Bank of America Merrill Lynch Sales Team Presentation February 2009
Business Overview As at @ Nov ‘08 Recession … have been planning for a downturn for the past 12+ months Capital Conservation Operating cash flow – Net sellers since Sept 2007 – Maximise occupancy – Receipts of £160m – £17.8m space let / renewed (12 months) – Purchases of £26m – Investment void low @ 3.4% – Will rise during 2009 – No development starts – Completing & letting existing – Pragmatic leasing policy – Deferring imminent projects – Approach tenants early – Working up pipeline – 82% in the West End Core – Good liquidity – Off low office rents of £35 per sq ft – Gearing low @ 53% – Committed unutilised facilities & cash of £327m – No debt maturity until 2012 1
Headline Results 3 months To 31 December 2008 6 months 12 months (12.4%) Property Valuation* (17.5%) (23.6%) (9.4%) Portfolio ERV movement* (11.9%) (10.5%) (20.5%) NAV (27.1%) (36.5%) * including share of joint ventures 2
Total Property Return Relative to IPD Central London Total Property Return (% pa) Years to September Source: IPD 3
Pro forma estimated balance sheet* Pence per Percentage share Adjusted NAV £m movement At 30 September 2008 892.1 493 Valuation deficit (175.5) (97) Interim dividend (7.2) (4) At 31 December 2008 709.4 392 (20.5%) NNNAV Mark to Market of debt and derivatives 5 9.3 At 31 December 2008 397 718.7 (21.4%) At 30 September 2008 505 913.5 * The pro forma estimated balance sheet does not include retained earnings for the quarter 4
The Valuation 1 Drivers of Valuation Movement 2 % movement -30 -25 -20 -15 -10 -5 0 5 10 12 months 6 months 3 months Yield Shift Rental Value Shift Residual 1 Including share of Joint Ventures 2 Excludes development properties 5
Debt Analysis Low relative leverage December 2008 March 2008 Net debt excluding JVs (£m) 375.0 424.6 Net gearing 52.9% 40.5% Total net debt including 50% JV non-recourse debt (£m) 507.9 570.4 Loan-to-property value 40.8% 34.9% Total net gearing 71.6% 54.4% December 2008 March 2008 Interest cover 2.3x¹ 1.8x Weighted average interest rate 5.6%² 6.0% % of debt fixed / capped 86% 76% Cash & undrawn facilities (£m) 327 280 ¹ Six months to September 2008; ² Spot rate at 31 December 2008 6
Debt Covenant Levels Significant headroom over financial covenants Dec 08 Key Covenants Covenant Actuals 1 Headroom under “Stress Test” GPE Bank Facilities 58% movement in net equity. Equivalent to a further ≤ 1.25x Net Debt / Net Equity 0.53x 33% valuation fall or NAV of around 165p ≥ 1.66x Inner Borrowing 2 2.75x 29% further fall in portfolio value ≥ 1.30x Interest Cover* 2.13x 39% fall in profits before interest or £22m GCP Loan 3 ≤ 70% Loan to Value 42.5% 39% fall in asset value Notes: * 12 months to September 2008 1.Covenant definitions of key financials vary from accounting definitions 2.Ratio of unsecured assets to unsecured borrowings 3.GCP Loan also has an interest cover covenant where headroom is in excess of GPE interest cover percentages 4.Other covenants relate to GPE’s 2029 Debenture and GVP1 non-recourse loans both of which have substitution or cash trap mechanisms which facilitate covenant compliance 7
Maturity Profile No maturity of drawn facilities until 2012 £m £33m GPE bank facility March 2012 July 2012 £200m GPE bank facility £28.4m GVP bank facility October 2012 £112.5m GCP bank facility March 2013 £142.9m 5.625% Debenture January 2029 8
Cash collection / delinquencies Rent Collected within 7 working days 100% 95% 90% 85% 80% 75% Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Value and Number of Delinquencies Value and number of delinquencies 6 1.0% 5 0.8% 4 0.6% 3 0.4% 2 0.2% 1 - 0.0% Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Number of Delinquencies Value of Delinquencies as a percentage of rent roll Value of rent deposits and bank guarantees of over £14m or >20% of rent roll 9
Sales & Acquisitions Net Investment, Inc 50% share of JV Millions – £92.7m of sales in the first half – 5.7% below March 2008 book value in aggregate – Crystallising profits from mature assets – No acquisitions in first half – £1.9m acquired since September – Disciplined investment management Sept 08 6 months to 10
Asset Management Priorities Focus on broad spectrum of tenants – Maximising occupancy – Tackling lease events early Rent subject to break or expiry Months <12 12-24 24-36 36-48 >48 Rent roll pa £12.3m £6.3m £12.4m £4.3m £32.9m % of rent roll 18% 9% 18% 6% 49% Ave rent per sq ft £29 £33 £34 £45 £43 Nurturing development pipeline – Maximising net income – Aligning leases 11
Development Update – No new construction starts for 18 months – Capital Expenditure remaining £8.4m – Development starts have been deferred Capital Expenditure ERV pa Remaining Committed Schemes Completion £m £m 79/83 Great Portland Street, W1 Completed 0.2 0 Metropolitan Wharf, E1 Completed 0.6 0 45 Foley Street, W1 Completed 1.0 0 Wells & More, W1 Jan-09 6.3 2.8 46/58 Bermondsey Street, SE1 Jun-09 1.5 5.6 9.6 8.4 Profit on cost £25.4 million / 19.5% (Development Yield 7.8%) 12
Deferred Development Starts Deferred capital Existing Rent to achieve Value Sept 08 expenditure area portfolio equivalent (GPE share) (GPE share) sq ft yield (6.1%) 240 Blackfriars Road, £7.5m £44.9m - n/a SE1 12/14 and 43 Fetter £11.0m £20.1m 53,600 £25 per sq ft Lane, EC4 79/97 Wigmore Street, £17.0m £27.3m 75,100 £28 per sq ft W1 1 £35.5m £92.3m 1 Development assets only 13
Development Pipeline Increase Pre-Development Proposed Schemes Area Area Sq. ft. % Committed 5 260,000 315,000 55,000 21% Schemes Development 19 1,570,000 2,580,000 1,010,000 64% Pipeline 24 1,830,000 2,895,000 1,065,000 58% – 64% of GPE portfolio included in development business – All pipeline assets except Blackfriars Road are income producing – Income being rolled over – Next cycle schemes 14
Wells & More, W1 Committed Scheme – 116,000 sq ft office, retail and residential – Completed last week – 60,800 let – Interest from more than we can accommodate 15
Hanover Square, W1 Pipeline 16
Outlook Recession … how long, how deep? Adjusting our business Strategy to out perform – Conserving capital – Core locations – Keeping gearing low – Off low rents, angles to exploit – Focusing on cash flow – Speculative development limited – Work up on substantial pipeline – Maximise occupancy rates – Ample liquidity – Low leverage – Specialist skills / disciplined approach – Exploit market dislocations 17
Appendices
Appendix 1 Central London Office Market Market Balance to Sept 2008 Months supply, at current take-up levels Approx equilibrium 1993 1995 1997 1999 2001 2003 2005 2007 Source: PMA / Knight Frank 19
Appendix 2 West End Office Market Availability % Source: Knight Frank 20
Appendix 3 West End Office Take-Up 1992 - 2008 Million sq ft 9 Q1 Q2 Q3 Q4 Full Year 8 7 6 Full Year Ave 5 4 Q1-Q3 Ave 3 H1 Ave 2 Q1 Ave 1 0 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 Source: Knight Frank 21
Appendix 4 Central London Investment Market Q3 2008 Turnover volume vs Initial yield Overseas Purchasers City Prime Yield (RH scale) £ billion % Domestic Purchasers West End Prime Yield (RH scale) Source: CB Richard Ellis 22
Appendix 5 West End Active Requirements >10,000 sq ft 000 sq ft May 2008 Nov 2008 Change Total 2,426 822 (66%) Professional Services 255 40 (84%) Financial Services 678 157 (77%) Manufacturing & Corporates 197 59 (70%) Miscellaneous 428 142 (67%) Marketing & Media 588 213 (64%) IT & Technology 160 65 (59%) Government 120 146 22% Source Knight Frank 23
Appendix 6 West End Take Up Lettings - Q3 average Market GPE Size 4,400 sq ft 3,600 sq ft Rent £53 per sq ft £46 per sq ft* We are still dealing in this market segment … •123,000 sq ft under offer •£4.9m p.a. (GPE share £4.4m p.a.) •Average of £40 per sq ft *Excluding short-term leases in development space 24
Appendix 7 West End Prime Rental Growth vs UK GDP Growth As at Nov ‘08 Source: CB Richard Ellis 25
Appendix 8 City Top Prime Rents vs Rent Free Periods Q4 2008 Rent Free Periods Rent (RHS) Net Rent (RHS) 35 70 65 30 Rent Free Period Months 60 25 55 Rents £ psf 50 20 45 15 40 35 10 30 5 25 0 20 1994 Q2 1994 Q4 1995 Q2 1995 Q4 1996 Q2 1996 Q4 1997 Q2 1997 Q4 1998 Q2 1998 Q4 1999 Q2 1999 Q4 2000 Q2 2000 Q4 2001 Q2 2001 Q4 2002 Q2 2002 Q4 2003 Q2 2003 Q4 2004 Q2 2004 Q4 2005 Q2 2005 Q4 2006 Q2 2006 Q4 2007 Q2 2007 Q4 2008 Q2 2008 Q4 Note: The net effective rent is calculated using a DCF over 10 years @7% and assumes a 3 month fitting out period Source: CB Richard Ellis 26
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