Portfolio Valuation

The table below shows the principal valuation movements by sector for the six months and the three months (Q2) to 30 September 2008.

The capital return from the portfolio at -11.2% for the six months, as measured by IPD (calculated on our UK assets on average capital employed and excluding capitalised interest) was behind IPD Benchmark by -1.3%. The capital return from Retail was ahead of IPD. Our Office portfolio, while performing broadly in line with IPD at the investment subsectors level, had a lower overall capital return than IPD due to its higher weighting in the City and the impact of the developments.

Like for like rental value (ERV) movement for the overall portfolio was -1.0% for the six months (IPD -0.3%). The Retail positive ERV growth of 0.9% was outweighed by the fall in rental values in Offices of -4.0% (also due to our City weighting).

The net equivalent yield (after notional purchaser’s cost) on the portfolio at 30 September 2008 was 6.1%, 57 bps higher than 31 March 2008.

Valuation by sector	Group £m	Funds/JVs1 £m	Total £m	Portfolio %	Change2%
					3 mths	6 mths
Retail
Retail Warehouses	1,747	1,252	2,999	25.9	(5.5)	(10.2)
Superstores	123	1,087	1,210	10.4	(3.4)	(5.3)
Shopping Centres3	1,578	328	1,906	16.5	(5.3)	(8.0)
Department Stores	530	117	647	5.6	(7.5)	(10.8)
High Street	67	-	67	0.6	(9.1)	(12.7)
All retail	4,045	2,784	6,829	59.0	(5.3)	(8.9)
Offices4
City5	3,334	3,334	28.8	(8.6)	(14.1)
West End6	1,103	-	1,103	9.5	(5.6)	(9.6)
Provincial	20	11	31	0.3	(9.3)	(16.6)
All offices	4,457	11	4,468	38.6	(7.9)	(13.2)
Industrial, distribution, leisure, other	256	18	274	2.4	(10.8)	(13.7)
Total	8,758	2,813	11,571	100.0	(6.5)	(10.8)

¹ Group’s share of properties in Funds and Joint Ventures
² change in value for 3 months and 6 months to 30 September 2008, includes valuation movement in developments, purchases and sales, net of capital expenditure
³ Meadowhall Shopping Centre valuation down 7.4% to £1,400 million; ERV £86.7 million; net equivalent yield 5.7%
⁴ includes Developments in City, West End and provincial: total value £547 million, 4.7% of Portfolio, 22.1% down for the 6 months (201 Bishopsgate and the Broadgate Tower now included in Broadgate and valued as investments)
⁵ Broadgate valuation down 13.7% to £2,897 million; headline ERV range £45.50-62.50 per sq ft (average headline ERV has fallen 5.7% to £50 psf); net initial yield 5.9% (assuming top up of rent free periods and guaranteed minimum uplifts to first review); net equivalent yield 6.3%
⁶ Regent’s Place valuation down 6.1% to £661 million; headline ERV range £35-61 per sq ft; net initial yield 5.9% (assuming top up of rent free periods and guaranteed minimum uplifts to first review); net equivalent yield 6.2%.

The main sector impacts on the valuation movements over the six months were:

• City Offices, at 28.8% of the portfolio including developments, saw outward initial yield shift of 78 bps on the investments which, coupled with the decline in ERV of 5.4%, contributed to an overall decrease in valuation. The gross (top-up) initial yield moved out to 6.2%;
• West End Offices, including developments at 9.5% of the portfolio, had outward initial yield shift of 60 bps on the investments and no change in rental values, decreasing valuation by 9.6%;