Crosby Disposal

The Board of Berkeley announces that it has entered into an agreement with Lend Lease Corporation Limited ("Lend Lease") for the sale of Crosby for £235.7 million. In addition Berkeley will be repaid £15 million, in respect of working capital provided to Crosby since 30 April 2005.

Berkeley Group Managing Director Tony Pidgley said:

"I am delighted to announce this transaction which allows Berkeley to focus on its core market in London and the South East, and gives Berkeley greater financial flexibility for the future.  It is down to Geoff Hutchinson and his Management Team to take Crosby forward with Lend Lease and I wish him and Crosby every success in the future. This transaction moves forward the strategy Berkeley announced at the time of last year's Scheme of Arrangement. The business becomes more focused and gives the Berkeley Group greater flexibility in the balance between the generation of cashflow to secure the Return to Shareholders and maximizing the value of the resultant ongoing business."

Background to the Transaction

Following the strategic review reported on 26 June 2003 the board of Berkeley decided to concentrate on increasingly complex mixed-use urban regeneration projects in London and Southern England. The management of Crosby proposed maximising the value of the assets within Crosby and incentivising them by acquiring a shareholding in Crosby. At this time Crosby was a wholly owned subsidiary of Berkeley.

On 27 August 2003, Berkeley entered into an agreement whereby the Crosby Managers, led by Geoff Hutchinson, subscribed for newly issued shares in Crosby ("Crosby B Shares") for a consideration of £500,000, funded by a loan from Berkeley (together "the Crosby transaction").

Following this subscription the share capital of Crosby comprised Crosby A Shares, held by Berkeley, and Crosby B Shares, held by the Crosby Managers. Berkeley retained control of Crosby through its holding of Crosby A Shares and continued to consolidate Crosby as a subsidiary. Under the terms of the Crosby Transaction, Crosby had to make agreed milestone payments to Berkeley every six months and generate in aggregate £450 million of operating cashflow within seven years of the date of the subscription.

It was agreed that if these two criteria are met, the Crosby B shares are broadly entitled to 50.01% of the economic and voting rights of Crosby.  In addition, Berkeley would retain voting control of Crosby until the gross assets and net assets of Crosby fall below £75 million and £50 million, respectively, at which point voting control of Crosby passes to the Crosby Managers and Crosby ceases to be consolidated by Berkeley.

The sale of Crosby B Shares to Lend Lease is outside the control of Berkeley and has been the subject of separate negotiation between the Crosby Managers and Lend Lease. Upon receipt of the consideration for the sale of their Crosby B Shares to Lend Lease for £10 million, the Crosby Managers will repay to Berkeley the £500,000 loan mentioned above. As part of the Disposal, Berkeley and the Crosby Managers will enter into a Termination Deed, pursuant to which the arrangements put in place at the time of the Crosby Transaction will be terminated.

On 25 June 2004, the Berkeley Group announced the next stage of its strategy to increase the focus of the business while delivering enhanced shareholder value. On 24 August 2004, it announced proposals to seek to return up to £12 per existing ordinary share to shareholders (the "Return") by January 2011. The Return is to be effected by means of the redemption of four tranches of B Shares.  The 2004 tranche of £5 per unit was redeemed on 3 December 2004. A full description of the mechanics and payment of the Return including a description of the rights attaching to the B Shares and the timing of further redemptions was set out in a circular sent to Shareholders dated 24 August 2004.

Terms of the Transaction

The disposal is unconditional and is due to complete on the 8th July 2005.  The consideration comprises in aggregate £235.7 million in respect of the Crosby A shares held by Berkeley including the repayment of the inter-company indebtedness owed to Berkeley by Crosby at 30th April 2005.  In addition, Berkeley will be repaid £15 million in respect of working capital provided to Crosby since 30th April 2005.