British Land Company PLC

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Sector and Asset Selection

The prospects and expected performance of each asset in our portfolio are regularly reviewed in light of changing market conditions; part of the ongoing process of concentrating on sectors and properties with positive medium-term supply/demand characteristics to best capture trends in customer demand and rental growth, and disposing of lower growth or riskier assets.

Within our selected markets we recycle capital - buying and selling properties to refine the focus on those assets with more occupier appeal and better potential for increases in rent, or with opportunities for us to improve growth through asset management. Even where our sector view is positive, there are assets which reach a point where there is little we can do to improve them further and a sale may be appropriate.

We have continued our emphasis on sales in line with this approach, managing financial gearing and overall reducing our exposure to a falling market. All sectors have been reduced this year. Over the 12 months to March 2009, despite a difficult market with an overall low level of transactions, property disposals have amounted to over £1.9 billion gross, with £1 billion (including 50% of Meadowhall) achieved in the last financial quarter, since 31 December 2008. These sales are a significant achievement in current conditions and represent more than our market share. We expect to redeploy proceeds into higher performing assets, taking appropriate opportunities to enhance returns.

The Retail portfolio has been changed by:

• enhancing our retail park profile through sales of assets with slower rental growth prospects;
• sales of more in-town investments, high street shops in total £74 million (reducing our remaining investment in this sub-sector to only £20 million) and department stores at £108 million; and
• a reduction in our investment in Meadowhall shopping centre by the creation of a new 50:50 joint venture.

In the Offices portfolio we have:

• continued to reduce our City offices investments at this point in the cycle;
• sold assets where we saw the growth prospects as lower with limited scope for value-add; and
• achieved sales of residential elements of successful developments.

The transactions are summarised in the table below. It should be noted that this data (in keeping with our past practice) compares all sales in the year against the previous March 2008 year end valuations. Given the mark down in market and portfolio valuation over the year, while most sales contracted this year showed losses against the March 2008 valuation, sales were overall accretive to our performance and allowed us to manage gearing.

The recent post year end sales shown are in line with current valuation. These are smaller lot sizes where the range of interested investors is larger (as is usual) and there are signs of increasing market activity.

The sale of the Willis Building realised a profit on the cost of its development by us and underlined our record of successfully delivering and letting significant development projects. The London headquarters of Abbey at Triton Square, a development by us completed in 2002, was sold to Grupo Santander. We are pleased to have Abbey as a significant stakeholder in the Regent's Place Estate.

The sale of the Peacocks Shopping Centre achieved an attractive price for a timely disposal in line with our strategy to focus the retail portfolio on those assets which will continue to show growth from our asset management efforts.

In February 2009 we formed a 50:50 joint venture in respect of the Meadowhall Shopping Centre with London & Stamford Property Green Park Property Trust. The transaction valued Meadowhall at £1,175 million, on a net initial yield of 6.75%. British Land is property manager for Meadowhall and acts jointly with London & Stamford Property Ltd as strategic adviser for the joint venture, which also owns certain nearby properties including the Meadowhall distribution centre. The surrounding development land and ancillary sites remain in British Land ownership; the joint venture has the option to acquire these at a later date at market value.

The formation of this new partnership underlines the enduring investment and occupier appeal of Meadowhall, one of only six super-regional shopping centres in the UK. The transaction reduced our exposure to our largest retail asset while allowing us to retain a substantial share of its future performance; it also has the effect of increasing our financial flexibility.

There were no purchases contracted during the year, save for the shares of our partner in the Asda St James joint venture, involving a mixed used scheme in Leeds. The purchase of St Stephen's Shopping Centre, Hull, which was contracted in a previous year, completed in late 2008.

Investment in European Retail

British Land continues to be a market leader in Europe's out-of-town retail park market through both direct investment and its effective 40% investment in PREF, based on a strong management infrastructure and expertise in both the UK and Europe.

With a continued softening investment market this year, asset management has remained a key driver in combating falling values. During the year to March 2009, our European team has delivered 32 new lettings totalling over 300,000 sq ft. This was only marginally below the level achieved in the more robust market of the previous year. One notable achievement in November 2008 was the successful launch of the new 108,000 sq ft Carrefour hypermarket at Nassica, Madrid, Spain. We had taken a former Leroy Merlin DIY unit, reconfigured and enlarged the space and achieved the new letting, which has resulted in a 20% increase in footfall at the retail and leisure park, where the visitor numbers reached seven million for the year.

Early in 2008, PREF successfully completed €300 million of sales in a transaction which anticipated the weakening market, was in line with our UK strategy of divesting assets with weaker growth prospects and enabled us to recycle equity. Purchases included two parks that PREF had forward committed to acquire in previous years in Portugal (Santarém Retail Park) and Italy (Terminal Nord, Udine) both of which are now fully trading.

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