Mapeley Run to run property -

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Mapeley Run to run property -
                                               Run to run property
                                               Annual Report 2007

                  Mapeley Annual Report 2007
Mapeley Run to run property -
Run to run property
                                                        Printed on material

The size and diversity of our property                  manufactured from 50%
                                                        recovered fibre and 50%
                                                        virgin fibre product with
                                                        FSC certification. The

portfolio enables us to develop                         Forest Stewardship Council
                                                        (FSC) is an international
                                                        network which promotes
                                                        responsible management

significant property management                         of the world’s forests.
                                                        Forest certification is
                                                        combined with a system
                                                        of product labelling that

expertise, first-hand knowledge of                      allows consumers to
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                                                        based products from
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regional markets, relationships and                     Designed and produced
                                                        by Carnegie Orr
                                                        +44(0)20 7610 6140

contacts with local owners, brokers           

and occupiers and an understanding
of the needs and behaviours of
public and private sector tenants.

01 Financial and operational highlights
02 What we do
03 How we do it
10 Chairman’s and Chief Executive Officer’s statement
14 Finding value and adding quality
16 Business review
26 Corporate Responsibility

30   Financial Highlights
31   Financial Review
37   Board of Directors
38   Directors’ Report
42   Directors’ Responsibility Statement
43   Corporate Governance
47   Remuneration Report
51   Independent Auditors’ Report
52   Consolidated income statement
53   Consolidated statement of changes in equity
54   Consolidated balance sheet
55   Consolidated cash flow statement
56   Notes to the audited consolidated
     financial statements

94 Additional Information
96 Company details
Mapeley Run to run property -
Financial and operational highlights

FFO (£m)                             FFO growth
2007 56.4
2006 45.7
2005 25.5                            23.4%

Dividend (p)                         Dividend growth
2007 188
2006 168
2005 130                             11.9%
EBITDA (£m)                          EBITDA growth
2007 115.4
2006 93.5
2005 64.8                            23.4%
Revenue (£m)                         Revenue growth
2007 417.4
2006 385.0
2005 339.4                           8.4%

_ Total asset value of £2.3 billion
_ Total portfolio value of £2.1billion
_ £223.3 million of acquisitions
_ Loss before tax of £129.0 million

Mapeley Limited Annual Report 2007                     01
Mapeley Run to run property -
What we do

Own and manage a diverse
portfolio of properties

                                                                                                                                                                  Lifecycle works – investing
Facilities management
                                                                                                                                                                  in and protecting the value
                                                                                                                                                                  of our estate
services – running
buildings smoothly

Projects – changing the
working environment of
our clients

  1. Own and manage            2. Facilities management       3. Lifecycle works –             4. Projects – changing the        5. Customer services –           6. Acquire new assets –
  a diverse portfolio          services – running             investing in and protecting      working environment of            meeting customers’ needs         growing Mapeley’s platform
  of properties                buildings smoothly             the value of our estate          our clients                       We operate a 24 hour client      Be it through winning new
  We own freehold assets       We provide a full range        Lifecycle refers to the fabric   From refurbishment works          help desk for our outsourcing    outsourcing contracts or
  and we also manage           of accommodation-related       of the building and lifecycle    to modernise space, to            clients and receive over         acquiring assets on a direct
  leaseholds occupied          services to tenants in our     works range from boiler          feasibility studies to increase   9,000 calls per month in         basis in the investment
  by our tenants.              portfolio ranging from         replacements to roofing          space capacity and provide        relation to the provision        market, we aim to increase
                               catering and cleaning          and cladding works.              sustainable property              of facilities management         our scale and coverage.
  Freehold properties exist    to childcare and security                                       solutions, we adapt and           and projects services.
  in both our Outsourcing      services.                      Lifecycle works are carried      fit-out our tenant’s space                                         Our regional operating
  and Direct Property                                         out to maintain and where        in response to their changing     Our clients benefit from         platform which gives us
  Investment Portfolios.       We do not self-deliver these   possible to enhance the value    occupational needs.               a quality assured service        a presence in every major
  With our leasehold assets,   services, they are provided    of our assets by ensuring                                          answered by specialist call      town and city in the UK is
  our clients occupy the       by our facilities management   they are fit for their           Most of the project works         handlers who are accustomed      easily leveraged to support
  assets as tenant but we      partners. Servicing our        purposes. We are required        we perform are as a result        to dealing with our diverse      growth by acquisition
  carry out all interaction    outsourcing clients’ estates   to carry out planned             of our obligations to HMRC        estate and familiar with         of new assets – freehold
  with third-party landlords   gives us valuable insight      maintenance, reactive            under the outsourcing             our clients’ building-related    or leasehold, to generate
  on their behalf and also     into their occupational        maintenance and lifecycle        contract, however we also         issues. Through excellent        shareholder value.
  carry principal risk on      strategies and enables us      replacement to the               provide project services to       customer service we aim
  the financial impacts of     to mitigate vacancy risk.      HMRC estate under our            new tenants taking space          to build and maintain strong
  the lease.                                                  outsourcing contract.            in our estate and to our          relationships with our clients
                                                                                               existing tenants in the           to secure their long-term
                                                                                               DPI Portfolio.                    occupation of our assets.

Mapeley Limited Annual Report 2007                                                                                                                                                         02
Mapeley Run to run property -
How we do it

                             Freehold assets                          Leasehold assets                        Construction and fit-out
                             We acquire freehold assets either        We operate leasehold assets occupied    We use a framework of contractors
                             as part of bundled outsourcing           by our clients on a principal basis.    and suppliers to carry out the
                             contracts or directly in the             Rents payable to third-party            construction and fit-out services
                             investment market. We are focused        landlords represent a cost to Mapeley   hence benefiting from further
                             on acquiring good quality assets         which we strive to keep as low          economies of scale. These services
                             let to strong credit tenants. We have    as possible. Our specialist team        are provided for a small margin
                             a proprietary database of over           carried out 258 rent reviews and        to our outsourcing tenants. We
Customer services –
                             10,000 assets, with approximately
                             4,500 potential targets, which enables
                                                                      lease renewals in 2007 on the
                                                                      leasehold estate. We aim to keep
                                                                                                              also leverage our capabilities and
                                                                                                              in-house expertise in this area
meeting customers’ needs     us to make direct approaches             our rental payments lower than          by providing services to tenants
                             to landlords to acquire these assets.    the contractual annually indexing       in our DPI Portfolio and new
                             Our reputation as being one of           income we receive from our clients      third-party tenants at market prices.
                             only a few providers of real estate      to generate profits.
                             outsourcing solutions, enables us
                             to gain insight into new outsourcing     Facilities management services
                             deals ahead of our competitors.          We currently use one facilities
                                                                      management provider to deliver
                                                                      facilities management services
                                                                      to our outsourcing clients, HMRC
                                                                      and IPS. By using one provider
                                                                      we benefit from pricing advantages
                                                                      through scale. We aim to keep
                                                                      these costs as low as possible to
                                                                      generate a profitable spread between
                                                                      the income we receive from our
                                                                      clients and what we pay to the
Acquire new assets –
                                                                      facilities management partner.
growing Mapeley’s platform

                                Portfolio              Freehold               Leasehold              FM Service             Construction and
                                                       Property               Property                                      Fit-out

                                Identity and
                                Passport Service                                                                                  
                                Direct Property

Mapeley Limited Annual Report 2007                                                                                                               03
Mapeley Run to run property -
It’s about know-how . . .

Mapeley Limited Annual Report 2007                               04
Mapeley Run to run property -
Market capability
We are present in every major town and
city in the UK and own or operate a diverse
estate of some 1,689 assets. We carried
out 339 rent reviews and lease renewals
in 2007 as both landlord and tenant.
The operational aspects of our business
provide us with unrivalled, in-depth
specialist local market knowledge which
enables us to drive superior returns
through our regional operating platform.
From finding creative solutions to a
client’s catering requirements, to using
rent review information to make an
off-market acquisition approach to a
third-party landlord, our diversely skilled                         Run to run property
                                                                    Our diversely skilled team
team work tirelessly to leverage our                                work tirelessly to find
operating capability to find solutions for                          solutions for our clients.
our clients, mitigate risks and drive
returns. We are run to run property.

Customer relationships
Understanding our clients’ needs is at
the core of what we do. Our acquisition
strategy of ‘occupier inertia’ – our belief
that chosen clients will remain in
occupation of their buildings – requires
strong day to day relationships.
93% of our income is generated from
UK Government and investment grade
                                              . . . it’s about relationships
corporate clients. We focus on these
high quality clients as we perceive them
to have significant and complex real
estate requirements which we can service,
creating value for both parties. We employ
a partnership approach to secure and
build strong and trusting relationships
with our clients.

Mapeley Limited Annual Report 2007                                                           05
Mapeley Run to run property -
It’s about balance . . .

Asset management                                 Balanced business
Owning and operating a diverse estate            We are different to a lot of property
of some 1,689 assets creates numerous            companies. As well as acting as landlord,
opportunities for generating value. We           we also act as tenant through our leasehold
refer to this as ‘optionality’. From disposing   portfolio. This gives us a competitive
of assets which become vacant to securing        advantage as we see both sides of the
upfront cash payments for extending leases       property market. Our target markets are
with third-party landlords, we deploy            the UK regions which tend to be more
pro-active asset management strategies           stable compared to London. Our portfolio
to generate recurring revenue streams, often     is balanced and defensive. We generate
working with our clients and sharing in          93% of our income from UK government
the profits created. We have a controlled        and investment grade tenants, we have
pipeline of asset management opportunities       a 10 year average lease length and one
– an excellent source of organic growth.         of the lowest vacancy rates in the sector
                                                 at 3.5%.

Mapeley Limited Annual Report 2007                                                             06
Mapeley Run to run property -
. . . it’s about performance

                                     Working with our clients
                                     We deploy pro-active asset
                                     management strategies to
                                     generate recurring revenue

Mapeley Limited Annual Report 2007                           07
Mapeley Run to run property -
Because of our truly
portfolio, unique kno
of our markets, strong
with tenants and our
platform and capabil
well placed to deliver
shareholder returns.

Mapeley Limited Annual Report 2007   08
ity, we are

 Mapeley Limited Annual Report 2007   09
Chairman’s and Chief Executive
Officer’s statement

                                     Mapeley had solid 2007 operating results.

                                     Our underlying business performed well.
                                     Funds from operations (FFO), our key
                                     measure of underlying performance, grew
                                     by 23%.

                                     _ FFO growth of 23% from £45.7 million
                                       to £56.4 million
                                     _ Dividend growth of 12% from 168 pence
                                       per share to 188 pence per share
                                     _ Investment property acquisitions of
                                       £223.3 million
                                     _ Occupier inertia strategy proving
                                       successful with lease extensions and
                                     _ Refinancing of our £257 million
                                       revolving credit facility due April 2008

                                     During the first half of the year we acquired
Jamie Hopkins                        £180 million of high quality assets let to
Chief Executive Officer              strong credit tenants all located throughout
                                     the UK. The second half of the year saw
                                     us take a more cautious approach to
                                     acquisitions, given the changes in the
                                     capital markets and the knock-on effects
                                     to UK real estate.

Creating a sustainable business      We benefited from asset management
                                     opportunities arising from the scale and
to provide our shareholders          diversity of our estate of some 1,689 assets
                                     covering 2.4 million square metres. We
with a secure income stream          were able to enhance returns through
                                     rigorous management of our leasehold
and long-term value is at            portfolio and through our asset management
                                     strategies by either disposing of vacant
the core of everything we do.        assets or securing new third party income.

Mapeley Limited Annual Report 2007                                              10
Our financial performance was reinforced      We continue to exploit the competitive          Revenue from Government and
by the resilience of our income stream        advantage we have built by acting as            investment grade tenants
which was maintained throughout 2007.         both landlord and tenant in every major
93% of our income continued to be
derived from government and investment
grade corporates such as Microsoft and
                                              town and city in the UK. We manage the
                                              leasehold assets, occupied by our clients,
                                              on a principal basis with the aim of ensuring
British Telecom with 70% of our income        the rents we are responsible to pay to
being subject to fixed contractual uplifts.   third party landlords do not grow faster
We also have a 10 year average lease          than the indexed contractual income our         Average lease length
length across the portfolio and our vacancy   clients pay us. In addition this insight
rate, one of the lowest in the sector,
continues to remain stable at just 3.5%.
                                              provides us with real data points to best
                                              position our property interests in each
                                                                                              10 years
                                              of these towns whether as landlord or
Our strategy                                  tenant and also provides us with further
Our aim is to be the leading owner and        acquisition opportunities.
operator of regional UK real estate let to                                                    Occupancy
strong credit quality tenants such as the     Performance review
UK Government. We enter into property
outsourcing contracts with high quality
counterparties, which usually involve
                                              We have a presence in every major town
                                              and city in the UK, and, for the most
                                              part, operate outside London. We have a
the acquisition of freehold assets, the       profitable operating business which runs
management of their leasehold interests       in tandem with an integrated real estate
and often the provision of property-related   investment business.
services, such as facilities management                                                       Assets under management
(cleaning, security, maintenance). We also     Given our geographic diversification,
acquire property on a direct basis from
the investment market.
                                               we are less impacted by the changes in
                                               occupier property demand seen in Central
                                               London. Rents in the UK regions tend to
Our investment strategy is not predicated      be more stable with only modest rental
on strong rental growth but on owning          growth. The stable nature of these markets
assets let to tenants who we believe will      works to our advantage in operating our        Office rental value growth (annual %)
remain in our buildings, which we refer        leaseholds as where we are negotiating         20                                   — Central London
to as ‘occupier inertia’. This applies to both with third party landlords our goal is to                                           — South East
our outsourcing contracts as well as our       hold rents down in order to minimise our       15                                   — Rest of UK

direct property acquisitions. Our objective costs. Our aim is to produce a profitable
is to secure high quality income and           income over cost spread between the
maintain it.                                   amounts our clients pay us for occupation      5
                                               of a property, versus what we pay out
Our occupier inertia strategy was further      to the landlords. For the period since we      0
proven during 2007. By fully understanding started operating the HMRC and Abbey
our tenants’ occupational strategy and         contracts to 31 December 2007 on a like        -5
delivering focused and pro-active asset        for like, mark to market portfolio basis,
                                                                                              -10                                        Forecast
management we are able to keep tenants         we have managed to maintain an average
in our buildings. For example, over the        increase in rental costs of only 2% while      -15
year, 32 leases in our DPI portfolio were      receiving a corresponding increase in            95    97    99    01    03    05    07   09   11
subject to a break clause or a lease expiry. income of 3.2% per annum.
25 of the 32 leases, representing 95%                                                         Source: IPD, CB Richard Ellis

of rent roll, were extended by tenants.

Mapeley Limited Annual Report 2007                                                                                                                    11
Chairman’s and Chief Executive Officer’s statement continued

                           Re-letting of Elphinstone       IPD’s analysis of our performance in respect   We have a large degree of visibility into
                           House, Glasgow, to new
                           government tenant               of 2006 rent reviews on our leasehold          our clients’ occupational requirements
                           _ A six storey modern office    estate once again demonstrates that we         given our day to day relationships and
                             with 15 car parking           have beaten the market by experiencing         the assistance and advice we contribute
                             spaces, a leasehold asset
                             in the Abbey portfolio        only 1.4% rental growth on our leasehold       to their estate management strategies.
                           _ Lease due for expiry          portfolio versus the IPD benchmark of          To this extent we have a two to three year
                             in 2015 with annual rent
                             of £615,000
                                                           2.1%. This continued out-performance           pipeline of potential opportunities for
                           _ Abbey exercised its right     creates organic growth for Mapeley and is      capital receipt generation. These capital
                             to vacate this asset early    generated by our specialist and dedicated      receipts are visible and predictable and
                             by serving the requisite
                             12 months notice, to take     in-house property team. Our tenacity and       provide a solid and recurring source of
                             effect from August 2007       focus on chasing down and minimising           organic growth. From the commencement
                           _ Mapeley promptly let
                                                           every penny of cost continues to drive         of our outsourcing contracts in 2001 to
                             the 3,133 sq m of office
                             space to the Government       returns across our business.                   31 December 2007, we have generated
                             of Scotland upholding                                                        £190.2 million (2006: £164.1 million) from
                             the strong tenant credit
                             of the asset
                                                           During 2007 we generated capital receipts      capital receipts. The benefit of the inherent
                           _ Financial effect of the       of £20.6 million which comprised of            flexibility in our outsourcing contracts
                             deal was enhanced income      £9.1 million of asset management receipts      enables us to create and manage flows of
                             over the term of the lease
                             totalling £1,298,212          and £11.5 million of disposal proceeds,        returns in this way.
                                                           in line with our budgeted expectations.
                           Abbey Outsourcing               Asset management receipts are generated        Since our last valuation at 30 September
                           _ Outsourcing contract          from our leasehold portfolio where we          2007 we have experienced a decline
                             closed in 2000                typically receive upfront cash premia          in values of 4.3% across our portfolios
                           _ Transaction included
                             freehold and long leasehold
                                                           from third party landlords in exchange         with the largest fall coming from the
                             properties as well as         for extending leases. Disposals are made       DPI Portfolio which fell by 7.7% and
                             rack-rented leasehold         when freehold properties become vacant,        experienced an adverse yield shift of
                           _ Portfolio spread across       either due to our clients occupational         56 basis points in line with IPD’s price index.
                             520 towns and cities          strategies or through an asset management
                             throughout the UK             initiative by Mapeley. Typically, under        In 2007 we acquired 23 assets totalling
                           _ Purchase and leaseback
                             agreement of 20 years         the contractual arrangements of the            £223.3 million at an average net initial yield
                           _ 595,000 sq m of               outsourcing transaction, when a notice         of 6.4%. This brings the total Direct Property
                             accommodation including
                             bank branches, offices
                                                           to vacate an asset is served we receive        Investment Portfolio to £996.5 million
                             and call centres              12 months notice. This allows sufficient       with an average net initial yield of 6.9%.
                                                           time to implement our strategy.                A significant purchase during the year was
                                                                                                          the £62 million acquisition of Elinia House
                                                                                                          in Cardiff, one of three key data centres
                                                                                                          occupied by BT. This lease contains fixed
                                                                                                          annual uplifts in rent and runs until 2020.

Mapeley Limited Annual Report 2007                                                                                                                     12
Results and dividend                             Current trading and outlook
                                     During 2007 we achieved growth in                In March 2008 we completed the refinancing
                                     funds from operations of 23.4% enabling          of our £257 million Revolving Delta
                                     an increase in our dividend of 11.9%.            acquisition facility. This has been replaced
                                     For the fourth quarter, we announced a           with a new £152 million seven-year term
                                     dividend of 47 pence per share.                  facility and a separate £60 million facility
                                                                                      maturing in April 2009. The balance
                                     Our loss before tax of £129.0 million was        of the repayment was made with cash
                                     directly affected by non-cash revaluation        from within the business. Following this
                                     losses of £148.6 million. However                refinancing the average total cost of
                                     revaluation losses taken to the income           borrowing across the Group is 5.7%.
                                     statement do not impact our cash flows.
                                                                                      We expect the strong credit worthiness of
                                     People                                           our tenants to support our cashflows and
                                     We would like to thank all the staff at          expect our vacancy rate to remain stable.
Livingston, Scotland,                Mapeley for their continued hard work            We also expect to continue to enhance
_ DPI Portfolio acquisition          and focus during 2007. It is a tremendous        the performance of our portfolio by asset
  for £23.5 million                  achievement that we were able to produce         management initiatives and through
_ Net internal area of
  9,504 sq m
                                     these results given the challenging macro        a continuation of high success rates for
_ Net initial yield of 6.9%          environment. We put this down to the             achieving lease roll-overs and re-gears.
_ Let to Scottish Water with         combined efforts and creativity of our people.
  lease expiry in 2015
_ Annual rent of                                                                      With regard to new acquisitions we are
  £1,620,000                                                                          continually reappraising new opportunities
                                                                                      and sources of capital to drive growth.
                                                                                      We will also continue to build our database
                                                                                      of assets and have a strong pipeline of
                                                                                      acquisition opportunities to exploit, when
                                                                                      we feel the opportunity is right.

                                                                                      We look forward to 2008.

                                                                                      Wes Edens

                                                                                      Jamie Hopkins
                                                                                      Chief Executive Officer

Mapeley Limited Annual Report 2007                                                                                              13
Finding value and adding quality

01 Aberdeen,                    04 Peterlee, acquisition         07 London,
refurbishment project           Occupier inertia is a key        chiller replacement
The third floor of this         strategy for Mapeley. EDS        Mapeley is responsible for
asset in the HMRC Portfolio     occupy a building within         replacing and maintaining
had become vacant and           the DPI Portfolio located        the plant and services
Mapeley had successfully        in Peterlee. The property        installations within Euston
let the vacant space            was purchased with a lease       Tower, a 35 storey tower
to a third-party tenant.        expiring in 2019, with a         in Central London. This
Mapeley was completing a        tenant break option in           leasehold asset is part
refurbishment of the space      2009. EDS has a good             of the HMRC Portfolio.
and the tenant requested        relationship with Mapeley        Although only two chiller
that Mapeley undertake          and occupy several buildings     units are required to provide
the fit-out of the office       on our estate. In 2007 EDS       a suitable level of cooling
for them for an additional      did not exercise their break     in the office areas it is
revenue of £30,000.             option effective in 2009         important to provide
This saved the tenant both      resulting in the lease           additional units to meet
time and money and              rolling-over and continuing      peak seasonal demands and
demonstrates the added          until 2019. The result of        system resilliance. Mapeley
value that Mapeley is able      this roll-over was both an       replaced one of the existing
to offer tenants and the        increase in term certain         chiller units and extensively
additional income which         income and value.                refurbished a second.
can be leveraged from
ordinary course activities.     05 Liverpool acquisition         08 Southampton,
                                The Triad, Bootle was            project services
02 Glasgow, advertising         purchased as an addition         Grenville House,
hoarding                        to Mapeley’s DPI Portfolio.      Southampton is a freehold
Portcullis House, Glasgow       The tenant is the Secretary      property within Mapeley’s
is a leasehold property         of State, a UK government        DPI Portfolio. Mapeley
within the HMRC Portfolio.      client. The lease is due         converted the ground floor
The building adjacent to        for expiry in 2027 giving        redundant pub to two new
Portcullis House had been       Mapeley an annual rent           retail units and refurbished
demolished exposing a           of £1,700,000 for the            and extended the upper
party wall gable that faces
the M8 motorway. Mapeley
secured a contract to display
an advertising banner whilst
                                next 20 years. The cost
                                of the property which
                                covers 19,536 sq m was
                                £24,460,000 with a net
                                                                 office floors. The building
                                                                 extension increased the
                                                                 net lettable area by 12.7%
                                                                 increasing the total building
                                                                                                  Initial yield
the gable is exposed in         initial yield of 6.9%.           size by 161 sq m. Two
this highly visible location.                                    pre-let opportunities were
                                06 Notting Hill, London,         in place prior to works
03 Galashiels acquisition       disposal                         commencing; one for Costa
The Maxwell, Galashiels is      This disposal involved a         Coffee in one of the ground
a 846 sq m office building      partial sale of a freehold       floor retail units and
occupied by Scottish            asset in Mapeley’s Abbey         one to BPP Holdings Plc
Enterprise, a Government        Portfolio located in Notting     (a professional education
tenant, until 2012. The         Hill in London. The asset        company) on the ground
property was added to our       consisted of both residential    and first floor.
DPI Portfolio at a purchase     and retail parts. Mapeley kept
price of £1,470,000.            the Abbey retail unit but        09 Jersey acquisition
Rental income is £100,000       disposed of the remaining        22 Colomberie, Jersey was
per year equating to a net      retail and residential parts     acquired in 2007. PwC are
initial yield of 6.8%.          to a developer, creating         tenants and this is their only
                                a net cash profit of             office in Jersey. The lease
                                £1.1 million. This disposal      runs until 2019 with a break
                                was in Mapeley’s pipeline        option in 2013. Rental
                                of potential disposal            income for the 1,560 sq m
                                opportunities for two years.     area is £350,000 per annum.
                                                                 The purchase price was
                                                                 £4,880,000 with a net initial
                                                                 yield of 7%.

Mapeley Limited Annual Report 2007                                                                                14



                                                                   sq m of office space



                                                         06   07



Mapeley Limited Annual Report 2007                                                   15
Business review

With 1,689 assets        Milestones 2007
                         _ Continued to outperform IPD on the
                                                                                      Mapeley’s portfolio is split between its
                                                                                      Outsourcing and Direct Property Investment
spread over 2.4 million _ leasehold   estate, driving organic growth
                           £8.6 million of disposal profits generated
                                                                                      Portfolios (‘DPI’). Mapeley acquires
                                                                                      freehold assets either as part of bundled
sq m of UK real estate _ from    the sale of vacant assets
                           266 rent reviews carried out on estate
                                                                                      outsourcing contracts or directly in the
                                                                                      investment market, and is focused on
our options for creating _ £41.9 million spent on estate enhancement                  acquiring good quality assets let to strong
                                                                                      credit tenants.
value are many and Overview
                         Mapeley Limited (Mapeley, the Company                        With leasehold assets, Mapeley’s clients
varied. Through          or the Group) is a Guernsey-based property                   commit to and pay for the benefit of
rigorous management investment        and outsourcing company which
                         owns, manages and operates a portfolio
                                                                                      occupation of these buildings and Mapeley
                                                                                      has the corresponding financial exposure
of our estate, asset     of properties located throughout the entire
                         UK, covering some 2.4 million square metres
                                                                                      to the underlying landlord through the
                                                                                      lease. Mapeley negotiates rent reviews
management strategies, and    with a presence in every major town
                         and city. Mapeley Estates Limited, a wholly
                                                                                      and lease renewals as principal with third
                                                                                      party landlords in order to manage costs.
re-lettings, extensions owned subsidiary of Mapeley, provides a                       Mapeley has created a spread of income

and renewals of leases, complete    range of management services
                         to Mapeley’s portfolio and its asset-owning
                                                                                      received from clients over costs paid to
                                                                                      landlords through the management of
Mapeley drives long- subsidiaries.                                                    these leasehold assets. The unique insight
                                                                                      into the markets the business operates in,
term returns.            Mapeley drives returns through managing
                         property risks and owns £2.1 billion of
                                                                                      gained by acting as both landlord and
                                                                                      tenant, enables the maximisation of returns.
                                     real estate. In addition to owning real estate
                                     Mapeley also has an operating business.          Mapeley provides a full range of facilities
                                     As part of its outsourcing contracts it          management services, ranging from catering
                                     manages leasehold assets occupied by its         and cleaning to childcare and security
                                     clients, provides facilities management          services, to the HMRC and IPS estates as
                                     services and project construction services.      part of the bundled outsourcing contracts.
                                                                                      One facilities management provider delivers
                                                                                      these services on behalf of Mapeley. By
                                                                                      consolidating the provision of the services
                                                                                      to one partner Mapeley benefits from
                                                                                      pricing benefits through scale. Servicing
                                                                                      the outsourcing clients’ estates gives
                                                                                      valuable insight into their occupational
                                                                                      strategies and enables the mitigation of
Total portfolio value
                                                                                      vacancy risk.

Funds From Operations

Q4   2007 14.3
Q3   2007 14.5
Q2   2007 13.8
Q1   2007 13.8

Mapeley Limited Annual Report 2007                                                                                              16
The Group’s aim is to become the leading
owner and operator of UK regional
commercial real estate let to Government
                                                            The geographic spread of the
and investment grade tenants. The credit
quality of tenants is of fundamental
                                                            portfolio as at 31 December 2007
importance. A list of top 10 tenants and                    as per IPD regions is as follows:
their contribution to total revenue is set
out below. Save for the UK Government
and Abbey, Mapeley does not have any
significant exposure to any one client or
sector. These clients are targeted as their
occupational requirements are often
complex and Mapeley estimates that they
will remain in occupation of their assets
for the long-term. 93% of the portfolio
income is from government or investment
grade tenants and the portfolio vacancy
rate of only 3.5% is low and stable.

In total, the estate covers 2.4 million square
metres and 1,689 assets. Through the
flexibility inherent in the outsourcing
contracts, a portfolio of this size creates
many opportunities for creating value
through asset management, disposals, re-
lettings and contract and lease extensions.

                                            Percentage of                                                   By value      By value      By value
Tenant                               total group revenue                                                    of office      of retail     of other
HMRC                                              50.1%                        Number of       By area         assets        assets        assets         Total
Abbey                                             20.8%     Location            properties        sq m            £m            £m            £m            £m
Other government and local authorities             5.9%     City of London             12      25,493     41,354,545             –            –      41,354,545
Identity and Passport service (Government)         5.6%     East Midlands              68     132,507    113,717,273    13,429,200            –     127,146,473
British Telecommunications plc                     2.0%     Eastern                   165     191,829    105,151,727    19,676,300      736,364     125,564,391
Microsoft Ltd                                      1.7%     Inner London              112     182,158     30,475,000    38,552,700      999,091      70,026,791
Diligenta Ltd*                                     1.0%     London-Mid Town             6      28,182              –             –            –               –
Zurich Assurance Ltd                               1.0%     London West-End            14      27,364     26,000,000     6,241,000            –      32,241,000
WS Atkins                                          0.9%     North East                 86     130,553    102,762,364     5,844,100            –     108,606,464
KPMG LLP                                           0.6%     North West and
                                                             Merseyside               169     235,401    143,488,182    28,863,600            –     172,351,782
* Subsidiary of Tata Consulting.                            Northern Ireland           53      42,359     16,956,364     3,634,700            –      20,591,064
                                                            Outer London              151     137,913     99,099,091    37,714,400            –     136,813,491
                                                            Scotland                  149     227,801    242,195,000    22,482,400      109,091     264,786,491
                                                            South East                255     379,770    434,813,182    41,265,000            –     476,078,182
                                                            South West                132     165,248    134,472,091    21,354,000      100,000     155,926,091
                                                            Wales                      88     117,133    108,778,818    13,058,200      781,818     122,618,836
                                                            West Midlands             110     185,212    129,795,273    21,957,100            –     151,752,373
                                                            Yorkshire and
                                                             Humberside               119     170,340     96,224,818    13,999,400             –    110,224,218
                                                            Total                   1,689    2,379,263 1,825,283,728 288,072,100       2,726,364 2,116,082,192

Mapeley Limited Annual Report 2007                                                                                                                                17
Business review continued

HMRC Portfolio                                                Portfolio review                                             Entering into a real estate outsourcing
                                                              The Group’s real estate portfolio is split into              contract with Mapeley provides occupiers
£563.4m                                                       two distinct segments, namely Outsourcing                    with real estate platform solutions which
                                                              Contracts and Direct Property Investments                    enable:
                                                              (‘DPI’), however the characteristics of the                  1 Transfer of all risks relating to real
                                                              assets in both portfolios are very similar.                    estate, leaving the occupier better placed
                                                                                                                             to focus on its core business
                                                              As at 31 December 2007, Mapeley owned                        2 Price certainty at pre-agreed costs
                                                              and managed 1,689 properties with a                          3 Release of capital where asset transfer
                                                              property portfolio value* of £2.1 billion.                     occurs
                                                              This valuation covers only the 595 freehold                  4 Occupational flexibility through pre-paid
                                                              and valuable long leasehold properties                         vacation rights
                                                              which Mapeley owns. Of these £1.8 billion,                   5 Improved customer service.
                                                              by value, and 237, by number, are office
                                                              assets and £0.3 billion (358) are retail and                 There is a degree of additional activity in
                                                              other. The remaining 1,094 are rack-rented                   the Outsourcing Contracts versus the DPI
Portfolio acquired in 2001 as part of a bundled 20-year
                                                              occupational leasehold interests where                       Portfolio, given the existence of leasehold
outsourcing contract containing freeholds, leaseholds         Mapeley acts as tenant on behalf of its                      assets, facilities management and project
and the provision of facilities management and project        clients through its outsourcing contracts                    construction services. In the case of HMRC
fit-out services.
_ 136 freehold or long leasehold properties                   (see ‘Outsourcing Contracts’ below for                       and Abbey, these are 20 year agreements
_ 371 leasehold properties                                    further detail on these portfolios). These                   with cost certainty and limited pre-paid
_ Portfolio occupancy: 98.1%
                                                              rack-rented leaseholds do not carry any                      rights to vacate, allowing the clients
                                                              value in Mapeley’s financial statements,                     flexibility in their occupational requirements
Abbey Portfolio                                               they are short leases where the rent reserved                over the term of the contracts.
£556.2m                                                       under the lease is close to the market
                                                              rent for the property and are typically                      Mapeley benefits from any difference
                                                              subject to regular, five-yearly, upward-                     between the income it receives from its
                                                              only rent reviews.                                           outsourcing clients and its outgoing costs
                                                                                                                           to third parties, such as rent and payment
                                                              The geographic spread of the portfolio by                    for facilities management and project
                                                              value and by area as at 31 December 2007                     construction services. Rental payment
                                                              as per IPD regions is given on page 17.                      obligations, which reflect the open market
                                                                                                                           rent it pays to its landlords, are by far the
                                                              a) Outsourcing Contracts                                     most significant of these costs. Mapeley’s
                                                              Real estate outsourcing involves the                         income rebases upwards each year
                                                              transfer of an organisation’s property                       whereas the outgoing rental costs which
                                                              and the risks associated with occupying,                     Mapeley pays out to third party landlords
                                                              managing and servicing that property.                        are reviewed typically on a five-yearly
                                                                                                                           basis. Mapeley generates returns to the
                                                                                                                           extent it minimises rental uplifts on rents
Portfolio acquired in 2000 as part of a 20-year outsourcing
contract comprising freehold and leasehold assets.                                                                         payable to a lower level than contracted
_ 367 freehold or long leasehold properties                                                                                rental income growth of either 3% or
_ 656 leasehold properties
_ Portfolio occupancy: 89.7%
                                                                                                                           RPI (in the case of Abbey and HMRC
                                                                                                                           respectively). In 2007, on a like for like
                                                                                                                           and mark to market basis, the annual
                                                                                                                           growth in outgoing rental liabilities paid
                                                                                                                           by Mapeley since acquiring these leases
                                                                                                                           was 2.0% compared with average income
                                                                                                                           increases of 3.2% per annum.

                                                              * property portfolio value is defined as the Group’s
                                                                property assets as valued by one of the Group’s valuers,
                                                                CBRE or Knight Frank, or one of the Directors

Mapeley Limited Annual Report 2007                                                                                                                                     18
IPS Portfolio                                                    IPD has analysed the Group’s performance
                                                                 on the leasehold portfolio for 2005 and
68 sites                                                         2006 rent reviews relative to its benchmark
                                                                 of performance. For 2005 and 2006 rent
                                                                 reviews Mapeley continued to outperform
                                                                 the IPD benchmarks of 2.9% and 2.1%
                                                                 respectively by incurring only 0.9%
                                                                 and 1.4% annual rental growth on the
                                                                 leasehold portfolio. As 2008 progresses the
                                                                 performance of further 2006 rent reviews
                                                                 will be reported whilst a meaningful
                                                                 number of 2007 rent reviews settle.

                                                                 The effective management of the leasehold
                                                                 portfolio and a consistent focus on limiting,
                                                                 and where possible, reducing costs such as       Catering service tender for
                                                                                                                  HMRC estate
                                                                 rent, service charge, other property-related     _ Mapeley is responsible for
Portfolio acquired in 2006. Contract includes the acquisition,   expenditure and facilities management              leading and implementing
fit-out and servicing of properties throughout the UK.           services costs (in the case of HMRC only)          tenders in relation to the
_ Portfolio includes only leasehold assets                                                                          procurement of services
                                                                 are key drivers of FFO growth for the              across HMRC’s estate
                                                                 Outsourcing Contracts.                           _ Procurement of national
                                                                                                                    catering contractor for
                                                                                                                    the HMRC Portfolio to
                                                                 Real estate outsourcing deals are difficult        incorporate standardisation
DPI Portfolio                                                    to predict due to the scale and complex            across the estate including
                                                                                                                    core products, branding
£996.5 m                                                         nature of outsourcing transactions, Mapeley
                                                                 is one of very few operators currently
                                                                                                                    signage, menus and tariffs
                                                                                                                  _ Procurement of a
                                                                 in the UK with the capacity, specialist            contractor who could
                                                                                                                    comply with the Public
                                                                 knowledge and ability to undertake such            Sector Food Procurement
                                                                 large deals. So far in the UK the majority         Initiative and demonstrate
                                                                                                                    their commitment to
                                                                 of outsourcing deals have been transacted          the environment, healthy
                                                                 with either public sector or major corporates.     eating, local suppliers and
                                                                 The likelihood of corporate outsourcing            waste reduction
                                                                                                                  _ No capital investment
                                                                 transactions could potentially increase            required by Mapeley
                                                                 in times of economic difficulty when               or HMRC
                                                                                                                  _ Subsidy payments
                                                                 corporates seek to become more efficient           envisaged to be completely
                                                                 and shed non-core risk, such as property.          eliminated within the first
                                                                                                                    year of the contract saving
                                                                                                                    the client approximately
                                                                                                                    £300,000 per year

Portfolio consists of assets acquired directly in the
investment market.
_ 92 freehold or long leasehold properties
_ Portfolio occupancy: 98.5%

Mapeley Limited Annual Report 2007                                                                                                                19
Business review continued

                                                             Within the Outsourcing Contracts segment,       HMRC pays the Group a unitary service
                                                             the Group holds three portfolios, as            charge on a quarterly basis which covers
                                                             described below:                                not only the charge for the accommodation,
                                                                                                             but also all services that are provided.
                                                             i. Her Majesty’s Revenue & Customs              The Group has retained responsibility for,
                                                                 (HMRC) Portfolio                            but sub-contracted, the performance of
                                                             Assets in the HMRC Portfolio are held in        the majority of its obligations to provide
                                                             the financial statements as Property, Plant     services (other than property management
                                                             and Equipment given the existence of            services) on terms that reflect and are
                                                             the outsourcing contract which comprises        consistent with the Group's underlying
                                                             these assets. The HMRC Portfolio was            obligations to HMRC. Mapeley has
                                                             acquired in 2001. The transaction involved      maintained the property risk in the
                                                             the acquisition of freehold and long            outsourcing contracts but passed on
                                                             leasehold properties and rack-rented            risks relating to the provision of facilities
                                                             leasehold properties under a purchase           management services, such as wage inflation.
                                                             and leaseback agreement for a 20-year
                                                             duration. This portfolio totalled 1.5 million   ii. The Abbey Portfolio
                                                             square metres, representing the majority        The Abbey Portfolio was acquired in 2000.
                                                             of HMRC's UK property, including offices,       The transaction involved the acquisition
                                                             customer contact centres and other              of freehold, long leasehold and rack-rented
                                                             facilities located in 279 towns and cities      leasehold properties under a purchase
                                                             across the UK. In addition, the Group           and leaseback arrangement for a 20-year
                                                             provides comprehensive property and             duration. At the time of acquisition,
                                                             facilities management services to HMRC.         the portfolio totalled 595,000 square metres
                                                             These services include maintenance,             of accommodation, representing substantially
                                                             life-cycle replacement, cleaning, help desk,    all of Abbey's UK occupational portfolio.
                                                             security, catering, childcare, health and       The properties included bank branches,
                                                             safety, utilities, equipment management,        offices (including Abbey's headquarters)
                                                             management of removals (churn), vending         and call centres located in 520 towns and
                                                             and landscaping.                                cities across the UK.
Sustainable drinking solution   HMRC Outsourcing contract
to provision of water to        _ Outsourcing contract won
HMRC estate                       in 2001                                                                    iii. The Identity and Passport Service
_ European tender and           _ Transaction included                                                            (IPS) Portfolio
  subsequent installation         freehold and long
  of mains fed water units        leasehold properties
                                                                                                             In March 2006, Mapeley won the Identity
  across the HMRC estate          as well as rack-rented                                                     and Passport Service Authentication by
_ Problems associated with        leasehold properties                                                       Interview outsourcing contract. The Identity
  bottled water eradicated        and the provision of
  e.g. storage, lifting large     facilities management                                                      and Passport Service is an Executive Agency
  bottles, environmental          and construction fit-out                                                   of the UK Government’s Home Office.
  waste                           services to the estate                                                     This contract includes the acquisition,
_ Financial savings made        _ Purchase and leaseback
  due to reducing numerous        agreement of 20 years                                                      fit-out and delivery of serviced office
  suppliers to one provider     _ 1.5 million sq m                                                           accommodation for 68 interview offices
_ Reduction in fuel               representing offices,
  and emissions due to            customer contact centres
                                                                                                             throughout the UK. The contract is for
  eliminating bottled             and other facilities                                                       an initial term of up to five years. Work
  water deliveries              _ Portfolio spread across                                                    commenced on this contract in early 2006.
                                  279 towns and cities
                                  throughout the UK                                                          As at 31 December 2007, 67 of the 68 assets
                                                                                                             were operational with the remaining office
                                                                                                             mobilised during 2008.

Mapeley Limited Annual Report 2007                                                                                                                      20
b) Direct Property Investments Portfolio
    (DPI Portfolio)
Mapeley also acquires single property
assets and portfolios into its Direct Property
Investments Portfolio (DPI Portfolio).
These assets are similar to the individual
freehold assets Mapeley has acquired
under its outsourcing contracts; they are
good quality, regional office buildings
located throughout the UK. The key
acquisition criteria for these assets is the
quality of the building, the type of tenant,
the strength of the tenant’s covenant,
the acquisition yield and Mapeley’s
assessment of whether the tenant is likely
to remain in occupation of the building.

Acquisitions during 2007 ranged in cost
from £1.0 million to £62.0 million. During
2007, the Group acquired 23 freehold
or long leasehold properties at a cost of
£223.3 million, and at an average net initial
yield of 6.4%.                                   Re-letting of London asset                  Given our day to day relationship with
                                                 One of the benefits of entering into an     HMRC we were aware of their intention
As at 31 December 2007 the total DPI             outsourcing contract with Mapeley is        to vacate. We targeted a tenant, a quasi-
Portfolio was valued at £996.5 million and       the occupational flexibility purchased      government organisation, who were
the current yield on the portfolio is 7.7%.      by clients in respect of their ongoing      interested in taking up the lease but who
                                                 accommodation requirements and              required occupation of the asset three
Approximately 40% of the acquisitions            estate strategy.                            months before HMRC were due to vacate.
made in 2007 were sourced from either                                                        As a result of our excellent relationship
Mapeley’s proprietary acquisition database       This example involved the letting of an     with HMRC we were able to relocate HMRC
or by direct approaches to existing owners.      asset in our HMRC Portfolio where we        out of New Kings Beam House three
                                                 supplemented HMRC income with income        months early to facilitate the new letting.
At the year-end, properties in the DPI           from a quasi-governmental client.           The letting matches our liability to the
Portfolio were 98.5% let and income                                                          third party landlord extinguishing the
producing on fully repairing and insuring        New Kings Beam House is a leasehold         potential risk created by HMRC’s vacation.
leases to central and local Government           asset in the HMRC Portfolio located
and major corporate tenants. The average         in central London on the South Bank.
unexpired lease length across the DPI            HMRC exercised their right to vacate part
Portfolio was 8.2 years.                         of this asset serving the contractually
                                                 required 12 months notice effective for
                                                 departure on 31 March 2008. Under the
                                                 terms of the lease Mapeley is responsible
                                                 to the third party landlord for rental
                                                 payments until expiry at the end of 2011.

Mapeley Limited Annual Report 2007                                                                                                         21
Business review continued

Rent Reviews                         c) Portfolio valuations                          i) HMRC Portfolio: The value increased
                                     Mapeley’s portfolio is valued on a quarterly         by 0.6% to £563.4 million (2006:

339                                  basis by independent valuers and 100%
                                     of each portfolio is valued at each valuation
                                     by either CB Richard Ellis Limited (‘CBRE’),
                                                                                          £560.1 million).
                                                                                      During 2007 Mapeley retendered for
                                                                                      valuers for this portfolio. As a result Savills,
                                     Knight Frank LLP (‘Knight Frank’) or the         who had historically valued the portfolio
                                     Company’s Directors (see notes 10 and 11         were replaced by CBRE. As at 31 December
                                     to the financial statements for classification   2007, the HMRC Portfolio had a value
Lettings                             of these assets). As at 31 December 2007,        of £563.4 million (31 December 2006:
                                     the Group's total Property Portfolio had         £560.1 million). The current yield on this
41                                   a value of £2,123.5 million (2006:
                                     £2,046.2 million) generating total revenue
                                                                                      portfolio at 31 December 2007 was 8.2%
                                                                                      (2006: 8.4%).
                                     of £417.4 million during the year (2006:
                                     £385.0 million). Of this, £324.6 million of      As at 31 December 2007 the HMRC Portfolio
                                     rental income was generated from the             comprised 136 freehold or long leasehold
FM services provided                 Group's portfolio of 1,689 properties            properties, (31 December 2006: 138)
                                     (2006: £296.4 million from 1,683 properties).    and 371 rack-rented leasehold properties

£47.6m                               Over 93% of the Group’s income was
                                     generated from Government and investment
                                     grade tenants.
                                                                                      (31 December 2006: 380). Portfolio occupancy
                                                                                      (based on area) was 98.1% at 31 December
                                                                                      2007 (31 December 2006: 98.9%).

                                     On a like for like basis the value of the        ii) Abbey Portfolio: The value fell by 3.4%
                                     total portfolio fell from £2,031.3 million           to £556.2 million (2006: £575.7 million).
                                     to £1,920.6 million between 31 December          As at 31 December 2007, the Abbey Portfolio
                                     2006 and 31 December 2007. As between            (see note 11) had a value of £556.2 million
                                     30 September 2007 and 31 December 2007,          (31 December 2006: £575.7 million). The
                                     on a like for like basis the value of the        Abbey Portfolio fell in value by £20.1million,
                                     total portfolio fell by £94.7 million from       3.5% compared to 30 September 2007. The
                                     £2,210.8 million to £2,116.1 million,            reason for the fall in value was an adverse
                                     representing an adverse yield shift of           yield shift of 21 basis points applied to
                                     42 basis points applied to the portfolio         the portfolio by the Group’s valuers, in
                                     by the Group’s valuers.                          line with market expectations. The current
                                                                                      yield on this portfolio at 31 December 2007
                                                                                      was 6.6% (2006: 6.3%).

                                                                                      As at 31 December 2007 the Abbey Portfolio
                                                                                      comprised 367 freehold or long leasehold
                                                                                      properties (31 December 2006: 367) and
Portfolio occupancy rate (%)
                                                                                      656 rack-rented leasehold properties
2007 96.5
                                                                                      (31 December 2006: 698). Portfolio occupancy
2006 96.9
                                                                                      (based on area) was 89.7% at 31 December
2005 96.8
                                                                                      2007 (31 December 2006: 90.3%).

Mapeley Limited Annual Report 2007                                                                                                  22
iii) Direct Property Investments Portfolio:     Property management
                                          The value increased by 10.3% to            The Group regularly reviews national and
                                          £996.5 million (2006: 903.7 million).      regional estate strategies in order to take
                                     The increase of £92.8 million arose largely     advantage of opportunities to match its
                                     from the acquisition of 23 properties into      property interests to the accommodation
                                     the DPI Portfolio during the year in line       requirements of its tenants.
                                     with the Group’s investment strategy.
                                                                                     During 2007:
                                     On a like for like portfolio basis, the 69      _ Mapeley settled 207 rent reviews on
                                     properties which Mapeley owned at                 rack-rented properties in the portfolio as
                                     31 December 2006 and 31 December 2007,            tenant (2006: 187) with an annual rent
                                     fell in value by £102 million, a fall of          roll of £54.5 million (2006: £30.4 million).
                                     11.4%, reflecting an adverse yield shift          The average increase was 1.6% per annum
                                     of 82 basis points applied to the portfolio     _ Mapeley completed lease renewals for
                                     by CBRE, the Group’s valuers. As between          51 properties as tenant (2006: 39) with
Queens House, St Albans,             30 September 2007 and 31 December 2007            an annual rent roll of £3.2 million
Hertfordshire re-gear of
existing lease                       on a like for like portfolio basis the value      (2006: £3.5 million). The average annual
_ Freehold asset in the              of this portfolio fell by £82.6 million, from     increase in rent payable in 2007 was 1%
  DPI Portfolio occupied             £1,079.1 million to £996.5 or 7.7% reflecting   _ Mapeley settled 82 rent reviews as tenant
  by the Government
_ Original lease due for             an adverse yield shift of 56 basis points.        with nil increases (2006: 82)
  expiry September 2009                                                              _ Mapeley settled 59 rent reviews as
_ Worked with the tenant
  to secure the simultaneous
                                     The current yield on this portfolio as at         landlord (2006: 45) with an annual rent
  surrender of the original          31 December 2007 was 7.7% (2006: 6.9%).           roll of £20.5 million (2006: £1.6 million).
  lease and grant of a                                                                 The average increase was 0.9% per annum
  new 15-year lease with
  five year rent reviews             d) 2008 portfolio events                        _ Mapeley completed lease renewals for
  (no breaks) at existing            During 2008, Mapeley anticipates the              22 properties as landlord (2006: 10)
  rent levels                        following portfolio events:                       with an annual rent roll of £2.6 million
_ Capital contribution of
  £275,000 made towards              _ 6 lease breaks exerciseable on the DPI          (2006: £0.2 million). The average annual
  tenant capital works                 Portfolio on a rent roll of £0.8 million        increase in rent payable in 2007 was 1.7%
  which enhance the value            _ 11 lease renewals on the DPI Portfolio        _ Mapeley let 41 vacant properties during
  of the asset
_ £750,000 valuation                   on a rent roll of £1.8 million                  the year (2006: 44), generating £4.3million
  increase as a result of the        _ 118 rent reviews as tenant in properties        (2006: £1.6 million) of additional income
  new, longer lease
                                       in the Group’s Outsourcing Portfolio on         and maintained a low vacancy rate
                                       a rent roll of £22.6 million                    of 3.5% across the whole portfolio
                                     _ 21 rent reviews as landlord in properties     _ Mapeley spent £41.9 million on repair,
                                       in the Group’s total Property Portfolio         refurbishment and construction projects
                                       on a rent roll of £0.5 million                  (2006: £36.8 million), to enhance the
                                     _ 68 lease renewals as tenant in properties       quality of its estate in an efficient and
                                       in the Group’s Outsourcing Portfolio on         cost effective manner.
                                       a rent roll of £4.0 million
                                     _ 35 lease renewals as landlord in properties
                                       in the Group’s total Property Portfolio
                                       on a rent roll of £1.2 million.

Mapeley Limited Annual Report 2007                                                                                               23
Business review continued

Capital investment on estate         The agreements with Abbey and HMRC               The service provision is coordinated through
                                     both provide for annual indexation,              Mapeley’s 24-hour help desk. In 2007,

£41.9m                               with a 3% per annum increase in amounts
                                     payable by Abbey and an RPI-linked
                                     increase on payments by HMRC. As a result,
                                                                                      the help desk received 108,093 calls
                                                                                      (2006: 107,609). Mapeley’s ability to offer
                                                                                      such services provides it with two important
                                     70% (2006: 76%) of the income Mapeley            advantages: the ability to pursue other
                                     receives is subject to annual uplifts, with      similar transactions where such a service
                                     virtually all of the balance of the income       requirement might exist and real time
Help desk calls                      being subject to five-yearly upward-only         access to and insight into its tenants'
                                     rent reviews. To 31 December 2007, on a          changing occupational needs. This means
108,093                              like for like and mark to market basis,
                                     the annual growth in rental liabilities paid
                                                                                      that the Group is well positioned to provide
                                                                                      its tenants with appropriate solutions
                                     by Mapeley since acquiring these leases          and to manage the estate better through
                                     has been 2.0% per annum as compared              being able to anticipate and predict their
                                     with an increase in income of 3.2%.              occupational requirements.
                                     Services                                         In the year ended 31 December 2007,

132                                  a. Property services
                                     Mapeley provides a wide range of facilities
                                     management (‘FM’) services through its
                                                                                      Mapeley provided services with a value
                                                                                      of £47.6 million (2006: £45.2 million).

                                     wholly-owned subsidiary Mapeley Estates          b. Construction and fit-out projects
                                     Limited, to approximately 100,000 of                 services
                                     its tenants' employees in 759 buildings.         Mapeley has an extensive in-house projects
                                     Examples of these services include               team who are responsible for carrying
                                     maintenance and life cycle replacement,          out requested capital works projects
                                     security and cleaning, catering and childcare.   to the HMRC and IPS estates such as
                                     Mapeley provides FM services to HMRC             refurbishments, fit-out, space planning
                                     and IPS under its outsourcing contracts.         and life cycle works. When providing these
                                                                                      services Mapeley earns a margin in addition
                                     During 2007 Mapeley’s procurement team           to the unitary charge receivable from
                                     won two awards in respect of services            HMRC and IPS for its professional services.
                                     procured in respect of the procurement
                                     of water point of use and childcare              In addition, Mapeley manages the delivery
                                     services on behalf of HMRC for its estate.       of refurbishment projects for Mapeley
                                                                                      funded projects and for third-party clients.
                                                                                      Its proven project management capabilities
                                                                                      enables Mapeley to influence and add value
                                                                                      to the way its clients use and refurbish
                                                                                      their space.

                                                                                      In the year ended 31 December 2007,
                                                                                      Mapeley carried out repair, refurbishment
                                                                                      and construction projects with a value
                                                                                      of approximately £41.9 million (2006:
                                                                                      £36.8 million).

Mapeley Limited Annual Report 2007                                                                                              24
Our people
Mapeley continues to recruit and retain
the highest calibre of employees. Mapeley
is dedicated to building, rewarding and
retaining a diverse, highly skilled and
motivated workforce. As at 31 December
2007, Mapeley had 132 employees
(2006: 131).

Mapeley is committed to providing
effective and appropriate learning and
development opportunities for all employees.
This year, Mapeley successfully rolled out
a management development programme
which is predominantly aimed at senior
managers in the organisation. This is a
bespoke programme which focuses on
developing leadership and management
skills such as coaching, managing
performance and personal effectiveness.

In recognising that a good induction for
new staff is of fundamental importance          Regear of London asset                      Situated close to Westminster and
to the success of the organisation,             A key characteristic of our acquisition     representing economical central London
Mapeley has developed a new induction           strategy is ‘occupier inertia’ – our        office accommodation we believed the
programme which provides employees              estimation of the probability that our      potential ‘occupier inertia’ to be high. The
with role specific training at an early stage   target tenants will remain in occupation    downside risk was underpinned by excellent
in their career at Mapeley. In addition, the    of a particular asset. An excellent         redevelopment potential for residential use.
company supports a number of staff to           example of this is a re-gear of a lease     This investment opportunity satisfied our
gain professional qualifications through        within our DPI Portfolio.                   other underwriting and financial criteria.
further education.
                                                A year before the lease was due to expire   Through our regular contact and the
Mapeley continues to review and develop         and following extensive negotiations        excellent relationship we had built with
a reward and recognition management             we were able to agree and complete          the tenant we agreed a new 25 year lease
strategy. Remuneration and reward packages      a new 25 year lease with the tenant.        with a tenant break in 2013 and mutual
are externally benchmarked against                                                          breaks every five years thereafter. The
companies of a similar size and industry.       We acquired this asset in 2004. The         new lease was secured at no cost to
                                                property provides good quality office       Mapeley and at the same initial rent of
                                                accommodation, located in London and        £1.8 million per year rising to £2 million
                                                is occupied under a lease due to expire     per year from September 2008. This
                                                in September 2008.                          reflected a net initial yield of 7.3% rising
                                                                                            to 8% and an increase in valuation of
                                                Prior to acquisition, we undertook          £4.5 million from the last valuation date.
                                                comprehensive underwriting including
                                                a detailed assessment of the risk around
                                                the shorter income stream and the
                                                likelihood that the tenant would wish
                                                to remain in the building.

Mapeley Limited Annual Report 2007                                                                                                         25
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