INTERIM PRESENTATION - British Land/media/Files/B/British-Land...Share NAV 1 at March 2004 5,035 966...

INTERIM PRESENTATION

1

JOHN RITBLAT CHAIRMAN

2

STEPHEN HESTER CHIEF EXECUTIVE

3

FINANCIAL REVIEW GRAHAM ROBERTS, FINANCE DIRECTOR

4

HIGHLIGHTS NAV per share + 8.6% to 1049p (£5.5bn)

- Total Return 9.1%

Underlying profits before tax + 15.1% to £74.8m - Net rental income + 5.6% to £265.1m

Valuation + 3.8% to £11.1bn - Retail + 4.3% Offices + 3.4%

775,700 sq ft of Central London lettings - Adds £34.8m pa to rent

£122.1m pa additional rental value from reversions & committed developments - 63% already contracted

5

TOTAL RETURN: 9.1% IN 6 MONTHS

£m Pence per Share

NAV1 at March 2004 5,035 966

Valuation uplift (3.8% of portfolio) 400 76 + 7.9%

Retained profits and reserve movements 50 7

NAV1 at Sept 2004 5,485 1,049 + 8.6%

Total Return1 (including 4.8p dividend) 455 88 + 9.1%

1 Adjusted, diluted

6

UNDERLYING PROFIT BEFORE TAX: UP 15.1% TO £74.8M

Net interest payable

Gains on property disposals

Underlying profit before tax

Profit before tax

Net rental income

Sept 2004 £m

(171.7)

5.3

74.8

80.1

265.1

Sept 2003 £m

(163.9)

21.9

65.0

86.9

251.0

+ 15.1%

+ 5.6%

Underlying EPS1

Operating cash flow per share

Effective tax rate

12.1p

13.0p

17.5%

12.0p

13.5p

13.1%

See Appendix pages 68-70 for analysis of net rental income, operating cash flow per share and tax charge 1 Adjusted, diluted

7

LOW COSTS: 0.8% OF PORTFOLIO

% of Portfolio (annualised)

Sept 2004 £m

Sept 2003 £m

Total portfolio 11,066 9,649

Direct property costs1 0.39% 21.3 18.3

Administrative expenses2 0.41% 23.0 22.4

Total costs 0.80% 44.3 40.7

1 Includes letting and rent review fees, non-recoverable landlord costs, legal and professional fees, pre-development expenditure, void rates and advertising and promotional costs

2 Including JV admin expenses net of management and admin fees received from JVs

8

REVERSION: £99.7M, 56% ALREADY CONTRACTED

55.753.852.8

27.526.3

0

10

20

30

40

50

60

70

80

90

100

110

Contracted £54.0m

£85.0m

£102.8m £99.7m2

£m

£42.4m 1

2005 2006 2007 2008 2009

Year ending 30 Sept 1 Contracted rents from expiry of rent free periods and minimum guaranteed uplifts 2 The fall in reversion in 2009 is due to a lease break which is assumed to be exercised and re-let at the market rent See Appendix page 71 for detailed analysis of contracted reversion on a cash flow and p&l basis

9

BALANCE SHEET EFFICIENT

Sept 2004 March 2004

Total Group properties & investments £10,683m £10,063m

Net debt (Group) £4,936m £4,867m

Net assets1 £5,462m £4,877m

Mortgage ratio (Group) 46% 48%

Mortgage ratio (including share of JVs) 48% 51%

Gearing (Group) 90% 100%

Interest cover (Group)2 1.5x 1.5x

1 Adjusted 2 Group net rents / net interest

10

FLEXIBLE FINANCE

£730m of new unsecured bank facilities at an average cost of LIBOR + 65bp

Early conversion of £150m 6% Subordinated Irredeemable Convertible Bonds

Group Sept 2004 March 2004

Weighted average debt maturity 13.8 years1 16.9 years

Weighted average interest rate 6.5% 6.4%

% of net debt at fixed/capped interest rates 84% 84%

Cash and available undrawn committed bank facilities £1,164m £1,139m

1 The reduction in weighted average debt maturity is mainly the result of the conversion of the 6% Subordinated Irredeemable Convertible Bonds See Appendix page 72 for piechart of financing structure

11

INTERNATIONAL ACCOUNTING STANDARDS � Well advanced with preparations for IAS. Full compliance for March 2006 year end

� Workshop on transition to IAS on 25 Jan 2005. IAS restated March 2005 results to be released Summer 2005

� Cash flows will be unaffected

� Areas of particular focus:

IAS 12 Deferred Tax Contingent tax recognised on property valuations IAS 39 Financial Instruments Carried at fair value

All interest rate swaps qualify as effective hedges

IAS 17 Leases Different definitions for finance and operating leases

IAS 40 Investment Property Movements in valuation recognised in income statement

IAS 19 Employee Benefits Pension schemes assets/liabilities recognised at fair value FRS 17 already fully adopted in March 2004 – no change

IFRS 2 Share-based Payment Fair value expensed over the vesting period Already fully adopted in March 2004 – no change

See Appendix pages 73 and 74 for detailed summary of the impact of IAS on net assets and profits

12

£m

LONG-TERM INCOME PROFILE

EXCLUDING ANY RENTAL VALUE GROWTH

As at 30 Sept 2004 900

800

700

600

500

400

300

200

100

0 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Development programme (committed and prospective) Current interest cost (annualised) Reversionary income (not contracted) Renewal of leases on expiry or break Annualised net rents plus contracted reversions

This graph provides a snapshot of committed income and estimated income based on ERV at 30 Sept 2004, including our share of joint ventures and is not a forecast

The main assumptions which underlie the graph are outlined in the Appendix on page 75

13

REVENUE AND UNDERLYING PROFIT GROWTH NET RENTAL INCOME UNDERLYING PROFIT1

£m £m 550 160

500

140

450

120 400

350 100

300

80 250

200 60 150 40

100

20 50

0 0 2000/1 2001/2 2002/3 2003/4 2004/5 2000/1 2001/2 2002/3 2003/4 2004/5

H1 H2 1 Underlying profit before tax

14

TOTAL RETURN: 22.4% IN LAST 12 MONTHS

NAV1 GROWTH AND DIVIDENDS

Pence per Share 1,200 Compound average total return % pa

to Sept 2004 over the last: 1,000 195p

2001 2002 2003 2004 Year ended 30 Sept Total Return

1 Adjusted, diluted

4 years

3 years

2 years

1 year

11.5% 800

11.6% 600

14.5% 400

20022.4%

0

15

PROPERTY REVIEW BOB BOWDEN, PROPERTY INVESTMENT DIRECTOR

16

AGENDA

� Portfolio Valuation

� Portfolio activity

� Principal assets

� Developments

� Market commentary

17

VALUATION £11,066M: UP 3.8%

All Retail 4.3 %

3.3 %Shopping Centres

0.7 %Superstores

Retail Warehouses 9.0 %

High Street 5.7%

Retail Development 1.1 %

3.4 %All Offices 3.2 %City Offices 3.6%West End Offices

3.0 %Business Parks & Provincial 7.5 %Office Development

2.6 %Other 1 Includes developments, purchases and capital expenditure, and excludes sales % Change by sector since March 20041

See Appendix page 76 for detailed portfolio breakdown

18

WEIGHTED CONTRIBUTION BY SECTOR: UP 3.8% All Retail

Shopping Centres

Superstores

Retail Warehouses

High Street

Retail Development

All Offices

City Offices

West End Offices

Business Parks & Provincial

Office Development

Other 1 Includes developments, purchases and capital expenditure, and excludes sales See Appendix page 76 for detailed portfolio breakdown

2.2 %

0.6 %

0.1 %

1.2 %

0.3 %

0.0 %

1.5 %

1.0 %

0.2 %

0.1 %

0.2 %

0.1 % % Change by sector since March 20041

19

THE COMPONENTS OF CAPITAL GROWTH

Shopping Centres

Superstores

Retail Warehouses

High Street Retail

City Offices

West End Offices

Total Portfolio

-4 -2 0 2 4 6 8 10 12 %

ERV Impact Yield Impact Income Residual1

1 Income residual represents the impact on valuation of lease terms such as rent free periods, timing of rent reviews relative to the valuation date and lease lengths Source: IPD (standing investments only)

20

PORTFOLIO SPLIT: £11,066M

43% Offices: 52% Retail:

94% Central London 77% Out of Town

Central London Shopping Centres 41% 19%

Provincial 2%

Broadgate 25% Regent’s Place 5% Plantation 4%

Meadowhall 13%

Superstores 13%

Retail Warehouses Other High Street 14%5% 6%

Developments classified by end use

21

AGENDA

� Portfolio valuation

� Portfolio Activity


� Developments


22

SALES: £274M IN H1, YTD £321M

7 properties (residential, industrial)

6 properties (retail, offices and industrial) 26 residential units

17 pubs (PHIC) 6 office properties (BLD) 100 New Bridge Street and Watling House (BLW)

Group

Joint Ventures

Gross Proceeds1

13 245

23 29

6

22 59

151

Gain £m1,2

2 12

3 3

-

1 9 -

Total 274 15

Post Sept 2004: Swiss Centre 47 12

1 Group and 100% of JVs, Including our 50% share of JV sales, £151m completed in the six months 2 Gross gain over latest valuation

23

PURCHASES: H1 £153M, YTD £644M Joint Ventures 3 interests at East Kilbride and Aberdeen (SRPLP)

Total

Investment in Canary Wharf 194 residential units 2 – 21 Cornwall Terrace

Group £m1

145

8

153

97 32 16

65 freehold pubs 4 retail parks and 1 industrial estate (BLD)2

Post 30 Sept 2004 includes: Queensmere & Observatory Shopping Centres

1 Group and 100% of JVs. Including our 50% share of JV purchases, £149m completed in the six months 2 See Appendix page 77 for summary of BL Davidson acquisition

174 122

192

24

QUEENSMERE & OBSERVATORY CENTRES: £192M � Two adjoining freehold shopping centres comprising 45% of the entire

retail provision within Slough

� 500,000 sq ft retail space, 65,000 sq ft offices with 1,600 car spaces

� Considerable scope for management initiatives including linking the two centres

– BL already owns the linking 80,000 sq ft Allders store

� Income reversionary

Equivalent yield Reversionary yield

Initial yield

6.3% 6.6%

6.0%

� Prime Zone A rents psf: Queensmere £105, Observatory £50

25

65 SPIRIT PUBS: £174M

� Indexed annual rental uplifts for 20 years

– Initial yield of 6.1%, rising to 9.8%

� High quality freehold pubs with a large average lot size of £2.7m

� Asset management opportunity

� Landlord option to revert to open market value for Year 15 and 20

– Year 25 upwards only to OMV

LOCATION BY NUMBER

North of London and England South East

37% 40%

Midlands and South West East Anglia 6%

17%

26

1.1M SQ FT DEVELOPMENTS COMPLETED: 68% LET

Projects Sq ft Construction Total Of which cost1 Rent2 Let

Plantation Place 540,000 £198.7m £27.0m £26.0m

Plantation Place South 161,000 £60.2m £6.7m £0.1m

10 Exchange Square 163,400 £53.2m £7.0m £2.0m

Thatcham (BLG) 255,800 £4.5m £0.9m -

Total4 1,120,200 £316.6m £41.6m £28.1m3

1 Costs of construction excluding land and interest costs 2 Estimated headline rent pa 3 Further lettings under offer: £0.6m pa of retail space at Plantation Place and £1.2m pa of offices at 10 Exchange Square 4 Based on Group and 50% share of JVs (except areas which are at 100%)

27

28

PLANTATION PLACE, 30 FENCHURCH STREET, EC3

� Total net area 540,000 sq ft

� Offices 100% let to high qualitytenants, £26.0m pa rent

� Completed April 2004 on time, on budget

� Flagship development in the heart of the City

28

775,700 SQ FT LET IN CENTRAL LONDON: RENT £34.8M

Building Tenant Min.Term Sq ft Rent Rent yrs £ psf £m

51 Lime Street Willis1 25 465,000 45 – 47.50 21.0

Plantation Place Wachovia1, Aspen Re1 5 - 15 132,000 46 – 48.00 6.2 and Royal & SunAlliance

10 Exchange Square Herbert Smith 16 43,500 45.00 2.0

155 Bishopsgate HBOS 15 38,600 45.00 1.7

Exchange House F&C Management 16 20,500 42.00 0.9

6 Broadgate Ambac 9 12,600 43.00 0.5

350 Euston Road General Medical Council 20 48,000 39.00 1.9 Balfour Beatty 6 15,500 39.50 0.6

Total 775,700 34.8

1 Signed post Sept 2004. Willis is conditional on amendment to existing planning consent

29

30

51 LIME STREET, EC3

� 24 storey development

� 475,000 sq ft net area

� 465,000 sq ft pre-let to Willis Group

� £21.0m pa of rent

30

RENTS £565M: £76.7M OF CONTRACTED GROWTH Sept 2004 Of which

£m contracted £m

Annualised net rents 565.0 565.0

Reversions1 99.7 55.7

Committed developments 22.4 21.0

Increase 122.1 76.7

Total 687.1 641.7

Development prospects 157.0

1 Includes 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) See Appendix page 78 for breakdown of reversion

31

REVERSIONARY INCOME: £99.7M

Reversionary yield1

1 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years (as determined by independent valuers) See Appendix page 79 for analysis of annualised net rents and reversion by sector

2 £55.7m of the total reversion of £99.7m is already contracted from expiry of rent free periods and minimum rental uplifts

City Offices 6.6%

West End Offices 6.2% Business Parks & Provincial 7.4% All Offices 6.6% Shopping Centres 5.9% Superstores 5.7% Retail Warehouses 5.7% High Street 6.1% All Retail 5.8% Other 6.1% Total2 6.2%

32

LONG LEASES AND LOW VACANCY

Average lease term, yrs1 Vacancy rate to expiry to first break Proforma %2 Sept 2004 %

Total Portfolio 16.9 15.7 3.9 4.6

City Offices 14.4 12.7 7.7 10.0

West End Offices 13.8 11.5 3.0 3.0

Shopping Centres 15.3 14.8 3.2 3.2

Superstores 22.0 22.0 0.0 0.0

Retail Warehouses 16.8 16.4 1.1 1.1

Shops 26.2 23.5 1.7 1.7

1 Excluding developments and residential (predominately let on short leases) 2 Proforma for properties let since Sept 2004

33

INCOME: STRONG TENANT COVENANTS

Rating of rental income %1

Negligible; low; and low / medium risk 89.0

Medium / high risk 5.7

High risk 3.0

Unmatched 2.3

Total 100.0

1 IPD Tenant Income Credit rating Covenant Strength (TICCS) using Experian Stress Score See Appendix page 80 for list of top 30 tenants

34

AGENDA



� Principal Assets

� Developments


35

PRINCIPAL ASSETS: 89% OF THE PORTFOLIO

Broadgate Shopping Centres Superstores Retail Warehouses 25% 19% 13% 14%

Plantation Regent’s Place Developments High Street 4% 5% 3% 6%

36

BROADGATE £2,796M: UP 2.1%


Valuation £2,796m1 £2,665m

Rent pa £150.9m2 £151.7m

Contracted reversionary income pa £175.9m2 £170.7m

Average contracted rent psf3 £46.72 £46.79

Average ERV psf £37.50 £37.50

Vacancy rate 3.4% 1.7%

Net initial yield 6.0%4 6.0%

1 Including 10 Exchange Square completed in April 2004 2 F&C lease renewal in August 2004 has extended lease to Dec 2020 in return for a rent free period 3 Excluding vacant space 4 Excluding Exchange Square which was recently completed and is valued on an equivalent yield basis due to vacant space See Appendix page 81 for details of rent reviews

37

REGENT’S PLACE £543M: UP 0.9%


Valuation £543m £531m

Rent pa £29.0m £28.9m

Contracted reversionary income pa £31.0m £28.5m

Average contracted rent psf £33.57 £31.87

ERV range psf £22.50 - £37.50 £24.00 - £37.50


Net initial yield 5.84% 6.02%

38

MEADOWHALL £1,425M: UP 1.5%


Valuation £1,425m £1,400m

Rent pa £70.7m £70.1m

Estimated rental value pa £75.4m £75.4m

Average rent psf £55.11 £54.83


Net equivalent yield 5.11%1 5.29%

1 True net equivalent yield is 5.28% on actual basis of rent quarterly in advance

39

70 SUPERSTORES £1,445M: UP 0.7%



Rent pa £79.4m £79.1m

Total reversionary income pa £82.6m £82.8m


ERV range psf £8.85 – £27.50 £8.85 - £27.50

Vacancy rate 0% 0%

Initial yield 5.5% 5.5%

Reversionary yield 5.7% 5.8%

1 Supermarkets > 25,000 sq ft have been reclassified as ‘Superstores’ based on the Institute of Grocery Distribution (IGD) supermarket/superstore definition Supermarkets < 25,000 sq ft are included within High Street Retail

40

81% OF SUPERSTORES > 40,000 SQ FT

Average store size is 70,000 sq ft

Analysis of stores by Gross Internal Area

25,000 - 40,000

Sq ft mNumber

Standalone

0.414

Sq ft mNumber

Included in Shopping Centres/Retail Parks

0.12

Sq ft mNumber

Total

0.516

40,000 – 60,000 13 0.7 3 0.2 16 0.9

60,000 – 80,000 22 1.5 1 0.1 23 1.6

80,000 + 21 2.0 9 1.0 30 3.0

Total 70 4.6 15 1.4 85 6.0

41

64 RETAIL WAREHOUSES £1,521M: UP 9.0%



Rent pa £75.3m £74.1m



Average ERV psf £18.25 £17.71




42

HIGH STREET RETAIL £625M: UP 5.7%


Valuation £625m £541m -95 Shops £347m £320m -16 Department stores £214m2 £221m -19 Supermarkets £64m N/A

Rent pa £33.6m £29.8m





1 Supermarkets < 25,000 sq ft have been reclassified based on the Institute of Grocery Distribution (IGD) supermarket/superstore definition and are included within High Street Retail at Sept 2004

2 Allders, Slough has been reclassified within Shopping Centres post the purchase of the Queensmere & Observatory Shopping Centres

43

AGENDA




� Developments


44

COMMITTED DEVELOPMENTS: 94% PRE-LET Projects

51 Lime Street

Date1

Dec 2006

Sq ft

475,000

Construction cost2

£166.8m

Total Rent3

£21.4m

Of which pre-let

£21.0m

Blythe Valley Park Plot A1 Oct 2005 53,000 £8.4m £1.0m -

Total 528,000 £175.2m £22.4m £21.0m

1 Anticipated practical completion of construction 2 Costs of construction excluding land and interest costs 3 Estimated headline rent pa See Appendix page 82 for summary of the development programme

45

6.3M SQ FT OF PROSPECTS

York House

Ludgate West

122 Leadenhall Street

201 Bishopsgate

Regent’s Place

West End Office

City Office

City Office

City Office

West End Office/ Residential

Sq ft

138,000

126,000

601,000

747,000

1,154,000

Cost £m1

49

44

255

184

370

Planning

Detailed

Detailed

Resolution to grant

Detailed/ revised appl.

Pending

Redditch (BLG)

Daventry (BLR)

Dumbarton

Blythe Valley Park

Coventry, New Century Park

Total

Theale

Meadowhall Casino Complex

Distribution

Distribution

Retail

Office Park

Office Park

Residential

Leisure

375,500

1,329,700

20,000

747,000

364,500

6,318,300

282,600

433,000

6

20

2

112

53

1,250

47

108

Outline

Outline/ Detailed

Detailed

Outline/ Detailed

Outline

Pending

Pending

1 Costs of construction excluding land and interest costs Based on Group and 50% share of JVs (except areas which are at 100%)

46

47

122 LEADENHALL STREET, EC3

� Resolution to Grant detailed planning � 47 storey towerfrom City Corporation

� Triple floorspace of existing building � Total net area 601,000 sq ft 47

AGENDA




� Developments

� Market Commentary

48

INITIAL YIELDS HAVE HARDENED

%

8.0

7.5

7.0

6.5

6.0

5.5

5.0

4.5

4.0 Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct-01 01 01 01 02 02 02 02 03 03 03 03 04 04 04 04

Source: IPD All Property Retail Office

49

REAL INCOME RETURNS REMAIN HIGH

% 2003 Real Income Return 4.1%

20

15

10

5

1971 - 2003 Average - 0.4% 1984 - 2003 Average 3.2%

Bank of England Inflation Target 2%

25

0

1971 1976 1981 1986 1991 1996 2001 2006

Property Income Returns Inflation

Source: IPD

50

UK INSTITUTIONAL NET INVESTMENT 2001 - 2004 £m

2,000

1,500

1,000

500

0

-500

-1,000

-1,500

Sep

-01

Dec

-01

Mar

-02

Jun-

02

Sep

-02

Dec

-02

Mar

-03

Jun-

03

Sep

-03

Dec

-03

Mar

-04

Jun-

04

Sep

-04

Source: Gerald Eve (Property Data)

51

DECADE OF ATTRACTIVE PROPERTY RETURNS UK US

1993 – 2003 Property Equities Gilts Corp Bonds Equities

Total Returns pa 10.6% 6.1% 7.4% 9.4% 9.1%

Standard Deviation 3.7 16.9 10.1 10.1 18.7

% Total Returns from 70% 54% 78% 71% 11% Income

Source: Property Market Analysis (PMA), IPD, Barclays Capital

52

CITY MARKET

53

CITY: TAKE UP INCREASING

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Take

up

(rol

ling

annu

al) 0

00s

sq ft

1991 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Property Market Analysis (PMA)

54

CITY: ACTIVE DEMAND INCREASES

0

1

2

3

4

5

6

7

8

9

10 9.2m9.2m9.3m

7.6m 7.3m

5.5m 6.3m

m sq ft

Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Active Demand Potential Demand

Source: Jones Lang LaSalle See Appendix page 83 and 84 for detailed list of lettings under offer at Q3 2004 and major named active requirements

55

CITY: CONSTRUCTION STARTS STILL LOW

0

1

2

3

4

5 m sq ft

Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep-01 01 01 02 02 02 03 03 03 04 04 04

Source: Property Market Analysis (PMA)

56

CITY: ONLY 4 SPECULATIVE SCHEMES > 50,000 SQ FT

Source: Drivers Jonas London Crane Survey Q3 2004

Speculative schemes > 50,000 sq ft

Moor House, London Wall (Q4 2004)

310,000 sq ft

Condor House, St Paul’s Churchyard (Q1 2005)

130,000 sq ft

78 Hatton Garden (Q1 2006)

160,000 sq ft

Palestra (Q2 2006) 290,000 sq ft

1 – 6 < 50,000 sq ft

3

4

2

1

57

CITY: FORECAST

Sq ft Total Supply

Sq ft Take Up

Vacancy Rate End of Year Forecast

Year 2004 Start 13.3m 15.7%

Estimated 2nd hand releases New completions

1.4m 1.6m

Total vacancy 2004 Year 2005 Start

16.3m 12.0m

4.3m 13.9%

New completions Estimated 2nd hand releases

0.13m 0.25m

Total vacancy 2005 Year 2006 Start

12.38m 8.38m

4.0m 9.7%

New completions Estimated 2nd hand releases

0.45m 0.25m

Total vacancy 2006 9.08m 4.5m 5.3%

58

CITY: FORECAST RENTS

BL’s average City Office passing rent £46.07 psf

Agents’ Consensus BL City Rent Reviews Range £psf Average Increase % of rent roll

2005 42.50 – 49.20 + 2.3% 16%

2006 45.00 – 52.90 + 7.4% 19%

2007 48.00 – 59.50 + 9.4% 15%

2008 55.00 - 60.60 + 9.0% 22%

2009 61.25 – 64.76 + 8.2% 28%

59

CITY & WEST END: STRONG INVESTMENT MARKET

£6.7bn Q1 – Q3 2004 £bn £1.3bn Under Offer Q4 2004

9

7.9 7.88

6.8 6.97 6.7

6 5.4 5.3

5 Average £4.6bn 4.6

4

3.12.9 2.73 2.4 1.9 2.01.72

1

0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Q1 -Q3

2004

Source: Jones Lang LaSalle

See Appendix page 85 for detailed list of completed deals

60

RETAIL

61

RETAIL SALES CONTINUE TO GROW

Comparison Sales (non food)

Aug-01

Nov-01

Feb-02

May-02

Aug-02

Nov-02

Feb-03

Values

May-03

Aug-03

Volumes

Nov-03

Feb-04

May-04

Aug-04

Source: Property Market Analysis

-2%

0%

2%

4%

6%

8%

10%

12%

14%

gro

wth

%pa

62

RETAIL SALES GROWTH FORECAST

Comparison Sales (non food)

grow

th %

pa

14

12

10

8

6

4

2

0

-2

-4 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Values Volumes

Source: Property Market Analysis

63

52% RETAIL: 77% OUT OF TOWN

Total Retail Portfolio £5.8bn

Superstores

25% Retail

Out of Town as

% of Total Retail Spend1

2008E 32.5%

2006E 32.0%

2003 31.1%

2000 29.0%

1997 27.4%

1994 24.8%

Warehouses Meadowhall 25% 27%

In town High Street Shopping 11% Centres

12% Out of Town In Town

1 Verdict Developments classified by end use

64

PORTFOLIO SPLIT: £11,066M

43% Offices: 52% Retail:

94% Central London 77% Out of Town

Central London Shopping Centres 41% 19%

Broadgate 25% Meadowhall 13% Regent’s Place 5% Plantation 4% Superstores

13%

Retail Warehouses 14%

Developments classified by end use

Provincial Other High Street 2% 5% 6%

65

HIGHLIGHTS NAV per share + 8.6% to 1049p (£5.5bn)

- Total Return 9.1%

Underlying profits before tax + 15.1% to £74.8m - Net rental income + 5.6% to £265.1m

Valuation + 3.8% to £11.1bn - Retail + 4.3% Offices + 3.4%

775,700 sq ft of Central London lettings - Adds £34.8m pa to rent

£122.1m pa additional rental value from reversions & committed developments - 63% already contracted

66

APPENDIX

67

ANALYSIS OF NET RENTAL INCOME MOVEMENT

Rent reviews and new lettings 7.2

Purchases 13.1

Sales -2.5

-3.7 Asset management and other

14.1 Total

£m

68

OPERATING CASH FLOW: 13.0P PER SHARE Sept 2004

£m Sept 2003

£m

222.4 206.4

6.8 1.6

(7.0)

(157.0)

(1.0)

(141.1)

65.2 65.9

Operating cash flow per share 13.0p 13.5p

Net cash inflow from operating activities

Dividends received

Net interest

Tax paid

Net cash inflow from operating activities after interest and tax

69

TAX CHARGE RECONCILIATION

Gross Tax £m £m

Tax on profit for the period at 30% 80.1 24.0

Losses (revenue and capital) (5.6)

Capital allowances (4.9)

Other (3.7)

Corporation tax charge 9.8 12.2%

Deferred tax charge 4.2

Tax charge for Sept 2004 14.0 17.5%

70

CONTRACTED REVERSIONS FROM LETTINGS

Year ending 31 March 2005 2006 2007 2008 2009

Contracted Further Gross Rental Income1 £m £m £m £m £m

EBRD Cash flow - - 6.5 19.0 19.0

IAS basis* 14.2 14.2 14.2 14.2 14.2

Other City offices Cash flow 0.7 16.4 22.1 24.6 25.2

IAS basis* 14.4 23.9 23.9 23.8 24.0

West End offices Cash flow 0.3 1.2 1.4 2.6 2.9

IAS basis* 2.6 2.6 2.6 2.6 2.5

Retail Cash flow 1.9 4.1 4.2 4.2 4.1

IAS basis* 3.7 3.9 3.9 3.9 3.8

Total Cash flow 2.9 21.7 34.2 50.4 51.2

IAS basis*2 34.9 44.6 44.6 44.5 44.5

* UITF 28 2005 adjustment: EBRD £11.3m, Other City offices £11.9m, West End offices £1.8m, Retail £3.4m, Total £28.4m

1 Contracted Group cash flows and gross rental income (P&L) for new leases commencing after April 2004 (and signed by Sept 2004) and the major existing lease at EBRD 2 Unaudited based on current interpretation of IAS

71

ACCESSING A FLEXIBLE POOL OF FINANCE

Group Group and JVs Mortgage ratio 46% 48% NAV Gearing 90% 98%

£6.6bn Gross Finance Availability £1.0bn Undrawn

Securitisations (Fixed Rate Bonds) - Group 1Securitisations (Floating Rate Bonds) - Group 1

Debentures - Group

Debentures - JVs

US Private Placements - Group

Drawn Bank Facilities - Group

Undrawn Bank Facilities - Group

Drawn Bank Facilities - JVs

1 Floating rate bonds with related fixed rate swaps

72

IAS: IMPACT ON NET ASSETS

UK GAAP IAS Impact on Net Assets

Deferred tax Not recognised where not obliged to pay more

tax at a future date

Full provision. Recognise contingent tax on property

and other valuations

Reduce

Derivatives Not valued on balance Carried at fair value Reduce or sheet when hedges increase

Leases Different definitions of finance and operating leases Small reduction

Head leases Valuers deduct from On balance sheet as an Net effect small valuation additional asset and liability

Final dividend Accrued Recognise only when One- off approved by shareholders increase

73

IAS: IMPACT ON PROFITS

UK GAAP IAS Impact on Profits

Investment properties

Movements in fair value recognised in revaluation

Recognised in income statement

Increase or reduce Introduces volatility

reserve

Deferred tax Not recognised where not obliged to pay more tax at a

future date

Full provision. Recognise contingent tax on property and

other valuations

Tax recognised on valuation movements

Derivatives Matching basis Matching, if meets IAS effectiveness tests

No change as all hedges effective

JVs Proportion of operating profit, interest, capital profits and

taxation shown separately in P&L

JV profit after tax recognised in

consolidated profit before tax

Profit before tax and tax charge decrease. Profit

after tax unchanged

Lease incentives

Spread to first open market rent review

Spread to earlier of first lease break or expiry

Different phasing

Share-based incentives

Fair value charge already recognised from 2004 No change for British Land

74

LONG-TERM INCOME PROFILE ASSUMPTIONS • Annualised net rents of £565.0 million at 30 Sept 2004 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 £55.7m 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 £99.7 million is based upon estimated rental values (ERV) by our external valuers at 30 Sept 2004. Reversions have been reduced for the contracted reversions of £55.7m as the rent is received over the next five years*

• Development programme committed and prospective when completed and let has an estimated rent at 30 Sept 2004 of £179.4m million*, assumed to be realised evenly over the next 7 years * No rental value growth is assumed

The graph provides a snapshot of committed income and estimated income based on ERV at 30 Sept 2004, 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.

75

PORTFOLIO VALUATION

£m % Change %1

Offices: City 3,569 32.3 3.2 West End 722 6.5 3.6 Business Parks & Provincial 249 2.2 3.0 Development 229 2.1 7.5 All Offices 4,769 43.1 3.4

Retail: Shopping Centres 2,145 19.4 3.3 Superstores 1,445 13.1 0.7 Retail Warehouses 1,521 13.7 9.0 High Street 625 5.6 5.7 Development 19 0.2 1.1 All Retail 5,755 52.0 4.3

Other: Residential, Industrial and Distribution2, Leisure 542 4.9 2.6

Total Valuation 11,066 100.0 3.8

1 Includes developments, purchases and capital expenditure, and excludes sales 2 Includes development with a value of £25.8m

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BL DAVIDSON ACQUISITION � In October 2004, BL Davidson acquired the other 50% interest in The Retail and Warehouse

Company Ltd from Harris Ventures for £61m (total gross assets £122m) comprising:

Kingswood Retail Park, Kingston Upon Hull

Hindpool Retail Park, Barrow in Furness

Charlton Industrial Park and adjoining site, London

Cwmbran Retail Park, Cwmbran

Cornerhouse, Retail Park, Burrow in Furness

129,000

59,000

147,000

111,000

Size sq ft

73,000

£14.12

£9.68

£8.45

£11.54

Average passing rent psf

£9.36

� Income reversionary - equivalent yield 6%

� Weighted average lease term of 13 years

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ANALYSIS OF 5 YEAR REVERSION

Sept 2004 Of which contracted £m £m

Net reversion (rents reviews less lease expires) 13 -

Expiry of rent-free periods 51 51

Guaranteed rental uplifts 5 5

Letting of vacant space 311 -

Total 100 56

1 £4.6m of income has been contracted on lettings since Sept 2004

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REVERSIONARY INCOME: £99.7M

Annualised Reversion Reversionary net rents £m £m1 net yield

177.4 59.2 Offices: City 6.6%

39.4 5.2 West End 6.2% 18.7 (0.3) Business parks & Provincial 7.4%

235.5 64.1 All Offices 6.6% 112.0 15.1 Retail: Shopping Centres 5.9% 79.4 3.2 Superstores 5.7% 75.3 10.6 Retail Warehouses 5.7% 33.6 4.3 High Street 6.1%

300.3 33.2 All Retail 5.8% 29.2 2.4 Other 6.1%

565.0 99.72 Total 6.2%

1 Includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at ERV over the next 5 years (as determined by independent valuers) 2 £55.7m is already contracted from expiry of rent free periods and minimum rental uplifts

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STRONG TENANT BASE

Top 30 tenants represent c. 61% of total rental income

Top 30 tenants by rental income1

1. J Sainsbury 11. Herbert Smith 21. ABN Amro

2. Tesco 12. Henderson Holding Group 22. Denton Wilde Sapte

3. UBS 13. Bhs/Arcadia Group 23. Allders

4. House of Fraser 14. Somerfield 24. Bank One

5. Lehman Brothers 15. Dixons Group 25. Tokyo Mitsubishi

6. EBRD 16. Deutsche Bank 26. Ashurst Morris Crisp

7. Great Universal Stores 17. Abbey National 27. Legal & General

8. Accenture 18. Calyon 28. Indosuez Holdings

9. Royal Bank of Scotland 19. Next 29. Boots

10. Government 20. ING 30. JJB Sports

1 Group and 100% of JVs (adjusted for rent free periods)

80

BROADGATE: RENT REVIEWS � 8 office rent reviews settled on 157,000 sq ft with a combined rent of £6.8m at no uplift

Principal review settled:

Building Tenant Sq ft New Rent psf Old Rent psf

6 Broadgate Tokyo Mitsubishi 112,000 £42.50 £42.50

� 12 office reviews outstanding on 1,110,000 sq ft: average passing rent of £43.21 psf Principal reviews:

Building Tenant Sq ft Rent Date

100 Liverpool Street UBS 242,000 £44.97 Dec 2003

8 Broadgate UBS 112,500 £44.92 Dec 2003

135 Bishopsgate Natwest/RBS 324,000 £42.50 Feb 2004

Broadwalk House Credit Lyonnais 159,500 £42.62 July 2004

Broadwalk House Ashurst 116,000 £39.55 July/Sept 2004

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DEVELOPMENT PROGRAMME


Committed Prospects Committed Prospects

Net Area (sq ft) 0.5m 6.3m 1.1m 6.6m

Construction Cost £m1 175 1,250 320 1,361 - Of which costs to complete 166 1,219 64 1,326

Rent £m2 22 157 42 175

Pre-let Rent £m 21 - 21 -

1 Costs of construction excluding land and interest costs 2 Estimated headline rent pa Based on Group and 50% share of JVs (except areas which are at 100%)

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CITY: LETTINGS UNDER OFFER Q3 2004

Tenant Business Sector Max Sq ft

Willis Insurance 465,000 Norton Rose Legal 343,000 Legal & General UK Financial Services 170,000

Lawrence Graham Legal 125,000 The Economist Printing, Publishing & Recording 66,930 Ince & Co Legal 60,000

Wachovia Bank Foreign Banks & Securities Houses 49,000 Aspen Re Insurance 49,000 Petro-Canada Extraction & Energy 43,960

Collier Bristow Legal 30,000

Natexis Banque Populaires Foreign Banks & Securities Houses 28,385

Bell & Clements Insurance 28,000

Salans Hertzfeld & Heilbronn Legal 25,000

Total Under Offer 1,483,275

Of which signed post Q3 2004 (as highlighted in bold) 1,097,930 Source: Jones Lang LaSalle

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CITY: ACTIVE DEMAND Q3 2004

Tenant Business Sector Max Sq ft

Dresdner Kleinwort Wasserstein (Under Offer)

AON Ltd

Foreign Banks & Securities Houses

Insurance

396,000

300,000

Berwin Leighton Paisner Legal 275,000

Deloitte & Touche (Under Offer) Accountants & Management Consultants 250,000

Standard Chartered Bank

Kennedys

UK Banks & Building Societies

Legal

200,000

150,000

Guardian Newspapers (Under Offer) Printing, Publishing & Recording 150,000

Macfarlanes Legal 120,000

Legal Services Commission

College of Law

Public Administration

Legal

100,000

100,000

Pinsents Legal 80,000

Charles Russell Legal 75,000

Barclays Capital UK Financial Services 75,000

Beazley Furlong Insurance 75,000

Sumitomo Finance Foreign Financial Services 70,000

Kilpatrick Lockhart Nicholson Graham Legal 70,000

Robson Rhodes

GE Insurance Solutions

Accountants & Management Consultants

Insurance

70,000

60,000

Euromoney Institutional Investors Printing, Publishing & Recording 60,000

Ballantyne, McKean & Sullivan Legal 60,000

EMAP

Decherts (Under Offer)

Printing, Publishing & Recording

Legal

50,000

55,000

Source: Jones Lang LaSalle (active requirements > 50,000 sq ft)

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CITY & WEST END: ACQUISITION YIELDS Q2 2004 TO DATE

Property Purchaser Lease expiry Price Yield 7 Clifford Street Hermes 4 yrs £39m 5.13% 33 Old Broad Street Consortium 35 yrs £140m 5.13% 1 King William Street Chinese Private Investor 13 yrs £60m 5.70% 10/12 Great Marlborough Street Merrill Lynch 4 yrs £36m 5.72% Aviation House, 125 – 129 Kingsway Strategic Real Estate 14 yrs £95m 5.80% 22 Kingsway Private Investor 21 yrs £48m 5.97% Premier Place, Devonshire Square RBS 17 yrs £182m 6.00% CAA House, Kingsway KPMG Corporate Finance 15 yrs £98m 6.00% Becket House, Lambeth Palace Road Pinder Fry Benjamin 22 yrs £76m 6.11% Thames Court, Upper Thames Street Jaguar Securities 13 yrs £133m 6.13% Hill House, 1 Little New Street Land Securities 31 yrs £80m 6.23% 55 Moorgate West Investment 12 yrs £42m 6.30% 3 Minster Court, Mark Lane Rotch 12 yrs £99m 6.38% Corn Exchange, 2 Mark Lane CSAM 3-5 yrs £96m 6.46% Senator House, 85 Queen Victoria Street Challenge International 12 years £100m 6.50% 1 America Square Rotch 2-14 yrs £107m 6.75% 100 New Bridge Street & Watling House DEGI 17 yrs £151m 6.75%

Source: Agents’ Reports (principal transactions with initial yield < 6.75%)

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The information has been extracted largely from the Preliminary Announcement for the six months ended 30 Sept 2004. General property market data has been extracted from Jones Lang LaSalle and other agents’ reports.

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 exclude the capital allowances effects of FRS 19. Adjusted earnings per share similarly excludes the capital allowances effects of FRS 19. Comparatives have been restated following the adoption of FRS 17 ‘Retirement Benefits’ in March 2004.

Certain statements are forward looking which are based on current expectations, forecasts and assumptions that involve risk and uncertainties that could cause actual outcomes and results to differ materially from those projected.

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INTERIM PRESENTATION - British Land/media/Files/B/British-Land...Share NAV 1 at March 2004 5,035 966...

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