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0
Transforming SEGRO’s performance
8 November 2011
1
Agenda
Park Royal and SloughBuses leave for site visit13.30
Lunch12.30
David Sleath (CEO), Justin Read (FD), Andy Gulliford
(COO) and Phil Redding (CIO)
Panel Q&A12.00 – 12.30
Andy Gulliford (COO)Expanding our logistics offering11.40 – 12.00
Phil Redding (CIO) and Gareth Osborn (BUD, Thames Valley
and Regions)
Focusing on key conurbations11.00 – 11.40
Break10.30 – 11.00
David Sleath (CEO)
David Sleath (CEO) and Justin
Read (FD)
Q3 IMS
Transforming SEGRO’s performance
09.30 – 10.30
2
Q3 IMS
3
Strong operational performance
� £11.9m of new annualised income secured (Q3 2010: £9.5m)
� Customer retention remains strong at 71%
� Group vacancy rate further reduced to 10.2% from 11.4% at 30 June
� 22 contracted or under construction development projects
- c.£19m of income and c.£174m of capex
- 76% pre-let
� Refinanced APP portfolio and SEGRO bank facilities maturing in 2013
� Impact of broader economic environment on occupier markets difficult to predict
but SEGRO well placed
4
Transforming SEGRO’s performance
David Sleath, Chief Executive
5
Delivering attractive shareholder returns
OUTCOME:
BUILDING ON EXISTING
STRENGTHS TO TRANSFORM
OUR PERFORMANCE:
SEGRO’S
PLATFORM:
High quality,
progressive,
sustainable dividends
and NAV growth
Industrial
focus
Strong
positionsin key markets
Experienced
operationalteam
Excellent
customer base
DISCIPLINED
CAPITAL
ALLOCATION
OPERATIONAL
EXCELLENCE
Right portfolio shape
Active portfolio management
Right capital structure
Appropriate corporate structure and lean cost base
Leasing
Customer and asset management
Development
Cost control
6
SEGRO’s strong platform
Industrial focus
Strong positions in key markets
Experienced operational
team
Excellent
customer base
•Attractive sector with potential to deliver attractive returns
•High yielding sector with opportunities to create value
•Leading position in key UK markets – West London & Slough
•Good platform in several attractive Continental European markets
•Expertise in leasing, customer and asset management
•Strong capability in multi-let industrial & logistics
•Good track record of development
•Long term relationships with a range of blue chip customers
•Diversified income stream
7
Drags on portfolio performance
� Vacant properties
� Management intensive secondary assets
� Pure suburban office parks
� Development land bank
� Some sub-scale or weaker markets
8
A clear plan to transform performance
� Continued focus on operational excellence to drive portfolio returns
� Recycle capital
• Opportunistically manage £640m of large non-strategic assets
• Recycle £1bn of smaller industrial holdings and land
� Reinvest in growth areas
• Prime industrial estates plus higher value uses in major conurbations
• Logistics/larger distribution warehouses in key markets
• Development and acquisition of portfolios
� Capital management
• Reduce borrowings: targeting 40% LTV over medium term
• Expand use of 3rd party capital
New management structure in place to support strategy
9
A strategy for success
10
Vision
To be the best
owner-
manager
and developer
of
industrial property in
Europe
DISCIPLINED CAPITAL ALLOCATION
• Right portfolio shape
• Active portfolio management
• Right capital structure
• Appropriate corporate structure and lean
cost base
OPERATIONAL EXCELLENCE
• Leasing
• Customer and asset management
• Development
• Cost control
How:
High quality, progressive,
sustainable dividends and
NAV growth
Result:What:
11
Operational excellence
•Efficiencies from adopting a consistent ‘One SEGRO’ approach
•Knowledge sharing and cross fertilisation of
business opportunities
•Realign KPIs and performance management around total property return
•Integration of Brixton
•Third party asset management – APP
•Increased customer retention rate
•Improved occupancy levels
•Successful development programme
•New property systems in Continental Europe
•Cost reductions
OpportunitiesRecent achievements
12
Vision
To be the best
owner-
manager
and developer
of
industrial property in
Europe
DISCIPLINED CAPITAL ALLOCATION
1. Right portfolio shape
2. Active portfolio management
3. Right capital structure
4. Appropriate corporate structure and
lean cost base
OPERATIONAL EXCELLENCE
• Leasing
• Customer & asset management
• Development
• Cost control
How:
High quality, progressive,
sustainable dividends and
NAV growth
Result:What:
13
Right portfolio shape
Right products (asset type)
Right markets(geographies)
Right balance(mix of stabilised
and opportunity assets)
14
Right portfolio shape – right products
0
2
4
6
8
10
12
14
16
1986-1995 1996-2004 2005-2010
Industrial Office Retail All Property
0
2
4
6
8
10
12
Industrial Office Retail All Property
IPD Total Returns % by Economic Cycle
(annualised to 2010)
IPD Total Returns % from 1986 to 2010
(annualised to 2010)
Industrial – an attractive asset class
15
Right portfolio shape – right products
0
1
2
3
4
5
6
7
8
9
10
1986-1995 1996-2004 2005-2010
Industrial Office Retail All Property
IPD Income Returns % by Economic Cycle
(annualised to 2010)
0
1
2
3
4
5
6
7
8
9
Industrial Office Retail All Property
IPD Income Returns % from 1986 to 2010
(annualised to 2010)
Industrial – an attractive asset class
16
Right portfolio shape – right products
0
2
4
6
8
10
12
14
16
1986-1995 1996-2004 2005-2010
To
tal R
etu
rn (
%)
Industrial London All Industrial
IPD Total Return % by Economic Cycle (annualised to 2010)
IPD Rental Value Growth % by Economic Cycle
(annualised to 2010)
-1
0
1
2
3
4
5
1986-1995 1996-2004 2005-2010R
en
tal
Gro
wth
(%
)
Industrial London All Industrial
17
Right portfolio shape - right products
Logistics warehousingLogistics warehousing
Logistics
•Larger distribution warehouses – typically 10,000 sq m and above
•Single and multi-occupier buildings
•International, national and regional
distribution
•Ports, airports and transportation corridors
Industrial
•Multi occupier estates and buildings in varying sizes
•Located in and around conurbations
•Light industrial and similar uses
•Urban logistics serving conurbations
18
Right portfolio shape – right products
Higher value uses within core industrial locations
Suburban offices
Data centres Car showrooms
Trade counters
Self storage
R & D facilities
0
5
10
15
20
25
30
35
Older
industrial
Modern
industrial
Other high
value uses
Airport
(landside)
Data
centres
Airport
(airside)
Suburban
Offices
Illustrative rental levels – South East England
(Rent per sq ft)
£6-7
£9-12
£9-15 £12.5-15.5 £16
£24-25
£23-30
19
Right portfolio shape - right markets
� Attractive market fundamentals
– Size
– Economic growth prospects
– Liquidity, maturity and transparency of real estate investment market
– Occupier market fundamentals
– Supply/competitive environment
� Strong SEGRO market position
– Have critical mass - typically with >£500m assets under management
– Potential to achieve critical mass in 3-5 years
Key selection criteria
20
Right portfolio shape – right markets
London & South East
Paris/Ile de France
Frankfurt
Dusseldorf(Rhine-Ruhr)
Primary targets for industrial and higher value uses
21
Right portfolio shape – right markets
Source: Jones Lang LaSalle
European Logistic Locations
22
Right portfolio shape – right markets
UK – South/Central
France – Paris/Lyon
Germany – Dusseldorf/Frankfurt/Hamburg
Benelux – Randstadt/Belgium triangle
Poland – Warsaw/Poznan/Lodz/Silesia
Czech Republic - Prague
SEGRO’s primary target markets for logistics
23
Right portfolio shape - right balance
Opportunity assets
•Well located assets in key markets
•Potential for significant future income and capital upside
•Examples:
• Developments under construction
• Land holdings or options
• Good secondary assets with deliverable asset management opportunities
•Not:
• Large, long term development sites
• Secondary assets in secondary locations -“turnaround assets"
Opportunity assets Stabilised assets
Stabilised assets
•Modern, well located assets
•Structural vacancy rate of <10%
•Solid income returns, minimal “leakage”
•Low capex requirements
•Above average long term total return
Indicative portfolio split
24
Right portfolio shape
Right products (asset type)
Right markets(geographies)
Right balance(mix of stabilised
and opportunity assets)
25
Right portfolio shape – SEGRO portfolio
*Based on June 2011 valuations with JVs @ 100%
72%
17%
11%
Core
Smaller non-core industrial holdings and land
Large non strategic assets
49%
7%
44%
Stabilised
Opportunity (built)
Opportunity (land & development)
Split of current portfolio (Value: £5.9 billion)
Split of current core portfolio by stabilised and opportunity assets
(Value: £4.3 billion)
26
Right portfolio shape - large non-strategic assets
Pegasus Park (Brussels)
Neckermann site
(Frankfurt)
Vimercate
(Milan)
IQ Farnborough
(Farnborough)
Total value: £640m
Total headline rent: £48m
Data as at 30 June 2011
MPM site(Munich)
Thales (Crawley)
27
Right portfolio shape – SEGRO portfolio
*Based on June 2011 valuations with JVs @ 100%
72%
17%
11%
Core
Smaller industrial holdings and land for recycling
Large non-strategic assets
Split of current portfolio (Value: £5.9 billion)
28
Right portfolio shape - recycling capital
Joint ventures shown at 100%
0
0.5
1
1.5
2
2.5
London &
South
Thames Valley Midlands &
North
France Germany Poland &
Czech
Benelux &
Other
Large non-
strategic assets
Stabilised (core) Opportunity (core) Land Smaller industrial holdings and land for recycling
Valu
e £
bn
29
Right portfolio shape – stabilised versus opportunity
*Based on June 2011 valuations with JVs @ 100%
49%
7%
44%
Stabilised
Opportunity (built)
Opportunity (land & development)
Split of current core portfolio by stabilised and opportunity assets(Value: £4.3 billion)
30
Right portfolio shape - Re-invest in growth areas
UK – South/Central
France – Paris/Lyon
Germany – Dusseldorf/Frankfurt/Hamburg
Benelux – Randstadt/Belgium triangle
Poland – Warsaw/Poznan/Lodz/Silesia
Czech Republic - Prague
3. Expand LOGISTICS
business around major
commercial ports, airports
and logistic corridors
2. Exploit opportunities to
develop HIGHER VALUE
USES within core industrial
locations
UK – London & South East (inc Thames Valley)
France – Ile de France (Paris)
Germany – Dusseldorf and Frankfurt
1. Build on existing strengths
within core INDUSTRIAL
markets and gain critical
mass in key target markets
WHERE:WHAT:
31
Right portfolio shape - development strategy
�Development a key element of ‘value add’
�Smaller overall land bank - more manageable scale of individual sites; more use of option agreements and JV’s
�Reduce excess holdings opportunistically
�Pre-let driven development programme
�Modest speculative development where local market conditions dictate
�Project level target returns-11% to 12% yield on cost (ex land)
-8% to 9% development yield (incl existing land values)
�Track record of successful development-Led by pre-lettings
�Last five years:-1.1 m sq m developed
-£0.8bn of capex spent
�By value:-43% logistics
-29% industrial
-28% higher value uses
�Attractive project level returns:-c.8% development yield
-c.11% yield on cost (ex land)
�Overall returns held back by size of land bank
FUTURE STRATEGYHISTORY
32
Right portfolio shape – indicative SEGRO portfolio
41%
16%10%
5%
11%
17%
Industrial
Logistics
Higher value uses
Development & land
Large non-strategic assets
Smaller industrial holdings and land for recycling
44%
39%
13%4%
Industrial Logistics
Higher value uses Development & land
2011* Future shape
*Based on June 2011 valuations. Joint ventures shown at 100%
33
Vision
DISCIPLINED CAPITAL ALLOCATION
1. Right portfolio shape
2. Active portfolio management
3. Right capital structure
4. Appropriate corporate structure and
lean cost base
34
Active portfolio management
BUY SMARTCAREFUL AND
WELL TIMED ASSET
SELECTION
ADD VALUEDEVELOPMENT
AND/OR ASSET MANAGEMENT
SELL WELLCO-ORDINATE
INDIVIDUAL ASSET
STRATEGIES WITHMARKET CYCLE
TIMING
THE CYCLE
35
Vision
DISCIPLINED CAPITAL ALLOCATION
1. Right portfolio shape
2. Active portfolio management
3. Right capital structure
4. Appropriate corporate structure and
lean cost base
36
Right capital structure
� Moderate gearing levels
- More defensive
- Increases opportunity to exploit future opportunities
- Medium term target to reduce LTV to c.40%
- Flex level over the cycle
� Focused use of third party capital to enhance risk-adjusted returns:
- Facilitate growth/achieve competitive scale
- Reduce capital intensity/concentration of risk
- Access capital with different risk/return profiles than public equity providers
- Leverage skills across a wider portfolio
37
Right capital structure - use of 3rd party capital
√
√
√√
√
√
√
√
Potential Future Opportunities:
Logistics
Slough Trading Estate (Higher
value uses)
√
√
√
√
√
√
√
√
√
Current:
Airport Property Partnership
Big Box
Earn asset
management
fees
Leverage
skills across
a wider
portfolio
Access
capital with
different risk /
return profiles
than public
equity
Reduce
capital
intensity /
risk
Facilitate
growth /
achievement
of competitive
scale
38
Vision
DISCIPLINED CAPITAL ALLOCATION
1. Right portfolio shape
2. Active portfolio management
3. Right capital structure
4. Appropriate corporate structure and
lean cost base
39
Primary operating offices
Slough
Paris
Amsterdam
Dusseldorf
Poznan
40
Appropriate corporate structure and lean cost base
� Focus operations in key markets only
- critical mass to generate economies of scale
� Minimise empty property costs by managing a predominantly prime well let
portfolio
� Lean and efficient management structure to support operational teams
� Generate asset management fees from 3rd parties
� Operate an efficient tax structure – low effective tax rate
41
Vision
To be the best
owner-
manager
and developer
of
industrial property in
Europe
DISCIPLINED CAPITAL ALLOCATION
1. Right portfolio shape
2. Active portfolio management
3. Right capital structure
4. Appropriate corporate structure and
lean cost base
OPERATIONAL EXCELLENCE
•Leasing
•Customer & asset management
•Development
•Cost control
How:
High quality, progressive,
sustainable dividends and
NAV growth
Result:What:
42
Financial Considerations
Justin Read, Group Finance Director
43
Financial considerations
� Asset recycling
� Work through large non-strategic assets - £640m
� Ongoing recycling of smaller industrial holdings and land - £1bn
� Re-invest in growth areas
� Reduce leverage
� Medium term target to reach 40% LTV
� Initial focus on paying down bank debt
� Earnings
� Manage recycling to mitigate earnings impact
� NAV
� Reshaped portfolio positioned to deliver NAV growth
44
Portfolio split by headline rent
Stabilised assets
£120m
Opportunity assets £130m
Smaller industrial holdings and land
£74m
Headline rent shown
Large non-strategic assets
£48m
Development(2011 -2015)
Committed Potential£19m £51m
+ income from
further
operational delivery
+ income generated
from acquisitions
CORE RECYCLE RE-INVEST
45
Key performance measures going forward
Efficient capital
structure
Cost effective admin
and tax structure
Total Property Return
NAV growth
EPS/DPS growth
Total Shareholder
Returns
46
Summary
47
Delivering attractive shareholder returns
OUTCOME:
BUILDING ON EXISTING
STRENGTHS TO TRANSFORM
OUR PERFORMANCE:
SEGRO’S
PLATFORM:
High quality,
progressive,
sustainable dividends
and NAV growth
Industrial
specialist
Strong
positionsin key markets
Experienced
operationalteam
Excellent
customer base
DISCIPLINED
CAPITAL
ALLOCATION
OPERATIONAL
EXCELLENCE
Right portfolio shape
Active portfolio management
Right capital structure
Appropriate corporate structure and lean cost base
Leasing
Customer and asset management
Development
Cost control
48
Appendices
49
From Slough Estates to SEGRO
Exited retail portfolio2004 & 2008
Exited energy business 2007
REIT conversion2007
Disposal of US business
2007
Acquisition of Brixton2009
Acquisition of 50% of APP2010
Expanded in Continental Europe
2005-2007
Exited Canada2004
50
SEGRO today
� European industrial specialist
� £5.9bn of assets under management
� 5.7 m sq m of lettable space
� Passing rent of £371m
� Over 1,600 customers
NB: Joint ventures included at 100%
51
Continuing to drive down vacancy
10
12
14
Jun-1
0
Jul-1
0
Aug-1
0
Sep-1
0
Oct-1
0
Nov-1
0
Dec-1
0
Jan-1
1
Feb-1
1
Mar-1
1
Apr-1
1
May-1
1
Jun-1
1
Jul-1
1
Aug-1
1
Sep-1
1
Group vacancy
% b
y r
enta
l valu
e
14.0%
10.2%
12.1%12.0%
11.4%
13.4%
52
SEGRO’s strengths - portfolio
� Unique, largely irreplaceable core of prime industrial assets
� Leading position in key markets in UK
� Heathrow - £1.2bn AUM
� Slough - £995m AUM
� Rest of London - £907m AUM
� Good platform in several attractive Continental European markets
� Poland - £298m AUM
� France - £423m AUM
� Germany - £532m AUM
53
SEGRO’s strengths – operational team
� Expertise in leasing, customer and asset management
� Management of 209 light industrial estates with over 1,600 customers
� Group vacancy reduced from 14.0% in June 2010 to 10.2% today
� Retention rate year to date of 71%
� Customer satisfaction score of 73%
� Expertise in logistics
� Particular exposure in Continental Europe
� Strong relationships with key third party logistics providers
� Track record of successful development
� 1.1 m sq m developed over last 5 years
� Expertise in pre-let development
� Light industrial and logistics
� Higher value uses – offices, data centres, trade counters and car showrooms
54
SEGRO’s strengths – customer relationships
“Our decision to remain located on Slough
Trading Estate is not only down to our long-
standing history on the scheme but also because of the fast-tracking development
process that the landlord is able to undertake.”
Andy McLean, Executive Vice President,
Selig UK
“The close working partnership with SEGRO that has
developed through their good understanding of the aviation
industry enabled an agreement that worked for both sides.”Gwyn Powell, Chairman, Airworld
“We started out in the area as a sub-tenant in a very small unit, but have been fortunate to grow the
business and this is our third move which SEGRO
has helped facilitate. Our new unit, along with our
adjacent facility, will ensure we can provide our customers with a wide range of products and
services.”
Dominic Worley, National Electrical Wholesale
”Working with SEGRO has allowed us to find
a development which suits our current and
longer-term needs, as our product range is
getting larger all the time.”Brett Owen, All Pond Solutions
“ We are delighted to be based at IQ Winnersh. This office
development has been built to a very high standard and we
were particularly attracted by the innovative, sustainable and
energy conscious accommodation which is exactly what we need for our operations. We favoured IQ Winnersh due to its
excellent transportation links and the ease of access for
employees getting to and from the office. We are pleased to
have worked with SEGRO in securing this location.”
Geraint Williams, UK & Ireland Real Estate Director, Atos
“Savvis and SEGRO formed an excellent working relationship that helped us to deliver a world-class datacentre on time and on budget.
SEGRO demonstrated a clear understanding of our business needs
and ensured that these were met through attention to detail,
flexibility and a desire to meet our expectations.”Mike Bennett, Vice President of Operations EMEA, Savvis
55
OverviewSEGRO’s strengths – diversified income stream
24%
14%
12%11%
9%
6%
5%
5%5%
4% 5%
Transport Retail
Engineering & Electrical IT
Utilities & Services Finance & Media
Agriculture & Food Automotive
Building & Construction Chemicals & Commodities
Other
Selected large customersTopped up net rent by customer sector
Data as at 30 June 2011
56
SEGRO strengths – recent acquisitions
� Acquisition of Brixton in August 2009
� 1.4 million sq m of space valued at £1.1bn
� Implied net initial yield on acquisition of 8.7%
� Integrated within 6 months
� Delivered £12.8m of cost synergies
� Reduced Brixton vacancy rate from 22.1% to 13.4%
� Ungeared IRR of 14.1%
� Acquisition of 50% of APP joint venture in June
� Acquired share of unique air related assets for £111.5m
� Sold £237m of assets into JV – net cash proceeds to SEGRO of £55.3m
� Asset management base fee of c.£3.2m per annum
� Capital value of portfolio increased by 5.3% (including SEGRO assets injected)
� Ungeared IRR of 15.2%
57
� Total land bank of 624.7 hectares valued at £483.0m
35%
22%13%
10%
8%
5%3% 2% 2%
UK Germany Poland
Belgium Netherlands France
Czech Republic Italy Hungary
Development – analysis of current land bank
Geographical split by value
58
Development pipeline
0
5
10
15
20
25
H2 2011 2012 2013 2014 2015
Net rental income - current projects Net rental income - potential projects
0
20
40
60
80
100
120
140
160
180
200
H2 2011 2012 2013 2014 2015
Capex - current projects Capex - potential projects
Net rental income by year of completion (£m) Capex by year of completion (£m)
59
Management structure to deliver the strategy
CEO*
DAVID SLEATH
Group Finance Director*
JUSTIN READ
Chief Operating Officer
ANDY GULLIFORD
Chief Investment Officer
PHIL REDDING
Finance and IT Teams Property Teams Investment Teams
* Board member
60
Right portfolio shape - indicative SEGRO portfolio
0
0.5
1
1.5
2
2.5
London &
Sout
hTham
es Val
ley
Mid
lands
& N
orth
France
Ger
man
yPola
nd & C
zech
Ben
elux
& O
ther
Large
non-st
rate
gic a
ssets
0
0.5
1
1.5
2
2.5
London &
South
Thames
Valley
Midlands &
North
France Germany Poland &
Czech
Benelux &
Other
Current portfolio shape (£5.9bn) Target portfolio shape – indicative
Joint ventures shown at 100%
Valu
e £
bn
Large non-strategic assets
Smaller industrial holdings and land for recycling
Development and land
Higher value uses
Logistics
Industrial
Valu
e £
bn
61
Forward-looking statements
This presentation may contain certain forward-looking statements with respect to
SEGRO’s expectations and plans, strategy, management’s objectives, future
performance, costs, revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to events and depend
upon circumstances that may occur in the future. There are a number of factors
which could cause actual results or developments to differ materially from those
expressed or implied by these forward looking statements and forecasts. The
statements have been made with reference to forecast price changes, economic
conditions and the current regulatory environment. Nothing in this presentation
should be construed as a profit forecast. Past share performance cannot be relied on
as a guide to future performance.
62
Transforming SEGRO’s performance
8 November 2011