft of additional retail units

• The scheme will become a regionaldestination of over 500,000 sq ft

• 106,000 sq ft Open A1 planning consent• Enable the extension of the M&S store• Provide flexibility for future extensions

at ground and mezzanine levels

• Construction completed of 117,000 sq ft shopping park

• Current tenants include Next, Cotswold, Debenhams, Game, Clarks, Mothercare & Costa

• Other retailers expected to commit include HMV, WHSmith, Mamas & Papas, Jessops, Clintons, Waterstones & Vision Express

Increasing Retail Development

Development

Broughton Shopping Park, Chester1

Nugent Shopping Park , OrpingtonGallions Reach Shopping Park, Beckton

Fort Kinnaird Shopping Park, Edinburgh1

32

1 Owned in HUT


OfficesTim Roberts, Co-Head of Asset Management



£0.2bn (4%)City Offices£3.5bn (68%)

Office Developments£0.8bn (15%)

West End Offices

£0.7bn (13%)

Overview

London Offices£5.0bn (96%)

Market Leader - Well Positioned for Cycle Upturn

Ropemaker Place

The York Building

The Broadgate Tower

Broadgate

Regent’s Place

£5.4bn Office Portfolio (BL Share £5.2bn)

The Willis Building

1

1 £2.3bn (34%) including costs to complete

33


10m sq ft of London Investments & Developments

Overview

BL InvestmentsBL DevelopmentsSongbird Investment

96% in London

34


0

1

2

3

4

5

2006 2007 2008 2009 2010

m s

q ft

Completions of which Pre-let

City Vacancy1

1 Jones Lang LaSalle and BL Forecast2 Estimated total completions 2006-2010 totalling 17.5m sq ft (including known pre-lets in 2006/7) based on DTZ potential

London Office Market

Market

pipeline

Total supply falling with Central London vacancy rate now 6.8%, City 9.3%

London economy led by financial & business services set to expand resulting in growing demand

Signs of rental growth now across the whole of Central London

In City, Grade A vacancy falling and immediate outlook is for acceleration of these trends from currently modest start

But supply will awaken and there is not a leasing ‘bonanza’ – so product and timing remain crucial

Investment market already pricing in growth in rents

City Development Pipeline2

35

02468

10121416

2003 2004 2005 2006 2007 2008 2009 2010

Vaca

ncy

%

BL Forecast


Office Activity£435m of purchases and £163m invested in development pipeline

£1.1bn of sales, 18% above valuation– Plantation Place sold at sub 5% net initial yield

Over 267,000 sq ft of new lettings in London,generating £8m additional rent pa

– Post year end letting under offer at 10 Exchange Square at £50 psf

Obtained planning consent for 3m sq ft1 of primeLondon offices

Vacant possession of Leadenhall building securedfor end 2006, to facilitate development start Q1 2007

Asset Management

The Leadenhall Building, EC3

1 Gross area

36


£5.0bn Prime London OfficesMaintain and increase portfolio weighting during upturn in cycle

Principal increase through development programme

Recycle capital through sale of “more mature”assets or those which do not offer adequaterisk adjusted returns

Portfolio well positioned for performance:

– Existing vacancy nearly all new or take back accommodation

– Broadgate 15 individual buildings, where rents vary between £37 - £55 psf and leases range in length from 4 to16 years

– 1.7m sq ft for review in 2008 & 2009 withaverage passing rent of £43 psf

– Broadgate “top-up” net initial yield of 5.3%

London Offices increases from 35% to 40% of total portfolio

1 Profrorma for costs to complete all office developments

Proforma for Office Developments at Cost1


37

Central London Offices 40%

Investments 27%

Developments13%

Other Offices2%


3.5m sq ft of Well Timed London Office Developments

Development

38

Pre-let

Pre-soldPre-sold

The York Building (138,100 sq ft)

The Willis Building (475,000 sq ft)

35 Basinghall Street (199,000 sq ft)

One Coleman Street (180,000 sq ft)

Ludgate West (127,000 sq ft)

The Broadgate Tower & 201 Bishopsgate (822,000 sq ft)

Ropemaker Place (548,000 sq ft)

Regent’s Place -Osnaburgh Street (380,500 sq ft)

The Leadenhall Building (601,000 sq ft)

2008 (0.8m sq ft)

2006 (0.1m sq ft)

2007 (1.0m sq ft)

2009 (1.0m sq ft)

2010 (0.6m sq ft)


Office Development ProspectsOffice Developments £m

March 2006 Valuation 836

Costs to Complete1 1,505

Tenant Incentives 315

Development Yield3 7.3%

Estimated End Value 3,265

Estimated End Surplus 609

Estimated Rent2 193

Development

1 Estimated construction costs to complete including notional interest during construction period to PC2 Current estimated headline rent (before tenant incentives)3 Yield on current valuation plus costs to complete, notional interest and tenant incentives4 Estimated remaining valuation surpluses (after tenant incentives) on committed and prospective office

developments, assuming current headline rents of £193m pa and current average valuation yield of 5.63% (sensitised for -25bp to + 50bp movement in yields and -5% to +15% growth in headline rents)

39

Illustrative sensitivity of potential development surpluses4 to yield shift and rental growth (£m)

Average valuation yield %

+25bp

323

£193m 474 609 757 919

625

777

928

£m 5.63% -25bp -50bp

451 591

922

1,088

1,253

+5% 767

746

1,093

1,267+10% 925

1,440+15% 1,083

-5%

Est

imat

ed h

eadl

ine

rent

£m

pa


SummaryStephen Hester, Chief Executive


Well Placed for the “Post Yield Shift” Environment

Distinctive leadership in the two sectors most favoured for growth over next 5 years

– London Offices, Out of Town Retail

Greatest downside protection in the market

– Longest leases, most prime, advantaged portfolio

Outstanding development programme

Demonstrable added value fromdisciplined portfolio reshaping & pro-active asset management

Proven “deal making” credentials

Fund management skills enhance earnings and increases manoeuvrability

Capability to add value in other sectors and geographies, building off core expertise

Summary

Property Capabilities

40


Appendix


ContentsAppendix

Contracted Rental Increases from Fixed and Minimum Uplifts 8

£2.2bn Sales – 11.5% above Valuation 11

2.5m sq ft of Committed Projects 163.8m sq ft of Prospects > 60% with planning approval 17Portfolio Valuation By Sector 18Ungeared Performance vs IPD Index – 2005/6 19109 Retail Warehouses £3,112m: Up 14.4% 2071 Superstores £1,767m: Up 16.0% 21

Rent Reviews 5.3% higher than ERV 12332 Lettings generating £18m pa of New Rent 13Developments adding Value 141.2m sq ft Completed Projects 15

Balance Sheet (Proportional Consolidation) 1Reconciliation of EPRA Diluted Net Assets 2Movement in EPRA Diluted Net Assets 3EPRA Triple Net Asset Value 4Income Statement (proportional consolidation) 5Reconciliation of Underlying Profit after Tax 6Contracted Rental Increases from Rent Free Periods 7

Illustrative “REIT” Financials – Assumptions 9£2.0bn Purchases – Already increased 7.8% in Value 10

Meadowhall £1,550m: Up 5.4% (pre-capex 8.4%) 22

Annualised Net Rents and ERV Analysis 26

Upturn in City Rents Predicted 32

City: Vacancy Forecast 33

In Town Retail £2,309m: Up 13.3% 23

Broadgate £3,227m: Up 13.5% 24

Regent’s Place £580m: Up 13.8% 25

Reversionary Income: £102m 27

Yield Profile 28

Strong Growth in Cash Rents in Prospect 29

Sustainable Income: Strong Tenant Covenants 30

Sustainable Income: Long Leases & Low Vacancy 31


Balance Sheet (proportional consolidation)Group JVs & Funds March 2006 March 2005

Total properties 11,753 2,661

(1,116)

7

EPRA Diluted Net Assets 6,250 1,552 7,802 5,913

Loan to value ratio 46% 52%

EPRA Diluted NAV per share 1,486p 1,128p

12,50714,414

(6,684) (6,538)

(56)72

Net debt (5,568)

Other net assets/liabilities 65

Results

1


Reconciliation of EPRA Diluted Net Assets

Results

March 2006

£m

March 2005

£m

Net assets 6,016 4,783

Deferred tax on contingent gains 1,510 963

IAS12 capital allowance effects 135 130

EPRA net assets 7,759 5,883

Adjust to fully diluted on exercise of share options 43 30

EPRA diluted net assets 7,802 5,913

Mark to market on interest rate swaps (net of tax) 24 17

External valuation surplus on trading & finance lease properties 74 63

Goodwill - (73)

2


£m Pence per Share

At 31 March 2005 5,913

1,953

Underlying profit after tax 185 35

Debt refinancing cost (post tax) (85) (16)

Goodwill on acquisition of Pillar (net of deferred tax) (56) (11)

Other (24)1 (6)

Dividends paid (84) (16)

7,802

1,128

At 31 March 2006 1,486

Net gains on property and investments 372

Movement in EPRA Diluted Net Assets

Results

3

1 Includes £20m of deferred tax on intangible asset


EPRA Triple Net Asset Value

£m Pence per

Share

EPRA diluted NAV 7,802

(1,530)

(294)

5,978

1,486

NNNAV 1,139

Deferred tax arising on contingent gains & trading surplus (291)

Mark to market of debt and derivatives (net of tax) (56)

Results

4


Income Statement (proportional consolidation)£m Group JVs & Funds March 2006 March 2005

Net rent and related income 589 112

Fees and other income 50 1 51 9

Administrative expenses (81) (7) (88) (53)

Gains on asset disposals 167 15 182 26

Debt refinancing costs (122) - (122) (180)

Amortisation of intangible asset (10) - (10) -

Impairment of goodwill (240) - (240) -

Net financing costs (369) (67) (436) (360)

Underlying profit before tax 189 39 228 181

Net valuation gains 1,295 363 1,658 753

Tax - Tax charge relating to underlying profit

- Other tax arising

(31)(310)

(12)(94)

(43)(404)

(42)(84)

Profit for the year after tax 938 311 1,249 654

Underlying EPS 36p 27p1

585701

Results

5

1 Restated to exclude prior year tax adjustments


Reconciliation of Underlying Profit after Tax

Results

March 2006 £m March 2005 £m

Profit before tax 1,590 738

Net valuation gains (1,658) (753)

Gains on asset disposals (182) (26)

Impairment of goodwill 240 -

Debt refinancing costs 122 180

Underlying profit before tax 228 181

Tax on underlying profit (43) (42)

Underlying profit after tax 185 139

Amortisation of intangible asset 10 -

Deferred and current taxation of joint ventures & funds 106 42

6


Contracted Rental Increases

Results

£m Year ended Year ending 31 March

Properties sold in year 10 - - - -

Of which total cash flow 46 59 77 81 81

Of which SIC 15 rent free adjustment 35 14 12 11 11

Contracted Accounting Gross Rental Income March 2006 2007 2008 2009

38 57

34

1

92

34

1

Total rent (accounting basis) 81 73 89

2010

Offices 37

92

54

34

1

57

34

1

Retail 33

Other 1

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

LFrom Lettings with Rent Free Periods1

7


Results

£m Year ended Year ending 31 March

Of which total cash flow 61 64 66 68 69

Of which IAS17 fixed uplift adjustment 20 18 16 14 13

Contracted Accounting Gross Rental Income March 2006 2007 2008 2009

40

14

27

40

81

14

40

14

2828

Total rent (accounting basis) 8282 82

2010

Debenhams

82

4040

14 14

28 28

Spirit Pubs

Other

Contracted Rental Increases From Fixed and Minimum Uplifts1

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 8


Illustrative REIT Financials - Assumptions

Results

The Bill is not final and the associated regulations and guidance have not yet been issued.As such the proforma REIT Balance Sheet and Income Statement assumes that the Finance Bill published on 7 April 2006 is enacted substantially in its current form with satisfactory regulations and guidance.

The analysis is also based on the assumption, for ease of presentation, that the entire UK property portfolio qualifies for REIT status. British Land has some property held through historic structures where the eligibility for REIT status may depend on the subtleties of the finalised legislation and regulations (which have not yet been seen).

Key calculations have been prepared as follows:Entry charge of 2% of the total value of the ring-fenced portfolio. The amount of entry charge will depend upon the total value of properties qualifying for REIT status.

Under the REIT regime, the Property Investment Dividend (PID) must be at least 90% of ring-fenced profits after adjusting for capital allowances claimed and reversing interest capitalised on development properties.

The Earnings yield is calculated by dividing the underlying profit after taxation by the British Land share price as at 31 March 2006 – 1,241p.

The interest cover test has been calculated on underlying profit before net interest payable and taxation divided by net interest payable. The proposed interest cover test in the legislation is measured on gross interest payable with no deduction for capitalised interest.

The balance of business tests which is measured on a ‘worldwide’ basis requires that 75% of activities, measured by asset value and income, are property investment related. Overseas investments count for the purposes of the balance of business tests even though outside the ring-fence.

9


£2.0bn Purchases – Already increased 7.8% in ValuePrice

£mBL Share

£mValue Uplift

%1

Pillar (wholly owned & share of Funds) 1,566 1,566 9.41

St Stephen’s Shopping Centre, Hull4 135 135 -2

4 Retail Parks4 97 33 2.8

2 Retail Parks (France)5 50 17 -

Others 167 150 6.5

Ropemaker Place, EC2 131 131 -3

Total 2,146 2,032 7.8

1 From purchase price on completion to 31 March 2006 – for Pillar 8 months since 28 July 20052 Forward purchase, expected completion mid 2007, not yet revalued3 Purchased 21 March 20064 Hercules Unit Trust (HUT)5 PREF – Europark Fund - purchases not yet revalued

Portfolio Reshaping

10


Portfolio Reshaping

£2.2bn Sales – 11.5% above Valuation

1 Sale price above last year end valuation (March 2005)/fair value on acquisition2 Sale contracted by Pillar prior to British Land acquisition3 City of London Office Unit Trust (CLOUT)4 Hercules Unit Trust (HUT) – Banbury 50% owned5 International Rail Freight Terminal – BL Rosemound (JV)

Price £m BL Share £m Gain%1

Offices:Plantation Place, EC3 527 527 20.2CityPoint, EC23 520 187 8.31 Fleet Place, EC4 120 120 21.0

Legal & General House, Kingswood 74 74 30.4

Microsoft Campus, Reading 52 52 9.8

Banbury Cross Retail Park, Banbury4 69 12 0.4

16 retail units 86 86 14.16 in-town supermarkets 49 49 3.8

Industrial & DistributionDaventry (Plots E1,E3,E4 & C1)5 83 42 19.0Heathrow Gateway (Units 1-3) 81 81 17.2Residential Portfolio 300 300 -Others 44 35 -

10 Fleet Place, EC4 109 109 15.6

2-16 Baker Street, W1 57 57 31.6

1,459 1,126 18.3

Auldhouse Retail Park, Glasgow 40 40 4.5Matalan Unit, Romford5 12 3 10.8

730 621 6.0

Total 2,697 2,205 11.5

Retail:ILAC Shopping Centre, Dublin 85 85 25.0Manchester Fort Shopping Park 167 167 -2

Greyhound Retail Park, Chester 66 66 -Palace Grounds Retail Park, Hamilton4 65 22 4.1Solarton Retail Park, Farnborough 48 48 -2

Priory Retail Park, Merton 43 43 6.8

11


Rent Reviews 5.3% higher than ERV

Proactive Asset Management

Rent ReviewsNumber BL Increase

Rent £m

CAGR1 pa over

5 years %

New rent

above ERV2 %

Retail Warehouses 49 2.3

3.3

1.9

0.5

-

0.4

0.6

9.0

1.57.2

3.0

2.7

5.4

-

0.7

1.9

6.8

7.3

10.4

-

3.8

2.9

High Street 20

City Offices 4

Other 26

3.0 5.3Total 229

West End Offices 7

Superstores 20

Shopping Centres 103

1 Compound Average Growth Rate2 ERV at valuation date prior to rent review

12


Proactive Asset Management

332 Lettings generating £18m pa of New RentNew Rent £m pa1

New Lettings & Lease RenewalsNumber Sq ft

‘000

Total2 BL Share3

Retail Warehouses 31 303

400

59

215

52

180

1,209

2.67.9

16.7

1.7

9.0

1.5

1.8

High Street 17 1.0

City Offices 25 8.0

Other 110 0.7

Total 332 38.6 18.0

West End Offices 18 0.4

Shopping Centres 131 5.3

1 Annual rent post expiry of rent free periods2 Including 100% of JVs & Funds3 Above previous passing rent 13


Developments adding Value

Developments

1 Daventry Plot C1 and Plot E4 were pre-let and forward sold. March 2006 valuation represents the sales price2 Estimated construction costs, excluding land and interest3 Notional interest for construction period4 Current estimated headline rent (before tenant incentives)5 Including 0.4m sq ft of CLOUT developments which are both forward sold and included at purchase price at 28 July 20056 Including £131m for the purchase of Ropemaker Place site

Sq ft

m

March 2005

Valuation

£m

2005/6

Expenditure

£m

2005/6

Surplus

£m

March 2006

Valuation

£m

Costs to

Complete

£m2

Notional

Interest

£m3

1.2 N/A

649

1,079

1,728

2.5

N/A

38

643.8

7.5 102

36

2836

Rent

£m4

Completed1

10

329

20

141

67

4

165

8123

667

191

981

108

113

229Total

Committed5 243

487

Prospective 177

14


1.2m sq ft Completed Projects

Developments

1 Current estimated headline rent (before tenant incentives)2 International Rail Freight Terminal – BL Rosemound (JV) 3 Most of remaining space under offer, further uplift expected when fully let

Rent £m paSq ft `000

Total1

2.5

4.3

1.1

7.9

Let/Pre-let

1,050

Construction+ interest £m

2.5

2.0

0.4

117

4.9

19

30

55

1,222

8

57

Site Cost£m

11

26

2

39

Uplift oncost

March 2006Valuation £m

38

72

13

27%

Nugent Retail Park, Orpington3 29%

123

Blythe Valley (Plot A1) 30%

Total 28%

Distribution -Daventry (E4 & C1)2

15

Year ended 31 March 2006 1 Estimated practical completion of construction2 Estimated construction costs to complete, excluding land and interest3 From March 2006 to PC4 Current estimated headline rent (before tenant incentives)5 Subject to revised planning – existing consent for 505,000 sq ft6 c. 40,000 sq ft to be occupied by British Land as new head office

Rent £m paMarch 2006

Valuation £m

212

131

186

20

19

57

39

664

3

201 Bishopsgate & The Broadgate Tower, EC2 Q3 2008 822 245 20 40.4 -

Ropemaker, EC25 Q2 2009 548 208 10 27.6 -

Willis Building, EC3 Q1 2007 475 88 5 21.3 21.0

Basinghall Street, EC2 (CLOUT) Q2 2007 199 18 - 3.3 3.3

Coleman Street, EC2 (CLOUT) Q1 2007 180 20 - 2.7 2.7

667

Blythe Valley (Plot G2) Q4 2006 35 4 - 0.7 0.7

Total 2,524 649 38 108.4 27.7

PC1 Sq ft`000

Costs toComplete £m2

Notional Interest £m3

Total4

London Offices:

6.3

6.1

Total London Offices 2,489 645 38 107.7 27.0

Business Parks:

York Building, W16 Q4 2006 138 29 1 -

Ludgate West, EC4 Q4 2007 127 37

Let/Pre-let

2 -

Developments

2.5m sq ft of Committed Projects

16


SectorSq ft ‘000

March 2006Valuation £m

Costs toComplete £m1

103 278

1311764

102

107

80

123

29

32

9

12

1,079

2373

15

23

-5

-5

13

1

3

191

NotionalInterest £m2

The Leadenhall Buliding 26

684

4

3

9

Meadowhall Car Showrooms 171 2 3.2 Pending

113.3

2

-

-

Total3 3,836 64

Regent’s Place

Blythe Valley Park

New Century Park

Meadowhall Casino

Theale

Gallions Reach Ph 2 Retail Park 94 1.4 Detailed

Deepdale, Preston Retail Park 67 1.2

Rent £m3 Planning

City Office

Detailed

601

West End Office:i) NE Quadrantii) Osnaburgh StResidential

341380288

14.916.75.9

PendingResolution

Pending

Business Park 699 14.0 Outline/ Detailed

Business Park/Distribution 582 8.1 Outline

Leisure 409 12.2 Submitted

Residential 204 4.3 Submitted

31.4 Detailed

Developments

3.8m sq ft of Prospects > 60% with planning approval

1 Estimated construction costs to complete excluding land and interest2 During construction to PC3 Current estimated headline rent (before tenant incentives)4 Including estimated cost of land to be acquired from Crown Estate under development agreement5 Value of these sites included in valuation of Meadowhall Shopping Centre

17


Portfolio Valuation By SectorGroup

£mTotal

£m1,556 3,112

1,767

2,622

900

374

8,775

3,542

687

180

791

5,200

439

14,414

1,513

2,107

757

338

6,271

3,500

643

174

790

5,107

375

11,753

Uplift %1

Retail: Retail Warehouses 1,556 21.6 14.4

Superstores 254 12.3 16.0

7.1

Department Stores 143 6.2 17.7

Development 1 5.5 23.7

Other: Industrial and Distribution, Leisure 64 3.0 8.2

12.2

12.6

14.3

13.1

14.9

15.5

13.5

All Retail 2,504 60.9

All Offices 93 36.1

Offices: City 42 24.6

West End 44 4.8

Business Parks & Provincial 6 1.2

Total Valuation

Funds/JV’s £m

Portfolio%

Shopping Centres 515 18.2

High Street 36 2.6

2,661 100.0

Valuation

1 Including valuation movements in developments, purchases and capital expenditure, and excluding sales

18


Ungeared Performance vs IPD Index1 – 2005/6Ungeared portfolio return was 1.1% less than IPD Index

Underperformance was in H1, perhaps influenced by change in valuers

In H2, portfolio outperformed IPD Index by 0.5%

Over the year, the shortfall came principally from three sources:

– Yield compression benefited index by 0.4% vs British Land

– Meadowhall performance was held back by capex, despite 3.3% like for like ERV growth

– Residential portfolio (since sold)

Valuation

1 IPD Quarterly Index to end March 2006

19


109 Retail Warehouses £3,112m: Up 14.4%

Assets

March 20061,2 March 2005

Valuation £3,112m £1,678m

Rent pa £123m £77m

Total Reversionary Income pa £158m £93m

Average ERV psf £21.20 £19.04

Net Equivalent Yield 4.6% 5.2%

Vacancy Rate 3.0%3 1.5%

Gross Initial Yield 4.0% 4.6%

Gross Reversionary Yield 5.1% 5.5%

Average Rent psf £16.46 £16.17

Weighted Average Lease Term to First Break 14.4 yrs 16.0 yrs

20

1 Due to change of valuers,valuation metric changes since March 2005 not strictly comparable 2 Includes our share of Pillar retail parks (indirect & direct) completed on 28 July 2005. Thus uplift in value only includes 8 mths

for Pillar, however including for a full 12 mths, the uplift in value would be 16.3%3 Of which 1.4% relates to space take back under asset management initiatives


71 Superstores £1,767m: Up 16.0%

Assets



Rent pa £85m £85m

Total Reversionary Income pa £87m £87m

ERV Range psf £9.02-£31.50 £8.85-£30.25


Vacancy Rate - -





21

1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable


Meadowhall £1,550m: Up 5.4% (pre-capex 8.4%)

Assets



Rent pa £71m3 £72m

Estimated Rental Value pa £82m £76m

Vacancy Rate 9.1%3 1.8%



Net Equivalent Yield 4.75%4 5.00%



22

1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable2 Excluding Sainsbury’s and Allders space taken back for re-letting3 Largely reflects take back of Sainsbury’s and Allders space for re-letting. Voids excluding asset management initiatives 1.8%4 True equivalent yield is 4.90% on actual basis of rent quarterly in advance


In Town Retail £2,309m: Up 13.3%

Assets


Valuation

- 9 Shopping Centres

- 39 Department Stores

- 78 High Street

£2,309m

£1,035m

£900m

£374m

£2,187m

£990m

£782m

£415m

Rent pa £115m2 £119m

Total Reversionary Income pa £130m2 £135m

Vacancy Rate 3.5% 2.8%





23

1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable2 Reduction in rents reflects £220m of sales in year


Broadgate £3,227m: Up 13.5%

Assets



Rent pa £151m £151m

Contracted Reversionary Income pa £180m £177m

Headline Office ERV Range psf £37.50 - £48.502 £45.00




Net Initial Yield3 5.3% 5.85%

Average Office Contracted Rent psf £46.80 £46.75


24

1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable2 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 leases3 Assumes top up of rent free periods and guaranteed minimum uplifts to first review


Regent’s Place £580m: Up 13.8%

Assets

25

1 Due to change of valuers, valuation metric changes since March 2005 not strictly comparable2 Excludes Osnaburgh Street and NEQ which are now held as developments3 Assumes top up of rent free periods and guaranteed minimum uplifts to first review

March 20061,2 March 2005

Valuation £580m £547m

Rent pa £28m £29m

Contracted Reversionary Income pa £32m £31m

Headline Office ERV Range psf £23.50-£45.00 £28.50-£38.50




Net Initial Yield3 5.01% 5.73%

Average Office Contracted Rent psf £33.16 £32.97



Annualised Net Rents and ERV AnalysisAnnualised net rents £m1 Estimated rental value £m2

All Offices 202 6 208 238 6 244Other 21 3 24 22 4 26

Group

£m

JVs & Trusts

£m

Total

£m

Group

£m

JVs & Trusts

£m

Total

£m

63

73

97

35

16

284

162

30

10

77

507

15812360

12

28

7

2

109

12

3

3

87

-

85

125

42

18

393

30

165

8

33

10

144

48

20

457

195

37

118

2

129

3

6251

12

727

3

-

139

81

75

114

40

18

328

192

34

12

588

Retail Warehouses

Superstores

Shopping Centres

Department stores

High Street

All Retail

City

West End


Total

1 Net rental income under IFRS differs from annualised net rents which are cash based, due to accounting items such as spreading lease incentives and contracted future rental uplifts, as well as direct property costs and disposals in the year

2 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years

Assets

26


Reversionary Income: £102mAnnualised net

rents £m

Net reversion

£m (5 yrs)1

Reversionary

Yield (5 yrs)3

123

85

125 19 Shopping Centres 5.5%

42 6 Department Stores 5.3%

18

393

165

33

10

208

24

625

Retail Warehouses 5.1%Retail35

2

2

64

30

4

2

36

2

1022

All Retail 5.2%

All Offices 5.5%

Other 6.0%

Offices: City 5.5%

West End 5.3%

Business Parks & Provincial 6.7%

Total

High Street 5.3%

5.3%

Superstores 5.0%

1 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years2 £47m contracted under expiry of rent free periods and minimum rental increases3 Reversionary yield to British Land (5 years)

Assets

27


Yield ProfileInitial Yield

%1

Reversionary

Yield (5 yrs) %2

Net Equivalent

Yield %3

Retail Warehouses 4.0

4.8

4.8

4.6

4.9

4.5

4.7

4.7

5.8

4.7

5.5

4.6

Superstores

4.65.1

5.0

5.5

5.3

5.3

5.2

5.5

5.3

6.7

4.5

5.5

6.0

Shopping Centres 5.1

5.3

Department Stores 5.2

High Street 4.9

All Retail 4.8

All Offices 5.0

Other 6.1

Total

City 5.0

West End 5.1

Business Parks & Provincial 6.2

5.0

1 Gross initial yield to British Land (without deduction of purchaser’s costs)2 Gross reversionary yield to British Land (5 years, without deduction of purchaser’s costs)3 Including purchasers’ costs

Assets

28


Strong Growth in Cash Rents in Prospect1

March 2006

£m

Of which

contracted £m

Annualised Net Rents 625 625

Increase 210 75

Total 835 700

Development prospects3 113 -

Net Reversions2 102 47

Committed Developments3 108 28

1 Net rental income under IFRS differs from annualised net rents and net reversions which are cash based, due to accountingitems such as spreading lease incentives and contracted future uplifts, as well as direct property costs

2 Reversions include rent reviews, expiry of rent free periods (£35m), lease break/expiry and letting of vacant space at ERV (£29m) over next 5 years (as determined by independent valuers)

3 To achieve income from developments will incur construction and associated costs

Assets

Plus ERV Growth

29


Sustainable Income: Strong Tenant CovenantsTop 10 Retail Tenants

1 J Sainsbury

2 Debenhams

3 Great Universal Stores

4 Tesco

5 House of Fraser

6 Bhs/Arcadia Group

7 Dixons Group

8 Next

9 Somerfield

10 Boots

31% of total rent and 50% of retail rents

Accenture3

EBRD4

Royal Bank of Scotland5

Herbert Smith6

Government7

Henderson Global Investors8

Deutsche Bank9

Abbey National10

22% of total rent and 56% of office rents

Lehman Brothers2

UBS1

Top 10 Office Tenants

Assets

30


Sustainable Income: Long Leases & Low VacancyAverage lease term to first break,

yearsVacancy Rate %

March 2006 March 2005 Adj. March 20061 March 2006 March 2005

2.8

1.7

-

3.4

-

2.9

1.8

5.2

0.8

7.22

4.6

Retail Warehouses 14.4 16.0 3.0 1.0

All retail 17.1 18.5 3.8 1.8

West End Offices 11.7 9.8 0.8 1.0

Business Parks & Provincial 9.9 8.4 7.22 2.9

All offices 10.3 11.4 4.7 5.7

Superstores 20.9 21.8 - -

Shopping Centres 13.2 14.8 7.9 3.3

Department Stores 30.9 31.1 - -

High Street 11.9 14.4 2.9 1.3

Total Portfolio 15.0 15.9 4.1 3.5

City Offices 10.0 11.9 5.3 6.8

Assets

1 Vacancy excluding space taken back in shopping centres and retail warehouses under asset management initiatives2 Actual vacancy space is largely unchanged, rise in vacancy rate reflects change in weighting following sales of Kingswood and

Microsoft Campus 31


Headline and Effective Rents1

Upturn in City Rents Predicted

Agents’ Consensus

BL City

Rent Reviews

Average

Increase

11.9%

2007 57.50 - 63.30 9.9% 15%

2008 60.00 - 70.20 8.2% 20%

4.7%

4.1%

Range

£psf

% of Rent Roll

2006 52.50 - 55.70 27%

2009 61.50 - 75.30 27%

2010 64.00 - 78.50 11%

Office Outlook

1 Property Market Analysis (PMA), May 2006

0

10

20

30

40

50

60

70

80

80 83 86 89 92 95 98 01 04 07 10

£ ps

f

Headline Effective

32


City: Forecast

Office Outlook

Total supplySq ft

Net take upSq ft

End of year forecastVacancy rate

March 2006 Start 8.0m

3.5mYear 2007 Start 6.1m

Year 2008 Start 4.6m

Year 2009 Start 4.6m

Total vacancy 2009 8.9m 3.9m 5.5%Year 2010 Start 5.0mNew speculative completions (estimated) 3.7mEstimated 2nd hand releases 0.8mTotal vacancy 2010 9.5m 3.9m 6.0%

New speculative completions (estimated) 3.4mEstimated 2nd hand releases 0.9m

New speculative completions (estimated) 3.0mEstimated 2nd hand releases 0.9mTotal vacancy 2008 8.5m 3.9m 5.2%

4.0m

9.3%New speculative completions 0.7mEstimated 2nd hand releases 0.9m

New speculative completions 1.6mEstimated 2nd hand releases 0.9mTotal vacancy 2007 8.6m 5.3%

Total vacancy 2006 9.6m 7.1%

33


The information contained in this presentation has been extracted largely from the Preliminary Results Announcement for the year ended 31 March 2006. 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 revaluation. EPRA NAV includes the external valuation surplus on trading and finance lease properties but excludes the deferred tax on revaluations and capital allowances and the fair value of debt and related derivatives.

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 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.

Disclaimer

Results Presentation/media/Files/B/British-Land-V4/reports-and... · Year ended 31 March 2006 1 EPRA diluted 2 Proforma for Pillar from April – July 2005 (i.e. full 12 mths) 3 Before

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