Interim Management Statement

Land Securities Group Plc
16 July 2007

16 July 2007

Land Securities Group PLC ('Land Securities' / 'Group')



LAND SECURITIES - INTERIM MANAGEMENT STATEMENT



Land Securities announces a strong start to its financial year with high levels
of achievement against its targets for development lettings, asset sales and the
acquisition of additional PPP contracts.  Highlights are:



  • 65,650 sq m of accommodation from our development programme let in Q1 or
    currently in solicitors' hands, reflecting buoyant conditions in the London
    office market

  • £485.7m of investment property disposals at an average yield of 4.1%. The 
    sales were at 3.8% above valuation to show a net profit on sale of £12.1m

  • £65m invested in seven new PPP acquisitions.  Since quarter end, contracts
    also exchanged for £163.5m to acquire AMEC's Project Investments business
  • Aggregate disposals, purchases and development expenditure results in net
    disinvestment of £161.3m in Q1
  • Investment property voids broadly unchanged at 5.1% at 30 June as compared
    to 4.9% at 31 March.  One third of these voids relate to pre-development
    properties
  • Grant of planning permission for our 55,370 sq m office tower at 20
    Fenchurch Street, EC3
  • Resolution to grant outline planning permission for 6,250 residential
    units and 231,000 sq m of commercial and community accommodation at Eastern
    Quarry in Kent
  • 104,295 sq m of planning applications for new developments submitted in Q1
  • First quarterly dividend of 16.0 pence (80% in the form of a Property
    Income Distribution)  -  payable on 26 October 2007



Commenting on the first quarter, Francis Salway, Group Chief Executive of Land
Securities said:



'The first quarter has seen extremely high levels of activity across the Group.
We have continued to enjoy success in letting up our development programme,
executing on the business plan for our recently acquired PPP business and making
selective sales from our Retail Portfolio.



'Reflecting the buoyant conditions in the London office market, we already have
60,500 sq m of lettings from our London Portfolio development programme in
solicitors' hands.  This is close to the figure of 60,700 sq m of London
Portfolio development lettings we achieved in the whole of the 2006/07 financial
year and underlines the excellent timing of our development programme.



'We embarked on an active programme of investment property sales after becoming
a REIT on 1 January 2007, taking advantage of the absence of capital gains tax
liabilities under the new REIT regime.  In the quarter we sold just under £500m
of investment properties and in addition agreed terms for further asset
disposals of more than £250m.  Since 1 January, we have sold or agreed terms to
sell assets totalling more than £1,250m.



'We are also delighted with the progress of our PPP businesses, Secondary Market
Infrastructure Fund and Investors in the Community, which were acquired in
February and have now both been fully integrated into Land Securities Trillium.
During the quarter we invested a further £65m through the acquisition of
additional PPP contracts in the secondary market and, since the quarter end, we
have exchanged contracts on a further £163.5m.



'The terms agreed for our next tranche of lettings on our London Portfolio
development schemes demonstrate continuing growth in rental values.  Our high
level of activity on transactions will ensure that we are allocating capital to
those areas of the market with the best growth potential.'





LONDON PORTFOLIO



Our substantial development programme in London is well timed in terms of
delivery with 223,000 sq m under construction, of which 135,000 sq m is due for
completion in our 2007/08 financial year.  We have made significant progress on
leasing negotiations on these projects in Q1.



Investment Portfolio

  • We completed £185.8m of acquisitions, the largest of which was the
    purchase of a 50.5% interest in Times Square, EC4 (in which we already held
    a 44.5% interest) for £144.4m at a net initial yield of 4.6%.


  • We concluded sales of New London House, EC3; 12 Gough Square, EC4; and a
    development site in Stamford Street, SE1 for an aggregate of £164.6m.



Development Activity

  • We completed buildings 2 and 3 totalling 24,500 sq m at New Street Square,
    EC4 for handover to Deloitte, who had pre-leased the buildings in 2005.
    This will generate an additional £9.9m per annum of rental income (after
    spreading of rent free periods over the lease terms).


  • We are currently in the position of having agreed terms for further
    lettings on our London development programme of 60,050 sq m.  These are at
    Bankside 2&3, SE1; Cardinal Place, SW1; buildings 5 and 6 at New Street
    Square, EC4; and One New Change, EC4 in the City.  This builds substantially
    on our successes in letting 60,700 sq m of London office developments during
    the 2006/07 financial year.


  • We submitted a planning application for 35,520 sq m of offices and 3,775
    sq m of retail space at 30 Old Bailey, EC4, where vacant possession of the
    site is due in 2010 following lease expiries.



  • We are delighted that on Tuesday 10 July the Minister granted planning
    consent for our proposed 55,370 sq m office tower at 20 Fenchurch Street,
    EC3 following the Public Inquiry.  Demolition works have already started and
    we will now review appropriate risk management options for the delivery of
    the scheme in the context of our overall development programme.


  • Capital expenditure on London developments during the quarter was £86.9m.





RETAIL PORTFOLIO



The quality of the assets in our Retail Portfolio, our extensive development
programme and our management skills ensure that we are well positioned to
continue to generate value in this sector.



Investment Portfolio

  • During the quarter, we exchanged contracts for the sale of £314.9m of
    retail properties. The disposals in the quarter included our 50% interest 
    in the East Kilbride shopping centre together with retail warehouse assets 
    at Wyvern Retail Park, Derby; Cheetham Hill in Manchester; High Wycombe; 
    and Stockton.

    We have also agreed terms for the disposal of our recently completed
    shopping centre development at Whitefriars, Canterbury.



Development Activity

  • During the quarter, we concluded another 23 lettings from our development
    programme at an aggregate rent of £2.2m per annum (Land Securities' share).
    We have a further 43 lettings at a rent of £5.0m per annum in solicitors'
    hands.



  • We are on schedule to open our city centre retail developments at Exeter,
    Corby and Cambridge in the second half of 2007 and the current letting
    position on these schemes is as follows:


                                     % let/terms agreed*
Exeter                                                   91
Corby                                                    51
Cambridge                                                91


* Measured by rental income



  • A planning application has been submitted for Buchanan Galleries, Glasgow
    (in which we have a 50% interest). The proposed development will extend the
    existing shopping centre by approximately 65,000 sq m, increase the overall
    size of the scheme to 120,770 sq m and making it one of the largest shopping
    centres in the UK.


  • Capital expenditure during the quarter on developments in our Retail
    Portfolio was £47.2m.





LAND SECURITIES TRILLIUM - PROPERTY PARTNERSHIPS



We have had success in managing our longstanding property outsourcing contracts,
bedding in the substantial volume of new business we acquired in the final
quarter of the last financial year and also acquiring new PPP contracts.



Outsourcing contracts

  • On the Department for Work and Pensions (DWP) contract, we disposed of a
    further 23,450 sq m of surplus leasehold space and 16,000 sq m of surplus
    freehold accommodation.


          The net proceeds from the freehold disposals were £11.6m, which showed 
          a net profit on book value of £3.8m after gain share.

          DWP issued vacation notices during Q1 on 27,500 sq m (75% leasehold 
          and 25% freehold).



  • On the surplus Royal Mail properties, we have completed our programme of
    11 refurbishment projects and have already let 2,350 sq m and agreed terms
    to let a further 2,300 sq m.



  • On the DVLA contract, we have been awarded three scope extensions to
    provide an additional 7,000 sq m of accommodation with capital investment of
    approximately £26m over the next 18 months.







Public Private Partnerships

  • We completed seven PPP acquisitions for £65.0m during the quarter.



  • Since the quarter end we have exchanged contracts for the acquisition of 
    AMEC's Project Investments business for £163.5m. The business has nine PPP
    contracts in the healthcare, transport and education sectors. Over half of 
    the assets are subject to pre-emption rights for joint owners. 
    The transaction is expected to complete by the end of October.

  • Since the quarter end we have exchanged contracts for the disposal of a
    non-core utility business acquired with SMIF, and also agreed terms for the
    sale of another utility business. The aggregate receipts will be
    approximately £45m and will show a material uplift on our acquisition cost.

  • Following our appointment of UBS as advisers to the creation of a PPP fund
    for third party investors, we have commenced initial marketing of the fund,
    which is planned to be launched during the 2007 calendar year.



New Business

  • We are one of two shortlisted parties for the Northern Ireland Civil Service 
    property outsourcing contract. We expect to submit our Best and Final Offer 
    by October 2007 and the client to announce a preferred bidder in January
    2008. One of the unsuccessful bidders is now seeking a Judicial Review of 
    the bid process which could delay the programme by three months.

  • On the Defence Training Review outsourcing contract, our Metrix consortium
    with QinetiQ is preferred bidder on Package 1 and provisional preferred
    bidder on Package 2. We are continuing to work with the Ministry of Defence
    on Package 2 seeking to resolve a material affordability issue so that
    Metrix can become preferred bidder on the combined package. We anticipate a
    decision within the next few weeks to proceed with either Package 1 in
    isolation, or on a combined solution, so that financial close can be
    achieved by the beginning of 2009.

  • We are shortlisted for the Building Schools for the Future (BSF) projects
    in Birmingham, Kent and Tameside where the initial phases involve in excess
    of £200m of PPP capital expenditure.





URBAN COMMUNITY DEVELOPMENT



On 5 July, Dartford Borough Council resolved to grant Outline Planning
Permission for Eastern Quarry at Ebbsfleet Valley in Kent. The project, on a
site of 270 hectares, consists of some 6,250 new homes and up to 231,000 sq m of
commercial and community floor space. Subject to the formal completion of the
section 106 agreement, which is expected in early August, this will be one of
the largest planning permissions granted and marks a significant milestone in
the development of the project.





FINANCE


As at 30 June 2007, the nominal value of our net debt (including joint ventures
but excluding non-recourse debt in the PPP contracts) amounted to £6,114m at an
average cost of 5.36%.  89% of our debt was fixed.  Following the recent rise in
interest rates, the market value of our debt and related interest rate swaps at
30 June 2007 was £5,856m.

As previously announced, Land Securities will commence payment of quarterly
dividends this year. The first quarterly dividend will be 16.0 pence per share,
of which 80% will be in the form of a Property Income Distribution payment, and
will be paid on 26 October 2007 to shareholders on the register at 21 September
2007. On an annualised basis, this represents a 20.8% increase above the full
year dividend for 2006/07.



                                    - ENDS -



A conference call for analysts is being held today at 08:30 BST



Conference call details:
UK dial in number: 0845 245 3471
International dial in number: [phone]
Call title: Land Securities Interim Management Statement
Conference ID: 6947400


For further information, please contact:


Francis Salway / Martin Greenslade / Edward Thacker      Stephanie Highett / Dido Laurimore
Land Securities                                          Financial Dynamics
T [phone]                                    T [phone]





Forward Looking Statements



This document may contain certain 'forward-looking' statements. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
future events and circumstances. Actual outcomes and results may differ
materially from any outcomes or results expressed or implied by such
forward-looking statements.

Any forward-looking statements made by or on behalf of Land Securities speak
only as of the date they are made and no representation or warranty is given in
relation to them, including as to their completeness or accuracy or the basis on
which they were prepared. Land Securities does not undertake to update
forward-looking statements to reflect any changes in Land Securities'
expectations with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.

Information contained in this document relating to the Company or its share
price, or the yield on its shares, should not be relied upon as an indicator of
future performance.




                      This information is provided by RNS
            The company news service from the London Stock Exchange