P&O Property Sale In Germany - P&O Sets 2005 Property Sales Target

Market Wire, January, 2005

                                                          24 January 2005

                P&O PROPERTY SALE IN GERMANY

             P&O SETS 2005 PROPERTY SALES TARGET

The HTC Hanseatic Trade Center GmbH & Co. Grundbesitz partnership ("HTC") has sold the remaining four buildings of its office development in Hamburg to a consortium (the " Consortium") comprising affiliates of Lehman Brothers Real Estate Partners, L.P., Tishman Speyer Properties and Quantum Immobilien AG. Contracts for the sale have been exchanged with completion expected to take place during the first half of 2005. The total net cash proceeds of sale, of approximately EUR200 million (GBP140 million) after costs, will be used to repay debt in the partnership. Lehman Brothers Capital Gmbh acted as exclusive financial adviser to the Consortium in respect of the transaction and Savills acted as adviser to HTC.

P&O holds a 47.5% equity interest in HTC. When the transaction has completed, P&O will have exited all its property interests in Hamburg, which represent most of the company's portfolio in Continental Europe.

As a result of the transaction, an exceptional impairment charge of approximately EUR85 million (GBP60 million) will be included in P&O's Group accounts for the year ended 31 December 2004. When completed, the transaction will result in a total reduction in net operating assets of the property division of approximately EUR145 million (GBP101 million). Under the terms of the sale agreement, P&O will provide contingent funding, primarily in respect of the achievement of leasing targets over the next three years, in exchange for the right to participate in a share of the proceeds above certain agreed levels in the event of a subsequent sale of the buildings.

Separately, P&O announces today that it has set an overall target for 2005 net property sales of GBP250 million. The HTC sale will contribute approximately EUR95 million (GBP66 million), being the Group's share of the sale proceeds, towards this. It is anticipated that the balance of the 2005 target will largely come from sales of UK developments.

Commenting on the transaction, Robert Woods, Chief Executive of P&O, said, "HTC is a sound development but has been our most challenging property project because of the poor market conditions in Germany. Although there is an upfront cost, we are pleased to have found a way of exiting the project while retaining some upside potential."

"We will continue to withdraw capital from our property business. Having achieved in excess of GBP350 million of net sales in 2004, I am confident that we will achieve this year's target of GBP250 million."

Further Information:   Peter Smith, Director, Communications and
                       Strategy
                       Tel:   44 (0)20 7930 4343

                       Andrew Lincoln, Manager, Investor
                       Relations and Strategy
                       Tel:   44 (0)20 7321 4490

Notes to editors:

1. The HTC Hanseatic Trade Center development consists of five office buildings located in the Hamburg port area, a short distance to the central business district. One building was sold on 30 June 2004. The remaining four buildings provide total accommodation of some 70,000 square metres. Timing of completion is dependent on finalising land registration formalities and other customary conditions.

2. HTC is funded mainly through a combination of bank debt, part of which is guaranteed by P&O, and by shareholder loans, the majority of which are provided by P&O. As a result of the sale, P&O will write off shareholder loans it has provided to HTC resulting in an exceptional impairment charge of approximately EUR85 million (GBP60 million) which will be included in P&O's group accounts for the year ended 31 December 2004.

3. For the six months to 30 June 2004, P&O's property division reported operating profit of GBP37.7 million (GBP1.7 million in Continental Europe) and at 30 June 2004 reported net operating assets of GBP755.4 million (GBP139.1 million in Continental Europe). The transaction results in a reduction in the net operating assets of the property division of approximately EUR50 million (GBP35 million) as at 31 December 2004. Completion of the sale will result in a further reduction in net operating assets of approximately EUR95 million (GBP66 million) in 2005.

4. P&O holds options to acquire some of the shares held by other shareholders in HTC. Consequently, under the requirements of International Financial Reporting Standards (IFRS), HTC will be consolidated as a subsidiary in P&O's Group accounts, as at 31 December 2004, when those accounts are re-stated to adopt IFRS. Compared to the accounts prepared under UK GAAP requirements this will increase P&O's consolidated debt by approximately EUR200 million (GBP140 million) and increase the net operating assets in the property division by approximately EUR105 million (GBP73 million). The sale of the development in 2005 will then reduce the Group's debt, on an IFRS basis, by EUR200 million (GBP140 million), with net operating assets reducing by the same amount.