Interim Results

British Land Co PLC 21 November 2006 21 November 2006 PRELIMINARY ANNOUNCEMENT THE BRITISH LAND COMPANY PLC INTERIM RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2006 Financial Highlights: â€¢ Net Asset Value(1) per share 1624 pence, up 11% underlying(2) 9% headline - NAV per share up 29% in 12 months - EPRA Net Assets1 Â£8.6 billion - Net Assets Â£6.6 billion â€¢ Total return(3) 12% for six months, underlying2 â€¢ Underlying pre-tax profit(4) up 27% to Â£130 million - Headline pre-tax profit(5) Â£702 million - Profit on ordinary activities before tax Â£670 million â€¢ Underlying earnings per share(4) up 33% to 20 pence - Headline earnings per share 111 pence - Interim dividend up 8% to 5.6 pence per share â€¢ Portfolio valuation increase 6.2% in six months - Valuation uplift led by London Offices and Out of Town Retail - Comparable with IPD data â€¢ Properties owned or managed Â£19.8 billion Business Highlights: â€¢ Delivering on our promises to renew and work the business hard - Â£1.7 billion (gross) of asset turnover in six months; tightening focus, recycling capital, improving growth prospects - London Offices development programme is accelerating; customer focused with good prospects - Â£1 billion debenture refinancing; reducing future interest expense - Like for like rental value growth of 2.8% (IPD 1.8%) underlines growth prospects for British Land's prime space â€¢ On track for REIT conversion on 1 January 2007. First full year REIT dividends not less than 33 pence per share - 94% higher than 2005/6 â€¢ Board succession plans announced at AGM on 14 July 2006 â€¢ Market leadership in prime London Offices and Out of Town Retail - a strong platform for outperformance (1) EPRA (European Public Real Estate Association) basis - see Note 1 to the accounts (2) before debenture refinancing charge (3) increase in EPRA NAV plus dividends paid (4) see Note 1 to the accounts (5) with proportional consolidation of Funds and Joint Ventures - see Table A Sir John Ritblat, Chairman, said: "This is my last report as Chairman of British Land. I could not be more pleased, therefore, to record that British Land is in sparkling form. "We are specialists - commercial property specialists. We offer shareholders both large and small a superb platform to enjoy the secure growth that commercial property offers, spiced up by our active management and deal-doing. "Property is a long-term business, and that is both its charm and its challenge. Buildings are around for many years and can deliver the most lucrative rewards to the patient investor - and we have the long-term rental cash flows to service our needs irrespective of cycles. "It has been a privilege to lead the Company and, as Honorary President, I will derive great satisfaction in watching British Land adapt to change, evolve and continue to flourish." Stephen Hester, Chief Executive, said: "Our strategy is working well. We are creating shareholder value through an intense focus on meeting customer needs with actively managed, efficiently financed real estate. "We intend to make the REIT election with effect from 1 January 2007. We believe that the REITs regime will reinforce the competitive position of quoted property companies like British Land, offering focused real estate investment with a pre-eminent combination of performance, scale and accessibility. "We bid farewell to our outgoing Chairman, Sir John Ritblat, who above all others created the industry leader we see in British Land today. His contribution to the Company and our industry has been immense." The full preliminary results report follows. This preliminary announcement, the slides from our interim results presentation and Stephen Hester's interview with Cantos can be viewed on our website www.britishland.com British Land: Laura de Vere 020 7467 2920 Finsbury: Gordon Simpson 020 7251 3801 Ed Simpkins STATEMENT BY THE CHAIRMAN, SIR JOHN RITBLAT This is my last report as Chairman of British Land. I could not be more pleased, therefore, to record that British Land is in sparkling form. British Land Today Over the last 36 years we have grown successfully to Â£19.8 billion of prime property assets owned and managed today. In 1970 British Land had net assets of just Â£20 million. At 30 September 2006 the EPRA Net Asset Value is Â£8.6 billion, 1624 pence per share, and we report a total return for the first half of 12% before refinancing charges. We are specialists - commercial property specialists. As such we offer shareholders both large and small a superb platform to enjoy the secure growth that commercial property offers, spiced up by our active management and deal-doing. We have an enduring business model that continues to serve shareholders well. In a world of international investment flows, our size allows us to compete for capital among the pre-eminent real estate players globally - whilst our performance underpins the investment case and importantly, we have the long-term rental cash flows to service our needs irrespective of cycles. REITs This is also the Company's last report to shareholders before making the attractive change to REIT status. We are calling an EGM on 20 December at which we will put to shareholders the changes to our Articles of Association necessary before we can elect into the new REIT regime from 1 January 2007. The REIT regime advances UK quoted property companies, removing the tax disadvantage versus other property market investors that has held back the sector and its valuation. I am confident British Land will be a leader of the new regime, offering an attractive and secure but still lively investment, exploiting its size and expertise to benefit our customers and the continued modernisation of the UK's built environment. An important element of REITs is higher cash distributions for shareholders. Reflecting our continued growth in profits, we are pleased to announce today an 8% increase to the interim dividend to 5.6 pence per share. Thereafter we will switch to payment of dividends quarterly - smoothing cash flows for shareholders that are more reflective of the long-term continuous rental inflows that so distinguish our business. Our first quarterly dividend will be paid in May in respect of the three month period to 31 December 2006 and will be 6.5 pence per share. Our first dividend in respect of REIT trading will be 8.25 pence for the quarter to 31 March 2007, paid in August. In respect of our first fiscal year as a REIT, we expect the four quarterly dividends together to total no less than 33 pence, which would be 94% up on the dividend paid for our 2005/6 financial year. British Land will continue to direct its strategy towards long-term growth in income and creating superior total returns. Dividends and their growth will be a more important component of return than before, but still only an element alongside capital appreciation. Board & Management Transition At the AGM in July I was pleased to welcome four new directors. Andrew Jones and Tim Roberts are fulfilling valuable roles in charge of Retail and Offices respectively. It is a pleasure to have Kate Swann and Lord Turnbull in their non-executive capacity. My successor as Chairman, Dr. Chris Gibson-Smith, is primed for office, complemented by Sir David Michels who steps up to the post of Senior Independent Director. The transition at Board and Management levels, begun two years ago with the appointment of Stephen Hester as Chief Executive, is now complete and has gone well. I have every confidence in the strength of our business model and pride in the outstanding portfolio which are continuing in such good hands. Industry Property is a long-term business, and that is both its charm and its challenge. Buildings are around for many years and can deliver the most lucrative rewards to the patient investor - provided of course that the original decisions were savvy! This is not to suggest that lethargy is the route to profit - opportunities have to be seized quickly and boldly. Long-term holdings such as Plantation Place were a profitable investment for over 30 years and then provided a further significant boost on redevelopment. The charm element of property is dealing with a relatively small charmed circle, and this is something that has made for some very enjoyable acquaintances not just for my thirty-six years with British Land but nearly fifty-five years in real estate. Where there has been a change which remains debatable, is the excessive proliferation of regulation and interference in every aspect of the industry. Some of course good and some less so but what is for sure is that the sheer complexity is time consuming and puts up the costs enormously. In earlier decades aspirations ran to being a doctor or a lawyer, nowadays you might aspire to be a Brussels based environmental consultant instead! As Macaulay opined in 1830, the natural rate of interest is 5% and by the same token the yield correction which has taken place establishes a return to long-term trend. I believe we can look forward to stable growth in rents. It may be that we shall be the beneficiary in an era of low interest rates as investors come to appreciate the benefit of the inflation hedge. So, in closing, may I thank all at British Land, and those who have retired after sterling service, for their efforts and their loyalty which have allowed us to come so far and yet be so well placed to prosper in the future. It has been a privilege to lead the Company and, as Honorary President, I will derive great satisfaction in watching British Land adapt to change, evolve and continue to flourish. REVIEW BY THE CHIEF EXECUTIVE, STEPHEN HESTER British Land is reporting a strong first half of the 2006/7 financial year. â€¢Our financial results are good. EPRA Net Asset Value is 1624 pence per share (up 9% from March 2006, 11% underlying, and 29% from September 2005). Headline pre-tax profits were Â£702 million, Â£130 million underlying, up 27% on the comparable period last year. â€¢Our strategy is working well. We are creating value through an intense focus on meeting customer needs with prime property in strong, supply constrained locations. The mission of the Company to 'sweat its assets' hard in executing that strategy is paying off. â€¢This is our last report before REIT election. We believe we have positioned the Company well to get the most from this new status and to prosper in the demanding market conditions we foresee. â€¢We bid farewell to our outgoing Chairman, Sir John Ritblat, who above all others created the industry leader we see in British Land today. His contribution to the Company and our industry has been immense. â€¢Reflective of investors' overall assessment, our shares have again outstripped the FTSE 100 Index and our industry peers. At over Â£15 presently, the share price has roughly doubled in two years. Timing is everything - but we are not satisfied just yet! REITs We intend to make the REIT election with effect from 1 January 2007, subject to EGM. An expected Â£315 million entry charge will be provided for in the quarter to 31 December 2006. Pro forma financial data is updated on our website, showing initial benefits of operating in a largely income and capital tax-free regime thereafter. The accompanying regulatory regime is light touch in concept. There will be kinks to iron out, but we expect to be able to compete successfully as a REIT - since tax and dividends aside, nothing changes on day one. We intend to continue to execute our existing strategy, meeting customer needs and thereby creating shareholder value from actively managed, efficiently financed real estate. We believe that the REITs regime, longer term, will reinforce the competitive position of quoted property companies like British Land. Fiscal efficiency, light touch regulation and attractive, asset-backed growth is a strong story for the long-term investor. British Land offers focused real estate investment with a pre-eminent combination of performance, scale and accessibility - a recipe of even greater relevance as the audience for quoted property investment expands and deepens in the UK and internationally. Property markets As predicted, the yield shift that has dominated real estate markets, boosting values, has now slowed. With an initial yield overall of 4.6% (rental income as a percentage of capital values) and equivalent yield of 5.3%, we see the UK property market as well anchored versus other asset classes. The rental growth in prospect brings overall forecast risk-adjusted returns from property to sustainable levels. Of course market movements will also reflect sentiment and unforeseen events as well as fundamental analysis; it remains management's responsibility to protect against unexpected shocks as well as to capture unexpected gains where possible. The capital flows that have driven the investment market remain robust. Liquidity is therefore still good and conditions competitive. It remains our view that the current market often gives insufficient weight to risk factors such as rental growth prospects and occupancy risk. Hence our preference for prime property and good income security overall. With waning yield shift, the emphasis is moving firmly to rental growth prospects as the driver of capital growth. Here sectoral and property specific influences dominate the outlook as the interplay of customer demand and product supply varies. In the Retail sector generally market conditions remain demanding as retailer profit pressures combined with new space releases slow rental growth and increase tenant demand for rental incentives. Nevertheless, annualised rental growth for the sector as a whole is currently some 2.8%. The majority of British Land's portfolio has been positioned in areas of above average customer demand with limited new supply of space. Hence we believe our rental growth and prospects to be above average for the sector. In London Offices, the well publicised cyclical upturn is under way with good customer demand as London's international services dominated economy expands and limited new office supply is immediately available. Rental growth in Central London is currently some 12% annualised. The key judgement to make is with what pace new supply is delivered to meet or exceed demand for new space in coming years - i.e. the length and trajectory of the current Office property cycle. And since Office prices have risen sharply (13% year to date) thereby contracting yields in anticipation of rental growth, the delivery of that growth should in due course be accompanied by outward yield shift, a mitigating factor in further capital growth. In this Office cycle there is attractive upside to be captured, but also significant risk of disappointment. Hence the specifics of quality, location, asset management and rental timing are vital. We are optimistic for British Land's prospects and working hard to capture the growth. Activity during the six months Portfolio reshaping Total purchases and sales in the first six months reached some Â£1.7 billion gross, aimed at further improving risk adjusted returns and growth prospects for our assets. Our two principal themes remain: sharpening our sectoral focus to concentrate on areas where we have both distinctive expertise and confidence in performance, and recycling our capital within 'advantaged' sectors. In London Offices the strong investment market has provided good opportunities to achieve high sale prices for assets where we see (risk adjusted) growth prospects as lower than those expected from reinvesting the proceeds into our office development programme: - the final investment held by CLOUT at Plumtree Court, EC4 sold for Â£120 million - the offices at 133 Houndsditch, EC3 realised Â£110 million, and - the disposal of 51 Eastcheap, EC3 completed at Â£55 million all at a premium over the March 2006 valuation. The table below also shows more exits from provincial offices and the profitable sale of our head office in Regent's Park prior to our relocation in 2007. In the Retail sector, activity has focused on: - enhancing our retail warehouse park profile through sales of assets with slower rental growth prospects, often bulky goods parks but may also be highly rented open A1, and selective reinvestment in those parks, usually open A1, where conversely we see better rental growth prospects - repositioning the in town retail portfolio through more sales of high street retail - increasing our investment in European out of town retail, via PREF and our direct purchase of a 50% share in the major retail development project in Zaragoza, Spain. We also perceive value in certain property portfolios where long-term fixed increase or indexed leases offer a level and security of return likely to be more sought after as overall property growth rates subside. The sales by HUT (and others) of Gallions Reach Shopping Park, Beckton for Â£192 million and by The Tesco British Land Property Partnership of Weston Favell Shopping Centre, Northampton for Â£122 million, were achieved at well above the March 2006 valuation. --------------------------------------- ----- -------- ---- Sales Price BL Share Gain --------------------------------------- ----- -------- ---- 6 months to September 2006 Â£m Â£m %1 Retail: Gallions Reach Shopping Park, 192 35 8.4 E62 Weston Favell Shopping Centre, 122 61 22.0 Northampton(3) 5 retail warehouse parks 58 37 10.6 11 in town retail units 55 55 4.9 B&Q warehouse, 29 29 0.5 Stockton-on-Tees ----- -------- ---- 456 217 10.1 Offices: Plumtree Court, EC44 120 43 18.8 133 Houndsditch, EC3 110 110 41.2 51 Eastcheap, EC3 55 55 7.1 2-12 & 20-21 Cornwall Terrace, Regent's 50 50 59.8 Park, NW15 Provincial offices 28 28 8.3 ----- -------- ---- 363 286 28.6 Others 30 20 17.4 --------------------------------------- ----- -------- ---- 849 523 19.9 (1) sale price above latest year end valuation (March 2006) (2) Hercules Unit Trust (HUT) (3) The Tesco British Land Property Partnership (4) City of London Office Unit Trust (CLOUT) (5) contracted July 2006 - completion expected July 2007 ---------------------------------------- ----- -------- ----------- Purchases Price BL Share Value 6 months to September 2006 Â£m Â£m Uplift %(1) ---------------------------------------- ----- -------- ----------- Retail: 50% share of BL Davidson 269 269 2.8 portfolio 9 B&Q warehouses(2) 230 221 6.8 5 retail parks in Europe(3) 88 30 1.5 50% share of Puerto Venecia Retail Park, 69 69 - Zaragoza(4) Giltbrook Retail Park, 35 35 - Nottingham(5) Worcester Road, Evesham(6) 20 5 - ----- -------- ----------- 711 629 3.6 Offices and other: 50% share of BL Davidson 96 96 7.1 portfolio Others 39 33 - ---------------------------------------- ----- -------- ----------- 846 758 3.9 (1) from purchase price to September valuation (2) includes 7 acquired in portfolio and 1 in Hercules Income Fund (HIF) (3) PREF (Pillar Retail Europark Fund) - 3 parks in Portugal, 1 in Madrid and 1 in Belgium (completion of 2 parks due September 2007) (4) purchase of 50% interest from and Joint Venture development agreement with Copcisa Corp (a Spanish construction company) and private investors (5) existing park and new development project (6) HIF - forward purchase of retail development We completed the acquisition of the outstanding 50% of the BL Davidson Joint Venture in August 2006, issuing loan stock for the net purchase price (after existing third party debt) of Â£256 million. Its current investment portfolio has a value over Â£700 million primarily in areas of our market leadership - open A1 retail and central London offices. We also completed the purchase of the Giltbrook Retail Park development in Nottingham. A portfolio of seven B&Q Warehouse stores was purchased in July 2006 for Â£198 million, each of approximately 100,000 sq ft in prime edge of town locations and let on 20 year leases. Current rent is at market levels and will be increased annually in line with RPI, subject to a cap. The value of British Land's portfolio with leases subject to fixed, minimum or indexed rental uplifts is now some Â£1.8 billion. Extending our investment in Europe, we have been able to capitalise on Eurozone contacts and UK expertise to secure good quality out of town retail assets. In May 2006 we completed the purchase of a 50% Joint Venture interest in the major Puerto Venecia project in Zaragoza, Spain. British Land has a 40% effective interest in PREF, which currently owns 10 income producing retail parks in Spain, Italy, Portugal, Belgium, France and Switzerland, and has contracted conditionally to acquire another six retail parks currently under development. The combined area of the Fund's income producing schemes and the developments when complete will be some 400,000 sq m (4.3 million sq ft), with a value of over â‚¬818 million (Â£550 million). Across the retail parks owned and under development in PREF and in our Zaragoza Joint Venture, the average capital value of Â£137 per sq ft and ERV of Â£8 per sq ft are lower than comparable assets in the UK, with higher gross initial yields of 5.9% in Euros, and provide good prospects for attractive returns under our management as the European market develops. Proactive asset management Across the business we continue to add value to our property through a range of intensive asset management and development activity. The focus on customer requirements is delivering good results from a range of lettings, tenancy changes, lease restructurings, planning improvements, scheme refurbishments and significant London office developments. In Retail particularly, our market leadership offers retailers an unrivalled choice and this scale benefits both parties. ------------------ -------- --------- -------------- New lettings and lease Number Sq ft Rent, Â£m pa renewals -------- -------------- 000s (including Funds and Joint --------- Ventures) -------- ------------------ New total BL share ------- of increase -------- ------------------ -------- --------- Retail Warehouses 48 300 8.7 5.5 Shopping Centres 77 278 11.8 5.0 High Street 11 50 0.5 - Central London Offices 11 80 2.9 2.2 Other 50 174 2.6 1.3 ------------------ -------- --------- ------- -------- Total 197 882 26.5 14.0 ------------------ -------- --------- ------- -------- At our completed development of Nugent Shopping Park, Orpington further lettings have been achieved in the six months to major retailers including Game, HMV, Vision Express and WH Smith Stationery. The latter two are first lettings to these companies in out of town retail park formats. Nugent is now some 75% let, with all remaining space under offer. HUT has also secured the first two out of town lettings to Stylo Barratt's new concept store, Shutopia, at Parkgate, Rotherham and Borehamwood Shopping Park. These lettings, together with those at Nugent, are further examples of the flexibility of these retail investments to meet retailers' changing requirements. At Meadowhall Shopping Centre, letting activity has continued with over 20 new leases in the six months covering over 65,000 sq ft concluded to retailers including Virgin, Timberland and River Island. The reconfiguration of the area previously occupied by Sainsbury's is progressing well with completion due in September 2007. Contracts have been exchanged with Primark and Next for units of 73,000 sq ft and 66,000 sq ft in this new space. The Meadowhall management has continued to address environmental impacts and the Centre has recently achieved zero waste to landfill, through a combination of recycling, on site materials recovery facility and incineration for energy recovery. In the City, we identified that our existing tenant UBS needed further office space at Broadgate. In order to meet this requirement, we have been able to agree the take back of 66,000 sq ft at 6 Broadgate and re-let to UBS at a headline rent of Â£45 per sq ft. This has also updated the open market rental value for unrefurbished space at Broadgate and is an indication of the continuing improvement in City occupational market conditions. At Plantation Place South, EC3, new lettings of 35,000 sq ft have been achieved, including 28,000 sq ft on two floors to AIG Global. A further 38,000 sq ft is under offer, with a best rent of Â£48 per sq ft. On completion of the fit out early next year, York House, W1, will incorporate the new head office for British Land. We have begun a master planning exercise for Broadgate, which is a relatively low rise and low density estate. The recent draft guidelines, produced by the Mayor's office, for narrowing the protected 'view corridors' to St. Paul's should allow us to explore more high-rise development at Broadgate. We are at the very early stages of the exercise, but the indications are that redevelopment and adding extra floors to existing buildings is possible, and would not be out of keeping with the surrounding area. During the six months we have also made good progress with rent reviews concluding 131 reviews at overall 6% above the external valuer's applicable ERV, generating an increase in current rental income to British Land of Â£5 million pa. ----------------- -------- ------------------ Rent reviews Number Rent, Â£m pa -------- (including Funds and Joint ------- -------- -------- Ventures) New Increase BL share ------------------ total -------- of ------- increase -------- ------------------ -------- -------- Retail Warehouses 33 11.2 3.0 1.8 Superstores 19 26.1 2.2 1.7 Shopping Centres 53 15.1 1.9 1.4 High Street 10 1.2 0.1 0.1 Central London Offices 8 17.7 - - Other 8 1.7 0.1 0.1 ------------------ -------- -------- -------- -------- Total 131 73.0 7.3 5.1 ------------------ -------- -------- -------- -------- A significant rent review determination was achieved on the Sainsbury's store at Chiswick of 75,000 sq ft, where the arbitrator's award was Â£30 per sq ft as a base rent, equating to Â£33 per sq ft after adjustment for fixtures and fittings. This represented a 42% increase above the previous passing rent and has a knock-on benefit to our superstores portfolio across other comparable sites. Development programme ------------------- ------- ----- ----- ----- ------ ------ ------- ------ ----- Committed PC(1) Sq ft Cost Â£m(2) Value Notional Rent Â£m pa Sales 000 -------------- Sept 06 interest ---------------- Â£m(5) Total To Â£m Â£m(3) Total(4) Let/ complete pre-let ------------------- ------- ----- ----- ----- ------ ------ ------- ------ ----- London Offices: 201 Bishopsgate & Broadgate Tower Q3 2008 822 297 222 295 26 42.0 - - Ropemaker Place (6) Q2 2009 590 225 221 150 36 29.4 - - Osnaburgh Street(7) Q1 2009 490 253 246 9 21 18.0 - 46 The Willis Building Q1 2007 475 201 57 270 7 21.3 21.0 - Basinghall Street(8) Q2 2007 199 40 13 26 - - - 43 Coleman Street(8) Q1 2007 180 39 16 23 - - - 44 York House(9) Q4 2006 138 57 11 100 - 6.7 - - Ludgate West Q4 2007 127 49 33 50 4 6.2 - - ------------------- ------- ----- ----- ----- ------ ------ ------- ------ ----- Total Offices 3,021 1,161 819 923 94 123.6 21.0 133 Retail Parks: Puerto Venecia, Zaragoza(10) Q3 2008 2,100 75 70 83 4 8.8 0.3 22 Giltbrook, Nottingham Q1 2008 201 37 37 9 3 3.4 - - Business Park: Blythe Valley (Plot G2) Q4 2006 35 6 2 9 - 0.7 0.7 - ------------------- ------- ----- ----- ----- ------ ------ ------- ------ ----- Total 5,357 1,279 928 1,024 101 136.5 22.0 155 =================== ======= ===== ===== ===== ====== ====== ======= ====== ===== (1) estimated practical completion of construction (2) estimated construction cost (3) from 30 September 2006 to PC (4) current estimated headline rent (excludes provision for tenants' incentives) (5) developments (or parts) expected to be sold, no rent allocated (6) subject to revised planning - existing consent for 505,000 sq ft (7) Regent's Place, development includes 110,000 sq ft residential expected to be sold (8) City of London Office Unit Trust (CLOUT) - BL share 35.9% - forward sold (9) c 40,000 sq ft offices to be occupied by British Land, development includes 26,000 sq ft residential expected to be retained (10) Joint Venture (Eurofund Investments Zaragoza) - BL share 50% Data for Group and its share of Funds and Joint Ventures, except areas in sq ft shown at 100% 3 million sq ft London Offices - developments carefully timed and customer focused Our London office development programme represents the best way to meet customer needs in this sector, with high quality buildings of architectural merit in the right locations, offering flexible, efficient floor plates and an attractive working environment. In turn, the economics are more attractive to us than the current investment market offers. We expect office rental growth to generate higher rents during 2007-2009 and our developments should be well timed for delivery into this improving market. The Willis Building, EC3, was 'topped out' in September and is on programme for completion in early 2007. The offices at York House, W1 have reached practical completion on time and within budget; we are now fitting out the c. 40,000 sq ft to be occupied as our new head office. The residential apartments at York House are scheduled for practical completion at the end of this calendar year. Construction of 201 Bishopsgate and The Broadgate Tower are also progressing well with the steel frame for the tower reaching level 20 - and making its mark on the London skyline. The design is energy efficient and is expected to produce a significantly lower level of emissions than is required by current building regulations. At Ropemaker Place, EC2, piling and preparation works are proceeding. The redesigns for the new development are in hand and we are submitting a revised planning application for a larger, more efficient building to provide 590,000 sq ft of prime office and ancillary space on this 1.2 acre island site. The next phase of the development of the Regent's Place, NW1 estate will be to provide 380,000 sq ft of offices and 110,000 sq ft of residential accommodation at Osnaburgh Street in the West End. We have now acquired the remaining freehold interest from The Crown Estate, enabling construction to begin in early 2007. 2.3 million sq ft retail - new projects in UK and Spain Giltbrook Retail Park, Nottingham is a retail warehouse scheme of 60,000 sq ft let to Decathlon and Next, and a site of 20.8 acres opposite with an existing planning consent for a further 150,000 sq ft of retail and 75,000 sq ft of industrial/office accommodation. We have been working on the project design and following local consultations have recently submitted a revised planning application for a 240,000 sq ft mixed use retail, industrial and office scheme, with improved environmental attributes. With the new park expected to complete in 2008, anchored by an adjacent existing IKEA store, we expect this to become an important regional retail destination. Our Joint Venture development of Puerto Venecia is under way at Zaragoza, to create a retail warehouse park, a specialist retail and leisure scheme and a shopping centre (with ancillary facilities), in total 195,000 sq m (2.1 million sq ft). Infrastructure works have begun and IKEA is progressing well with the construction of its store, expected to open for trading mid-2007 to anchor the retail park. Further anchor tenants agreed for the schemes include the major retailers Leroy Merlin, Decathlon, Porcelanosa and Conforama. ---------------- ----------------- ------ ----- ----- ------ ------ ------ ---------- Development prospects Sq ft Cost to Value Notional Rent Sales Planning 000 complete Sept 06 interest(2) pa(3) Â£m(4) Â£m(1) Â£m Â£m Â£m ---------------- ----------------- ------ ----- ----- ------ ------ ------ ---------- The Leadenhall City Office 601 323 115 37 34.3 - Detailed Building Regent's Place(5) West End Office 497 205 31 15 16.8 57 Pending Blythe Valley Business Park 704 113 14 3 14.1 - Outline/ Park(6) detailed New Century Park Business 582 76 24 3 8.0 12 Detailed Park/Distribution Meadowhall Casion Leisure 409 123 - 7 12.2 - Submitted Meadowhall Car Showrooms 171 29 - 2 3.2 - Pending Theale Residential 204 31 13 2 4.3 - Submitted Preston Retail Park 67 14 3 - 1.2 - Detailed ---------------- ----------------- ------ ----- ----- ------ ------ ------ ---------- Total 3,235 914 200 69 94.1 69 ---------------- ----------------- ------ ----- ----- ------ ------ ------ ---------- Total construction cost(1): 946 ----------------------------------- ------ ----- ----- ------ ------ ------ ---------- (1) estimated construction cost (2) during construction to PC (3) current estimated headline rent (excluding cost of tenant incentives) (4) developments (or parts) expected to be sold, no rent allocated (5) North East Quadrant, offices and residential (6) not including Phase 2, subject to a conditional development agreement All data for Group, projects 100% owned At Blythe Valley Business Park, Solihull, we have received outline planning consent for Phase 2, an additional 800,000 sq ft of new office space, bringing the total consented area at Blythe Valley Park to 2 million sq ft. We are working on preparation and design, with construction proposed to commence on site next year. Portfolio valuation The table below shows principal valuation movements for both the three months and the six months to 30 September 2006 by sector for our Â£15.9 billion portfolio. All sectors improved in value. The 6.2% uplift for the six months was comparable with that reported by IPD for the market overall (after adjustment for differences in calculation method, including time weighting). Contributing to the uplift was like for like growth in rental value (ERV) for the portfolio ahead of the market at 2.8%. The net equivalent yield (after notional purchasers' costs) on the portfolio has also tightened by 16 bps to 4.7% during the six months. The main sector drivers of the valuation increase over the six months were: - London offices, including developments, at 34.1% of the portfolio rose by 8.9%, mainly as a result of improvements in market rental and yield levels - retail warehouse parks at 24.6% of the portfolio were up by 6.3% due to continuing demand for open A1 parks, with the best prospects for rental growth. ----------------- ----- ----- ----- ---- ---- ---- Funds/ Valuation Group JVs(1) Total Portfolio Uplift(2)% ---- ---- by sector Â£m Â£m Â£m % 3 mths 6 mths ----------------- ----- ----- ----- ---- ---- ---- Retail Retail Warehouses 2,377 1,529 3,906 24.6 3.0 6.3 Superstores 1,590 266 1,856 11.7 2.7 5.0 Shopping Centres(3)2,194 490 2,684 16.9 1.0 3.8 Department Stores 786 146 932 5.8 1.2 3.5 High Street 392 - 392 2.5 2.0 3.1 ----------------- ----- ----- ----- ---- ---- ---- All retail 7,339 2,431 9,770 61.5 2.1 4.9 Offices City(4) 3,623 - 3,623 22.8 2.8 7.6 West End(5) 783 - 783 4.9 3.2 7.1 Business Parks 157 3 160 1.0 0.8 2.1 & Provincial Development 1,053 - 1,053 6.6 8.7 15.1 ----------------- ----- ----- ----- ---- ---- ---- All offices 5,616 3 5,619 35.3 3.8 8.6 Industrial, 474 34 508 3.2 1.7 2.8 distribution, leisure, other ----------------- ----- ----- ----- ---- ---- ---- Total 13,429 2,468 15,897 100.0 2.7 6.2 (1) Group's share of properties in Funds and Joint Ventures (2) increase in value for 3 months and 6 months to 30 September 2006, includes valuation movement in developments, purchases and sales, net of capital expenditure, and excludes properties in Europe (3) Meadowhall valuation up 3.0% to Â£1,613 million (up 4.1% pre cap-ex); ERV Â£82.8 million; net equivalent yield 4.65% (true equivalent yield 4.8%) (4) Broadgate valuation up 6.5% to Â£3,440 million; headline ERV range Â£40.00 - Â£50.00 per sq ft (average headline ERV has risen 7.3% to Â£43.30 psf); net initial yield 5.0% (assuming top up of rent free periods and guaranteed minimum uplifts to first review) (5) Regent's Place valuation up 4.8% to Â£608 million; headline ERV range Â£23.50 - Â£45.00 per sq ft; net initial yield 4.9% (assuming top up of rent free periods and guaranteed minimum uplifts to first review) Financial results ------------------------- ------------- ------------ --------- Highlights for the 6 September September Change months ended: 2006 2005 (restated (1)) ------------------------- ------------- ------------ --------- Income Statement Â£m Â£m % Underlying pre-tax 130 102 +27 profit(2) Gross rental income 291 327 -11 - proportional basis(3) 353 375 -6 Net interest costs 157 190 -17 - proportional basis(3) 188 218 -14 Headline pre-tax profit(3) 702 759 -8 ------------------------- ------------- ------------ --------- pence pence Diluted earnings per 111 116 -4 share(2) ------------------------- ------------- ------------ --------- Underlying diluted 20 15 +33 earnings per share(2) Dividend per share 5.6 5.2 +8 ------------------------- ------------- ------------ --------- As at: September March 2006 *Growth 2006 (restated (6 (1)) months) ------------------------- ------------- ------------ --------- Balance Sheet Net Assets Â£6,627m Â£6,016m +10% ------------------------- ------------- ------------ --------- EPRA(2) Net Assets Â£8,561m Â£7,802m +10% ------------------------- ------------- ------------ --------- EPRA(2) NAV per share 1624 pence 1486 pence +9% ------------------------- ------------- ------------ --------- (1) see Note 11 (2) see Note 1 (3) see Table A for non-statutory proportional consolidation, including share of Funds and Joint Ventures Income statement Gross rental income was 11% lower resulting from the significant level of asset sales over this period and last year. Since the disposals mainly affected the British Land Group rather than its interests in Funds and Joint Ventures the overall reduction in gross rental income between the two half year periods was only 6% on a proportionally consolidated basis, to Â£353 million. On a like for like basis (including our share of Funds and Joint Ventures) - that is excluding purchases, sales, developments and adjusting for asset management initiatives - growth in rental income was 3%, reflecting 1.8% for offices and 3.8% for retail properties. Fees and other income amounted to Â£33 million for the six month period (2005: Â£9 million) which includes a dividend received from Songbird Estates plc (Canary Wharf) of Â£18 million (2005: Â£nil) and performance and management fees of Â£11 million (2005: Â£2 million). Administrative expenses for the six months amounted to Â£42 million compared to Â£36 million in the prior period and included a full six months of administrative expenses, specifically staff costs, relating to the acquisition of Pillar Property plc in July 2005. Net interest costs reduced substantially following repayment of debt from the proceeds of sales and the impact of cheaper debt raised on refinancing, to Â£157 million for the six months (down 17%) and Â£188 million on a proportionally consolidated basis (down 14%), excluding the charge of Â£228 million pre-tax incurred on the British Land debenture refinancing (set out below). Underlying pre-tax profit, excluding the refinancing charge, was up 27% to Â£130 million, benefiting from receipt of the Songbird dividend in the first quarter, growth in underlying rents, lower finance charges as a result of refinancing activity and the disposals, which reduced interest costs by more than the rental income foregone. British Land's share of underlying pre-tax profit of Funds and Joint Ventures was Â£22 million (2005: Â£14 million). Including valuation gains, goodwill and taxation, Funds and Joint Ventures contributed Â£155 million (2005: Â£80 million) on an after tax basis. The tax rate for the six months is 18% with an underlying rate of 20%, excluding the refinancing charge, tax on sales and the effects of prior year items. Earnings per share were also affected by the refinancing charge; excluding this charge, earnings per share, reported at 111 pence, would have been 141 pence. Underlying earnings per share were up 33% to 20 pence. The revaluation gains on property recognised in income totalled Â£643 million (2005: Â£578 million) including gains on property disposals of Â£36 million (2005: Â£34 million). In addition the share of profits from capital items in Funds and Joint Ventures totalled Â£167 million (2005: Â£82 million) and a further Â£112 million (2005: Â£35 million) is shown within movements in equity relating to the revaluation of investments and development properties. In total on a proportional consolidation basis, capital revaluation gains in relation to properties and investments amounted to Â£922 million for the period (2005: Â£695 million). Capital growth The combination of growth in the property portfolio of 6.2% and increased profits, less the refinancing charge, have led to an increase in EPRA net assets in the six months since March 2006 of 9% to 1624 pence per share. EPRA net assets without the refinancing charge, which amounted to 30 pence per share, would have been 1654 per share, an uplift of 11% in the six months. Total return (NAV growth plus dividends) for the six month period was 12%, before the debenture refinancing charge. Financial implications of REIT status As discussed earlier, British Land expects to elect REIT status from 1 January 2007. On conversion to a REIT the entry charge will be treated as an expense in the period it is committed. At the same time there will be a release of provisions made for deferred tax to the extent that gains on future disposals are expected to be tax exempt. Based on 30 September 2006 values and assuming a target group structure that includes corporate joint ventures, the entry charge would be Â£315 million and the deferred tax release would be Â£1.7 billion. The assumptions underlying this can be found on our website (Interim Results Presentation). The entry charge expense will reduce NAV per share. The release of deferred tax will not increase NAV because deferred tax is excluded from that calculation. The overall pro forma effect on NAV (based on 30 September 2006 values) will be a reduction of 67 pence. Certain assets and income are not expected to qualify for tax exempt status within the REIT regime. These include our investment in Songbird and our overseas interests. Interests held in Unit Trusts will also be chargeable to tax on their disposal as will capital distributions. Corporate joint ventures may not form part of the tax exempt group on day one of the REIT regime. Accordingly the entry charge and the release of deferred tax balances on day one of the REIT regime will be smaller than the target figures and some deferred tax balances will remain. Financing activity Our financing policy is to enhance equity returns through strategic leverage while maintaining a risk-averse debt structure. Our current target range for the loan to value ratio across the entire business remains 45-55%, a prudent level particularly given our low income risk through long weighted average lease lengths (14 years) and low vacancy rates. The table below sets out the relevant ratios. -------------------------------------------- ------------ -------- Financing statistics 30 September 31 March 2006 2006 -------------------------------------------- ------------ -------- Group: Net debt Â£6,380m Â£5,593m Weighted average debt maturity 14.2 yrs 15.0 yrs Weighted average interest rate 5.46% 5.71% % of net debt at fixed/capped interest rates 95% 95% Interest cover(1) 1.69 1.51 Loan to value (debt to property & 43% 42% investments) Unsecured debt to unencumbered assets 28% 26% Undrawn committed facilities and cash Â£1,795m Â£2,415m Group and share of Funds and Joint Ventures: Net debt(2) Â£7,384m Â£6,684m Weighted average debt maturity 12.9 yrs 13.4 yrs Weighted average interest rate 5.45% 5.69% Interest cover(1) 1.69 1.52 Loan to value (debt to property & 46% 46% investments) -------------------------------------------- ------------ -------- (1) Underlying profit before interest and tax / net interest excluding refinancing charges (2) see Table A A Â£1 billion restructuring of the British Land debentures was completed in August 2006, creating a debenture security pool valued at Â£1.8 billion. A pre-tax refinancing charge of Â£228 million, mainly due to the difference between the market and book values of the debentures, reduced EPRA NAV per share by 30 pence; there is virtually no effect on NNNAV. British Land's annual interest costs will be reduced by some Â£10 million and its weighted average cost of debt is reduced by some 0.3% pa. With the simplified uniform structure, improved common covenants and enhanced transparency, the new debentures are already showing benefits of greater liquidity. During the six months we raised over Â£750 million of new (or renewed) bank revolving credit facilities. These included a successful syndicated seven year loan facility of Â£405 million, taking advantage of lower market pricing and replacing more expensive lines. In October 2006 we finalised the development finance for the Joint Venture project at Puerto Venecia, Zaragoza, to be provided by a syndicate of banks in Spain. On 20 November 2006 we announced our intention to refinance the Â£853 million Meadowhall Shopping Centre securitisation. Property sectoral outlook We continually review the prospects and expected performance of each asset in the light of market conditions, deciding across the portfolio when to buy, hold or sell. Our occupier-led strategy informs these decisions, concentrating on markets and properties with positive supply/demand characteristics and focusing on providing efficient accommodation in the best locations. Our asset management aims to further enhance rental growth and performance. Retail - Â£9.8 billion invested 76% of which is out of town The retail property investment market remains active with strong interest from, inter alia, Irish investors and institutional funds. However the disconnect between the investment and occupational markets is coming to an end, as buyers are now beginning to look through to the underlying occupational demand in pricing capital values. With this in mind we expect to see prime outperforming the secondary sub-sectors with prime rents and yields supported by attractive demand and supply dynamics. There is however a risk within the secondary sub-sectors of yields widening where there is greater chance of falling tenant demand. Overall we expect modest rental growth rates in the retail sector, with marked differentials between performance depending on an asset's particular type, location, tenant mix, size and unit flexibility, as well as retailers' trading performances. The strongest rental growth going forward is expected to be in open A1 retail warehouses. The range of retailers expanding into out of town operations, often with new trading formats, is maintaining demand for space in open A1 parks. Many high street retailers such as Asda, Marks & Spencer, Tesco and Debenhams, are taking more space out of town as they introduce new formats, improving tenant mix on the parks and strengthening the shopping destination. There is also healthy demand for more 'standard' units, with increasing lettings to retailers such as New Look, River Island, Boots and Monsoon. The volume of transactions remains healthy at the more desirable locations, although in the current market several transactions may be required to establish the growth. Prospects for improving rents in food superstores are also above average, where we see good demand for the stores (with limited supply) and affordable rents, which the tenants' trading would support at above current market levels. For retail investments in town, including shopping centres, we expect growth to be more difficult to achieve. Supply of town centre shopping space is increasing, while the competition from successful out of town locations grows. Smaller towns and secondary locations will perform least well. We are reducing our holdings of in town assets to focus on those which are located within large catchment populations, are dominant in the relevant area and where we believe income growth can be achieved through real asset management initiatives, including development opportunities. Across the sector, our customer led strategy is central. We are selectively acquiring (and holding) those properties which provide retailers with their preferred trading environment, and have the flexibility to adapt unit size and configuration as their requirements change. In a more challenging retail environment, with retailers being more focused on costs and margins these assets will perform best going forward, as rental growth becomes the principal element of improving value. Offices - Â£5.6 billion invested 97% of which is Central London Healthy market conditions in London offices prevail. Take up so far this year has been above average levels and as a result vacancy rates across the Capital have fallen. In the City, where the majority of our London investments and developments are held, the vacancy rate has fallen by a striking 26% over the last year. The outlook for take up is also positive, with current demand for accommodation, plus the level of enquiries, at encouraging levels. The falling level of availability and increasing demand are resulting in headline rents rising and incentives decreasing. In the City, we have benefited from office ERV growth of 6.4% over the last six months. Logically, at the same time as we are experiencing rental growth the investment market is strong, turnover is high and yields have hardened. This strong and liquid investment market has provided disposal opportunities for us, taking advantage of high prices achievable for offices where we see lower or riskier growth profiles. Looking forward, London's status as a favourable place in which to do business is continuing to improve. At the moment forecasts are relatively upbeat for growth in both London's GDP and City employment. The forecasts are supported by the feedback from our tenants who (on the whole) are planning for sensible growth in their businesses. The immediate outlook is positive. In the next few years we estimate that Central London office supply will be limited, so we expect rents to continue to rise. This outlook bodes well for our occupier led office development programme - of which 73% (and all of the committed projects) will be completed by 2009 - plus the performance of our prime well let investments which should capture cash flow growth through the rent review cycle. The development programme also allows us to invest further into a sector where values are rising, without having to compete for acquisitions in the buoyant investment market. The question looking into the medium term, especially in the City where there are outstanding planning consents, will be the extent to which the market will respond to rising rents and start to increase the supply of developments without pre-lets. We shall be vigilant to the signs of unsupported increases in supply, but for the time being we remain confident that for offices London is the place to be. Further portfolio analysis -------------------- ------------ ------------ -------- ------------ Current reversions Annualised Reversionary Current Reversionary (excluding net rents(1) income(2) yield(3) yield(3) developments) Â£m (5 years) Â£m % (5 years) % -------------------- ------------ ------------ -------- ------------ Retail Retail Warehouses 150 32 3.9 4.8 Superstores 87 3 4.7 4.9 Shopping Centres 123 20 4.6 5.3 Department Stores 41 7 4.5 5.1 High Street 19 1 4.8 5.2 -------------------- ------------ ------------ -------- ------------ All retail 420 63 4.3 5.0 Offices City 153 38 4.2 5.3 West End 34 5 4.7 5.4 Business Parks & 9 1 5.6 6.5 Provincial -------------------- ------------ ------------ -------- ------------ All offices 196 44 4.3 5.3 Industrial, 27 3 5.4 6.1 distribution, leisure, other Total 643 1105 4.44 5.1 -------------------- ------------ ------------ -------- ------------ (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 (2) includes rent reviews, expiry of rent free periods, lease break/expiry and letting of vacant space at current estimated rental value (as determined by external valuers) (3) portfolio yield (gross to British Land, without notional purchasers' costs) (4) current yield after adding back rent frees 4.6% (5) Â£50m contracted under expiry of rent free periods and minimum rental increases ------------------------ -------------- -------------- ------------ Leases and occupancy Average lease (excluding developments) term, years to Underlying(1) Vacancy rate first break vacancy rate % % ------------------------ -------------- -------------- ------------ Retail Retail Warehouses 14.0 2.5 3.6 Superstores 20.4 - - Shopping Centres 12.5 2.9 6.1 Department Stores 30.4 - - High Street 11.0 1.1 1.3 ------------------------ -------------- -------------- ------------ All retail 16.3 1.9 3.3 Offices City 10.0 1.8 4.2 West End 10.4 1.6 3.4 Business Parks & 10.4 7.2 7.4 Provincial ------------------------ -------------- -------------- ------------ All offices 10.1 2.0 4.2 Industrial, 21.3 0.4 0.8 distribution, leisure, other Total 14.4 1.9 3.5 ------------------------ -------------- -------------- ------------ (1) the underlying vacancy rate excludes asset management initiatives and units under offer The British Land Company PLC PRELIMINARY ANNOUNCEMENT OF FINANCIAL RESULTS For the three month and six month periods ended 30 September 2006 Consolidated Income Statement for the period ended 30 September 2006 Year ended Six months ended Six months ended 31 March 2006 30 September 2006 30 September 2005 Audited + Unaudited Unaudited + ---------------- ---------------- ---------------- Under Under Under -lying Capital -lying Capital -lying Capital pre and pre and pre and tax * other Total tax * other Total tax * other Total Â£m Â£m Â£m Note Â£m Â£m Â£m Â£m Â£m Â£m ------ ------ ------ --- ----- ----- ----- ----- ----- ----- 690 690 Gross rental 2 315 315 355 355 --------------------------- and related --------------------------------------------------------------------- income 589 589 Net rental and 2 274 274 305 305 related income 50 50 Fees and other 2 33 33 9 9 income (10) (10) Amortisation (8) (8) (3) (3) of intangible asset 39 272 311 Funds and 3 22 133 155 14 66 80 joint ventures (see also below) (81) (81) Administrative (42) (42) (36) (36) expenses 1,370 1,370 Net valuation 2 643 643 578 578 gains (includes profits on disposals) (240) (240) Goodwill impairment Net financing costs 50 50 - financing 28 28 35 35 income (419) (419) - financing (185) (185) (225) (225) charges (122) (122) - refinancing 6 (228) (228) --------------------------- charges ------------------------------------------------------------------ (369) (122) (491) (157) (228) (385) (190) (190) --------------------------- ------------------------------------------------------------------ 228 1,270 1,498 Profit on 130 540 670 102 641 743 ordinary activities before ------ ------ ------ taxation ----- ------ ----- ------ ------ ----- Taxation expense (7) current (6) (11) (307) deferred (86) (130) ------ ----- ----- (314) 2 (92) (141) ------------------------------------------------------------------------------------------------------------------------ 1,184 Profit for the 578 602 period after taxation attributable to shareholders of the Company ------------------------------------------------------------------------------------------------------------------------ 228 p Earnings per 1 111 p 116 P ------ share: basic ----- ----- 227 p diluted 1 111 p 116 P ------ ----- ----- ------------------------------------------------------------------------------------------------------------------------ Share of results of funds and joint ventures 39 39 Underlying 22 22 14 14 profit pre-tax 378 378 Net valuation 167 167 82 82 gains (includes profits on disposals) Goodwill impairment (2) (2) (9) (9) Current tax (2) (2) (2) (2) (97) (97) Deferred tax (30) (30) (14) (14) ------------------------------------------------------------------------------------------------------------------------ 39 272 311 3 22 133 155 14 66 80 ------------------------------------------------------------------------------------------------------------------------ + Restated as described in note 11. * As defined in note 1. Detailed Consolidated Income Statement for the period ended 30 September 2006 Three months ended Three months ended Six months ended 30 September 2006 30 June 2006 30 September 2006 Unaudited Unaudited Unaudited -------------- -------------- --------------- Under Capital Under Capital Under Capital -lying and -lying and -lying and pre other Total pre other Total pre tax other Total tax * tax * * Note Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m Â£m ---- ---- ---- ---- ---- ---- --- ---- ---- ---- ------------- Gross rental 2 160 160 155 155 315 315 and related income -------------------------------------------------------------------------------------------------- Net rental 2 138 138 136 136 274 274 and related income ------------- Fees and other 2 9 9 24 24 33 33 income Amortisation (4) (4) (4) (4) (8) (8) of intangible asset Funds and 3 13 64 77 9 69 78 22 133 155 joint ventures (see also below) Administrative (21) (21) (21) (21) (42) (42) expenses Net 2 281 281 362 362 643 643 valuation gains (includes profits on disposals) Net financing costs - financing (3) (3) 31 31 28 28 income - financing (79) (79) (106) (106) (185) (185) charges - refinancing 6 (228) (228) (228) (228) charges -------------------- -------------------- ---------------------- (82) (228) (310) (75) (75) (157) (228) (385) -------------------- -------------------- ---------------------- Profit on 57 113 170 73 427 500 130 540 670 ordinary activities before taxation ------ ------ ------- Taxation expense - current (1) (5) (6) - deferred (6) (80) (86) ----- ----- ------ 2 (7) (85) (92) ------------------------------------------------------------------------------------------------- Profit for the 163 415 578 period after taxation attributable to shareholders of the Company ------------------------------------------------------------------------------------------------- Earnings per share: - basic 1 31 p 80 p 111 p ----- ----- ------ - diluted 1 31 p 80 p 111 p ----- ----- ------ -------------------------------------------------------------------------------------------------- Share of results of funds and joint ventures Underlying profit 13 13 9 9 22 22 pre-tax Net 74 74 93 93 167 167 valuation gains (includes profits on disposals) Goodwill (2) (2) (2) (2) impairment Current tax (2) (2) (2) (2) Deferred tax (10) (10) (20) (20) (30) (30) -------------------------------------------------------------------------------------------------- 3 13 64 77 9 69 78 22 133 155 -------------------------------------------------------------------------------------------------- * As defined in note 1. Consolidated Balance Sheet as at 30 September 2006 31 30 30 30 June March September September 2006 2006 2005 2006 Audited + Unaudited Unaudited + Unaudited Â£m Note Â£m Â£m Â£m ---- ---- ---- ---- Assets Non-current assets 11,081 Investment properties 5 12,540 11,694 11,492 597 Development properties 5 800 304 693 ------- --------------------------------------- 11,678 13,340 11,998 12,185 Other non-current assets 1,234 Investments in funds and 3 1,204 1,185 1,402 joint ventures 248 Other investments 252 171 247 65 Intangible assets 57 72 61 Goodwill 8 105 180 ------- --------------------------------------- 13,225 14,958 13,606 13,895 ------- --------------------------------------- Current assets 36 Trading properties (at cost) 5 49 44 36 118 Debtors 129 81 111 133 Cash and short-term deposits 6 195 144 204 ------- --------------------------------------- 287 373 269 351 ---------------------------------------------------------------------------------------- 13,512 Total assets 15,331 13,875 14,246 ---------------------------------------------------------------------------------------- Liabilities Current liabilities (129) Short-term borrowings and 6 (140) (282) (124) overdrafts (417) Creditors (482) (467) (456) ------- --------------------------------------- (546) (622) (749) (580) ------- --------------------------------------- Non-current liabilities (5,575) Debentures and loans 6 (6,420) (6,657) (5,682) (44) Other non-current liabilities (47) (37) (38) (1,331) Deferred tax liabilities (1,615) (1,133) (1,447) ------- --------------------------------------- (6,950) (8,082) (7,827) (7,167) ------- --------------------------------------- (7,496) Total liabilities (8,704) (8,576) (7,747) ---------------------------------------------------------------------------------------- 6,016 Net assets 6,627 5,299 6,499 ---------------------------------------------------------------------------------------- Equity 130 Share capital 10 130 130 130 1,253 Share premium 10 1,255 1,252 1,253 176 Other reserves 10 274 17 243 4,457 Retained earnings 10 4,968 3,900 4,873 ---------------------------------------------------------------------------------------- Total equity attributable to 6,016 shareholders of the Company 6,627 5,299 6,499 ---------------------------------------------------------------------------------------- 1486 p EPRA NAV per share* 1 1624 p 1256 p 1592 p ------- --------------------------------------- + Restated as described in note 11. * As defined in note 1. Consolidated Statement of Recognised Income and Expense for the period ended 30 September 2006 Six Six Three months months months Year ended ended ended ended 30 30 30 31 March September September September 2006 2006 2005 2006 Audited + Unaudited Unaudited + Unaudited Â£m Note Â£m Â£m Â£m ---- ---- ---- ---- 1,184 Profit for the period after 578 602 163 -------- taxation ---------------------------------- Valuation movements 102 - on development properties 2 107 17 59 92 - on other investments 2 5 18 5 Gains (losses) on cash flow hedges (26) - Group 11 (47) (23) 2 - Funds and joint ventures 5 (7) (1) (1) Actuarial gain on pension scheme 3 Fair value adjustment on consolidation of former joint venture (7) (7) (56) Tax on items taken directly to (45) (12) -------- equity ---------------------------------- 113 Net gain (loss) recognised directly 79 (19) 21 in equity Transferred to the income statement (cash flow hedges) (14) - foreign currency derivatives 13 (12) 3 32 - interest rate derivatives 2 4 -------- ---------------------------------- 18 15 (8) 3 ------------------------------------------------------------------------------------------- 1,315 Total recognised income and expense 672 575 187 for the period ------------------------------------------------------------------------------------------- + Restated as described in note 11. ------------------------------------------------------------------------------------------- Reconciliation of Movements in Shareholders' Funds Six Six Three Year months months months ended ended ended ended 31 March 30 September 30 September 30 September 2006 2006 2005 2006 Audited Unaudited Unaudited Unaudited Â£m Â£m Â£m Â£m ---- ---- ---- ---- Capital items 4 - Shares issued 2 3 2 (10) - Purchase of ESOP shares (13) (9) (9) 8 - Adjustment for share and share 11 4 9 option awards (84) - Dividends paid in the period (61) (57) (61) -------- ----------------------------------- (82) (61) (59) (59) 1,315 Total recognised income and expense for 672 575 187 -------- the period ----------------------------------- 1,233 Movement in shareholders' funds for 611 516 128 the period 4,783 Opening equity shareholders' funds 6,016 4,783 6,499 -------------------------------------------------------------------------------------------- 6,016 Closing equity shareholders' funds 6,627 5,299 6,627 -------------------------------------------------------------------------------------------- Consolidated Cash Flow Statement for the period ended 30 September 2006 Six Six Three months months months ended ended ended Year ended 30 30 30 31 March September September September 2006 2006 2005 2006 Audited Unaudited Unaudited Unaudited Â£m Note Â£m Â£m Â£m ---- ---- ---- ---- 455 Cash generated from operations 4 234 242 107 (392) Interest paid (158) (180) (100) 13 Interest received 8 6 4 (10) UK corporation tax received (paid) 7 (4) (2) (3) Foreign tax paid (2) 25 Dividends received: funds and joint 23 7 ventures 16 other investments 18 ------- ------------------------------- 104 Net cash inflow from operating 132 62 16 ------- activities ------------------------------- Cash flows from investing activities Purchase of investment properties (402) and development expenditure (237) (105) (114) 1,889 Sale of investment properties 285 332 239 (8) Foreign tax paid on property sales (3) Purchase of investments (21) Investment in and loans to funds and joint (106) (3) (8) ventures 277 Capital distributions received from funds 85 80 and joint ventures 69 Amounts repaid by funds and joint 240 ventures (815) Purchase of subsidiary companies (net of 4 (815) 4 cash acquired)* ------- ------------------------------- 986 Net cash inflow (outflow) from 31 (351) 201 ------- investing activities ------------------------------- Cash flows from financing activities 4 Issue of ordinary shares 2 3 2 (10) Purchase of ESOP shares (13) (9) (9) (84) Dividends paid (61) (57) (61) 753 Issue of BL Superstores Finance PLC securitised debt (705) Redemption of BLSSP (Funding) PLC securitised debt Issue of British Land debentures 221 221 Amounts paid on exchange of British Land (201) (201) debentures Redemption of British Land debentures (20) (20) (398) Repayment of debt acquired with subsidiary (296) (403) (296) companies (669) Increase (decrease) in bank and other 272 752 142 borrowings ------- ------------------------------- (1,109) Net cash (outflow) inflow from (96) 286 (222) ------- financing activities ------------------------------- (19) Net increase (decrease) in cash and cash 67 (3) (5) equivalents 147 Cash and cash equivalents at 1 April 128 147 200 2006 ------- ------------------------------- 128 Cash and cash equivalents at 30 195 144 195 ------- September 2006 ------------------------------- Cash and cash equivalents consists of: 133 Cash and short-term deposits 195 144 195 (5) Overdrafts ------- ------------------------------- 128 195 144 195 ------- ------------------------------- * Properties of Â£563m acquired through corporate structures. 1. Performance measures Six months Six months ended Three months ended ended 30 September 2005 30 September 2006 Year ended 30 September 31 March 2006 2006 ------------- Earnings Pence Earnings Earnings Pence Earnings Pence per Earnings Pence per per share per share per share (diluted) share share Â£m Â£m Â£m Â£m ---- ---- ---- ---- 228 Underlying 130 102 57 pre-tax profit - income statement (43) Tax charge (26) (22) (12) relating to underlying profit ------------------------------------------------------------------------------------------------------------ 185 36 p Underlying 104 20 p 80 15 p 45 9 P earnings per share ------------------------------------------------------------------------------------------------------------ 1,184 227 p Profit for 578 111 p 602 116 p 163 31 P the period after taxation (prior periods restated) ------------------------------------------------------------------------------------------------------------ Underlying pre-tax profit excludes gains on property revaluations and disposals, intangible asset movements and refinancing charges. The weighted average number of shares in issue for the six month period was: basic: 519m (three months ended 30 September 2006: 520m; year ended 31 March 2006: 519m; six months ended 30 September 2005: 518m); diluted: 522m (three months ended 30 September 2006: 523m; year ended 31 March 2006: 521m; six months ended 30 September 2005: 520m). Basic earnings per share (undiluted) for the six month period were 111p (three months ended 30 September 2006: 31p; year ended 31 March 2006: 228p; six months ended 30 September 2005: 116p). 31 March 30 30 Sept 30 September -ember June 2006 Net asset value (NAV) 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- 6,016 Balance sheet net assets 6,627 5,299 6,499 1,636 Deferred tax arising on 1,908 1,276 1,765 revaluation movements, capital allowances and derivatives Goodwill (105) (180) 33 Mark to market on interest rate 89 (22) swaps 74 Surplus arising on trading 78 73 77 properties 43 Dilution effect - 53 38 53 options ------------------------------------------------------------------------------------------------------------ 7,802 EPRA NAV 8,561 6,595 8,372 ------------------------------------------------------------------------------------------------------------ 1486 p EPRA NAV per share 1624 p 1256 p 1592 P ------------------------------------------------------------------------------------------------------------ The European Public Real Estate Association (EPRA) issued Best Practices Policy Recommendations in January 2006, which gives guidelines for performance measures. The EPRA NAV per share includes the external valuation surplus on trading properties but excludes the fair value adjustments for debt and related derivatives and deferred taxation on revaluations and capital allowances and is calculated on a fully diluted basis. At 30 September 2006, the number of shares and potential shares in issue (on a fully diluted basis) was 527m (30 June 2006: 526m; 31 March 2006: 525m; 30 September 2005: 525m). Total return per share for the six months ended 30 September 2006 was 12.2% before refinancing charges. 2. Income statement notes Three Six months Six months months Year ended ended ended ended 30 30 30 31 March September September September 2006 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- Gross and net rental income --- 571 Rent receivable 263 293 134 Spreading of tenant incentives and guaranteed 54 rent increases 23 27 12 10 Surrender premiums 5 7 -------- ---------------------------------- 635 Gross rental income 291 327 146 55 Service charge income 24 28 14 -------- ---------------------------------- 690 Gross rental and related 315 355 160 income (57) Service charge expense (25) (24) (14) (44) Property operating (16) (26) (8) expenses -------- ---------------------------------- 589 Net rental and related 274 305 138 -------- income ---------------------------------- Fees and other income 29 Performance and 11 2 7 management fees 16 Dividend received from 18 Songbird Estates PLC 5 Other fees and commission 4 7 2 ----------------------------------------------------------------------- 50 33 9 9 ----------------------------------------------------------------------- Net revaluation gains on property and investments In income statement 1,203 Revaluation of properties 607 544 267 167 Gains on property 36 34 14 disposals -------- --------------------------------- 1,370 643 578 281 378 Share of profits of funds 167 82 74 and joint ventures (note 3) -------- --------------------------------- 1,748 810 660 355 In consolidated statement of recognised income and expense 102 Revaluation of 107 17 59 development properties 92 Revaluation of 5 18 5 investments ----------------------------------------------------------------------- 1,942 922 695 419 ----------------------------------------------------------------------- Taxation expense Current tax (3) - UK corporation tax 5 3 1 (30%) 11 - Foreign tax 1 9 -------- --------------------------------- 8 6 12 1 (1) Adjustments in respect of (1) -------- prior years --------------------------------- 7 Total current tax charge 6 11 1 307 Deferred tax on income 86 130 6 and revaluations -------- --------------------------------- 314 Group total taxation 92 141 7 (net) 106 Attributable to funds and 32 16 10 joint ventures ----------------------------------------------------------------------- 420 Total taxation 124 157 17 ----------------------------------------------------------------------- Tax attributable to underlying profits for the six months ended 30 September 2006 is Â£26m (six months ended 30 September 2005: Â£22m). 3. Funds and joint ventures Summary of British Land's share of investments in funds and joint ventures at 30 September 2006 Underlying Net Gross Gross profits Investment assets liabilities Â£m Â£m Â£m Â£m ---- ---- ---- ---- Share of funds 10 692 1,375 (683) Share of joint ventures 12 512 1,330 (818) -------------------------------------------------------- Total share of investments 22 1,204 2,705 (1,501) -------------------------------------------------------- The total investment in joint ventures is Â£522m, which also incorporates Â£10m being City of London Office Unit Trust (CLOUT) and its associated ventures, which is included within share of funds. Amounts owed to joint ventures at 30 September 2006 were Â£31m (30 June 2006: Â£30m; 31 March 2006: Â£26m; 30 September 2005: Â£29m). British Land's share of profits of funds and joint ventures Six months Six months Three months ended ended ended Year ended 30 30 30 31 March September September September 2006 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- 123 Gross rental income 62 48 31 -------------------------------------------------------------------------------------------------- 112 Net rental income 56 46 28 (6) Other income and (3) (4) (1) expenditure (67) Net financing costs (31) (28) (14) ---------- ----------------------------------------- 39 Underlying profit before taxation 22 14 13 378 Net valuation gains on property and 167 82 74 investments Goodwill impairment (2) ---------- ----------------------------------------- 417 Profit on ordinary 187 96 87 activities before taxation (9) Current tax (2) (2) (97) Deferred tax (30) (14) (10) ---------- ----------------------------------------- 311 Profit on ordinary 155 80 77 ---------- activities after ----------------------------------------- taxation 4. Reconciliation of profit on ordinary activities before tax to cash generated from operations Six Three Six months months months ended ended ended Year ended 30 30 30 31 March September September September 2006 + 2006 2005 + 2006 Â£m Â£m Â£m Â£m ---- --- ---- ---- ---- 1,498 Profit on ordinary activities 670 743 170 before tax 11 Depreciation and 8 3 4 amortisation (1,369) Net valuation gains on (643) (578) (281) properties (311) Share of profits after (155) (80) (77) tax of funds and joint ventures 369 Net financing costs 157 190 82 122 Refinancing charges 228 228 135 Other cash flow items (31) (36) (19) --------------------------------------------------------------------------------------------------- 455 Cash generated from operations 234 242 107 --------------------------------------------------------------------------------------------------- + Restated as described in note 11. 5. Investment, development and trading properties Investment, development and trading properties were valued on the basis of open market value, supported by market evidence, in accordance with the Appraisal and Valuation Manual published by The Royal Institution of Chartered Surveyors. 31 30 30 30 March September September June 2006 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- 11,081 Investment properties 12,540 11,694 11,492 597 Development properties 800 304 693 36 Trading properties at cost 49 44 36 -------- ------------------------------- 11,714 Carrying value of properties on 13,389 12,042 12,221 balance sheet 67 External valuation surplus on 73 62 69 trading properties (28) Head lease liabilities (33) (27) (26) -------- ------------------------------- 11,753 Total British Land Group property 13,429 12,077 12,264 -------- portfolio valuation ------------------------------- Share of funds and joint ventures 2,651 Investment properties 2,379 2,535 2,798 Development properties 83 78 4 Trading properties at cost 31 4 7 Finance lease properties 7 8 7 3 External valuation surplus on 7 3 trading properties 4 External valuation surplus on 5 4 5 finance lease properties (8) Head lease liabilities (6) (11) (8) -------- ------------------------------- 2,661 2,468 2,574 2,887 ----------------------------------------------------------------------------------- 14,414 Total property portfolio valuation 15,897 14,651 15,151 ----------------------------------------------------------------------------------- Group properties valued at Â£8,993m were subject to a security interest and other properties of non-recourse companies amounted to Â£8m. 6. Net Debt 30 30 30 31 March September September June 2006 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- 3,683 Securitisations 3,668 3,549 3,663 785 Debentures 1,138 786 784 1,049 Bank loans and overdrafts 1,324 2,413 1,183 187 Other bonds and loan notes 430 191 176 -------- ------------------------------- 5,704 Gross debt 6,560 6,939 5,806 -------- ------------------------------- 48 Interest rate and currency 49 92 39 derivatives (liabilities) (26) Interest rate and currency (34) (17) (36) -------- derivatives (assets) ------------------------------- 5,726 6,575 7,014 5,809 (133) Cash and short-term deposits (195) (144) (204) ----------------------------------------------------------------------------------- 5,593 Net debt 6,380 6,870 5,605 ----------------------------------------------------------------------------------- Gross debt includes Â£140m due within one year at 30 September 2006 (30 June 2006: Â£124m; 31 March 2006: Â£129m; 30 September 2005: Â£282m). The principal amount of gross debt at 30 September 2006 was Â£6,571m. Included in this, the principal amount of secured borrowings and other borrowings of non-recourse companies was Â£5,050m. Cash and deposits not subject to a security interest amount to Â£39m. On 29 August 2006 the Group's existing debentures were restructured to form a single Â£1bn debenture pool secured on Â£1.8bn of assets. The Group has incurred a pre-tax refinancing charge of Â£228m, mainly due to the difference between the market and book values of those debentures. Other bonds and loan notes includes a Â£256m floating rate secured loan note issued as consideration for the acquisition of the remaining 50% interest in BL Davidson Limited. 7. Dividends The proposed interim dividend of 5.6 pence per share (30 September 2005: 5.2 pence per share) was approved by the Board on 20 November 2006 and is payable on 16 February 2007 to shareholders on the register at the close of business on 19 January 2007. The reserves note shows total dividends paid in the six months ended 30 September 2006 of 11.8 pence per share, which is the 2006 final dividend of Â£61m, that was paid on 18 August 2006. The Company offers shareholders the option to reinvest their cash dividends automatically in the Company's shares through the Dividend Reinvestment Plan (DRIP). Further details of the DRIP can be found on the Company's website, www.britishland.com, or by calling Lloyds TSB Registrars' DRIP helpline on 0870 241 3018. 8. Corporate acquisitions On 13 July 2006 the Group acquired seven B&Q stores and on 31 August 2006 acquired the remaining 50% of the issued share capital of BL Davidson Limited. The fair values of the assets and liabilities acquired are detailed below and have been determined on a provisional basis as the Group is currently in the process of finalising the balance sheets at the date of acquisition. Â£m ---- Properties 563 Investment in joint ventures 1 Net debt (309) Other net current liabilities (11) --------- 244 Deferred tax (90) Goodwill 105 --------- Total consideration 259 --------- 9. Contingent liabilities There were no contingent liabilities of the Parent Company for guarantees to third parties at 30 September 2006 (30 June; 31 March 2006; 30 September 2005: Â£Nil). TPP Investments Limited, a wholly owned ring-fenced special purpose subsidiary, is a partner in The Tesco British Land Property Partnership and, in that capacity, has entered into a secured bank loan under which liability is limited to Â£23m (30 June; 31 March 2006; 30 September 2005: Â£44m)and recourse is only to the partnership assets. 10. Reserves Share Share Other Retained capital premium reserves earnings Total Â£m Â£m Â£m Â£m Â£m At 1 April 2005 - as previously published 130 1,249 12 3,392 4,783 Restatement (note 11) 32 (32) ------------------------------------------------------------------------------------------------- Restated position at 1 April 2005 130 1,249 44 3,360 4,783 Total recognised income and expense (27) 602 575 Share issues 3 3 Purchase of ESOP shares (9) (9) Adjustment for share and share option awards 4 4 Dividends paid in the period (57) (57) ----------------------------------------------- At 30 September 2005 130 1,252 17 3,900 5,299 Total recognised income and expense 159 581 740 Share issues 1 1 Purchase of ESOP shares (1) (1) Adjustment for share and share option awards 4 4 Dividends paid in the period (27) (27) ----------------------------------------------- At 31 March 2006 130 1,253 176 4,457 6,016 Total recognised income and expense* 67 418 485 Share issues* Purchase of ESOP shares* (4) (4) Adjustment for share and share option awards* 2 2 Dividends paid in the period* ----------------------------------------------- At 30 June 2006 130 1,253 243 4,873 6,499 Total recognised income and expense* 31 156 187 Share issues* 2 2 Purchase of ESOP shares* (9) (9) Adjustment for share and share option awards* 9 9 Dividends paid in the period* (61) (61) ------------------------------------------------------------------------------------------------- At 30 September 2006 130 1,255 274 4,968 6,627 ------------------------------------------------------------------------------------------------- * Memorandum: Six months to 30 September 2006 as 2 98 511 611 analysed above 11. Basis of preparation The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The full accounts for the year ended 31 March 2006, which were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union and which received an unqualified report from the auditors, and did not contain a statement under s237 (2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. The current period financial information presented in this document is unaudited. It has been prepared using accounting policies consistent with IFRS and the accounting policies set out in the Group's audited results for the year ended 31 March 2006, consistently applied in all material respects, with the exception that following an amendment to IAS 39 the surplus or deficit arising on the revaluation of other investments is now taken to equity rather than recognised directly in the income statement. This change has no impact on the Group's net assets and the comparative income statements have been restated on a consistent basis. This is the first interim report presenting results for the three months ended 30 September prepared by British Land. A retrospective valuation was not carried out at 30 June 2005, due to the additional costs and limited benefits involved; accordingly, comparatives for the three months to 30 September 2005 are not presented. The interim financial information was approved by the Board on 20 November 2006. Table A --------- Summary income statement based on proportional consolidation for the period ended 30 September 2006 The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with funds and joint ventures consolidated on a line by line, i.e. proportional basis. The underlying profit before tax (Â£130m) and total profit after tax (Â£578m) are the same as presented in the consolidated income statement. Q2 Q1 H1 H1 Three Three Six Six months months months months ended ended ended Ended 30 September 30 June 30 September 30 September 2006 2006 2006 2005 Â£m Â£m Â£m Â£m --------------------------------------------------- Gross rental income 177 176 353 375 --------------------------------------------------- Net rental income 166 164 330 351 Fees and other income 10 24 34 9 Administrative expenses (23) (23) (46) (40) Net interest costs (96) (92) (188) (218) --------------------------------------------------- Underlying profit before tax 57 73 130 102 Debt refinancing costs (228) (228) Net valuation gains (includes profits on 355 455 810 660 disposals) Amortisation of intangible asset (4) (4) (8) (3) Impairment of goodwill (2) (2) --------------------------------------------------- Profit on ordinary activities before tax 180 522 702 759 Tax charge relating to underlying profit (12) (14) (26) (22) Other taxation (mainly deferred tax) (5) (93) (98) (135) --------------------------------------------------- (17) (107) (124) (157) -------------------------------------------------------------------------------------------------- Profit for the period after taxation 163 415 578 602 -------------------------------------------------------------------------------------------------- Underlying earnings per share - diluted 9p 11p 20p 15p basis -------------------------------------------------------------------------------------------------- The underlying earnings per share is calculated on underlying pre-tax profit of Â£130m (six months ended 30 September 2005: Â£102m), tax attributable to underlying profits of Â£26m (six months ended 30 September 2005: Â£22m) and fully diluted shares numbering 522m (six months ended 30 September 2005: 520m). Gross rental income excludes service charge receivable. Table A (continued) --------------------- Pro forma summary balance sheets based on proportional consolidation The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the composition of the net assets of the Group, with share of funds and joint venture assets and liabilities included on a line by line, i.e. proportional basis and assuming full dilution. 30 30 30 31 March September September June 2006 2006 2005 2006 Â£m Â£m Â£m Â£m ---- ---- ---- ---- 8,775 Retail properties 9,770 8,379 9,174 5,200 Office properties 5,619 5,458 5,515 439 Other properties 508 814 462 ---------- ------------------------------------- 14,414 Total properties 15,897 14,651 15,151 250 Other investments 253 179 248 65 Intangible assets 57 72 61 (243) Other net liabilities (262) (281) (299) (6,684) Net debt (7,384) (8,026) (6,789) ------------------------------------------------------------------------------------------------ 7,802 EPRA NAV 8,561 6,595 8,372 ------------------------------------------------------------------------------------------------ 1486 p EPRA NAV per share (note 1) 1624 p 1256 p 1592 p ------------------------------------------------------------------------------------------------ Calculation of EPRA NNNAV per share 7,802 EPRA net assets 8,561 6,595 8,372 (1,530) Deferred tax arising on revaluation (1,820) (1,190) (1,670) movements (33) Mark to market on interest rate (89) 22 swaps (386) Mark to market on debt (148) (428) (313) 125 Tax relief arising thereon 44 154 88 ------------------------------------------------------------------------------------------------ 5,978 EPRA NNNAV 6,637 5,042 6,499 ------------------------------------------------------------------------------------------------ 1139 p EPRA NNNAV per share 1259 p 960 p 1236 p ------------------------------------------------------------------------------------------------- EPRA NNNAV is the EPRA NAV less fair value adjustments for debt and derivatives and the deferred taxation on revaluations and capital allowances. This information is provided by RNS The company news service from the London Stock Exchange

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