Another record income return of £328.8 million to the public finances

Today we have announced another strong set of results with a record return to HM Treasury of £328.8m, up 8.1% on 2015/16. 


27 June 2017

We have announced another record income return of £328.8m to HM Treasury, up 8.1% on 2015/16, while overall performance was significantly ahead of the market, with a total return of 8.1% against a bespoke benchmark of 5.8% and an MSCI universe benchmark of 4.4%. 

This year has also seen our busiest year ever of sales, purchases and capital expenditure totalling nearly £1.2bn, which included acquisition focused on improving our strategic position in London's West End. 

To read the full Integrated Annual Report for 2016/17 please follow the link below:

Integrated Annual Report 2016/17 (PDF, 8.14 MB)

 Results summary

  • Market beating total return: 8.1% against a bespoke benchmark of 5.8% and an MSCI universe benchmark of 4.4%; on a three-year rolling basis total return is 15.3% against a bespoke benchmark of 12.5% and an MSCI universe benchmark of 11%.
  • Record income return to HM Treasury for the public finances: £328.8m and now totalling £2.6bn over ten years..
  • Value: capital value up 2% at £13.1bn, with property value up 5.5% to £12.4bn.
  • Capital activity: totalled nearly £1.2bn. This includes over £500m of disposals, over £350m of acquisitions, and over £300m of capital expenditure, including expenditure on development.
  • Over 640,000 sq ft of space leased across the business, with agreed rent totalling £43m per annum at over 7% above the Estimated Rental Value (ERV)

 

We have delivered another year of market outperformance, enabling us to contribute a record £328.8 million to HM Treasury

Key performance drivers 

  • Central London rental growth driven by leasing new space in completed developments, such as St James’s Market, One New Burlington Place and 7 Air Street; headlease acquisitions; and underlying rental growth. Over 400,000 sq ft of retail and office space was let this year across the Central London portfolio for a total rent of £34.4m per annum and at 8.6% above the ERV. 
  • Growth of the offshore wind sector: The strongest valuation performance came from offshore wind with the value of the Energy, Minerals and Infrastructure portfolio increasing 18% to over £1.1bn. The sector is now meeting over 5% of the UK’s electricity demand and on-course to meet 10% by 2020.
  • Sales of £507m at 8.7% above book value from across the business.
  • Aquisitions totalled £353m, focused on strategic purchased to strengthen the Central London portfolio, including £160m headlease interests at 10 Piccadilly and 12 Charles II Street and a further £67m at 117 Jermyn Street.
  • A progressive approach to creating brilliant places for the long-term: Since 2009, the workplace coordinator scheme Recruit London has placed over 1,500 local people into full-time jobs and has now been extended to four retail destinations across the country, including Fosse, Leicester; Princesshay, Exeter; Crowngate, Worcester; and Rushden Lakes in Northamptonshire. 

Robin Budenberg, Chairman of The Crown Estate: “This year has seen another remarkable set of results from The Crown Estate for the benefit of the nation’s finances. Since taking up the role of Chairman last year, I have witnessed first-hand how Alison and the team combine active management of high quality assets with a commitment to doing business in the right way. In these more challenging times I am confident the business is well-placed to continue to deliver consistent and sustainable performance.”

Alison Nimmo, Chief Executive of The Crown Estate said: “We have delivered another strong set of results. This outperformance reflects many years of disciplined market positioning in our chosen sectors and has made our business resilient at a time of political and economic uncertainty. For over a decade we’ve carefully timed our development pipeline, focussed on creating brilliant places in the best locations and maintained our active support of the UK’s world-leading offshore wind sector.  

“Looking ahead, we expect returns to remain subdued, but we are confident in the underlying strength of our markets and our commitment to quality in what we deliver. Following a record year of capital activity, this year will see the launch of two major retail schemes at Rushden and in Oxford, and the continued preparation of the next phase of our development pipeline in central London that will form the backbone of our long-term performance.”

Investing in high-quality locations and place-making at its best

The business has continued to focus on the active management and development of high quality assets in the best locations. Its strategy combines scale and expertise in carefully chosen markets with a customer-focussed approach to deliver consistent and sustainable outperformance over the long term. These sectors include: Central London, Regional Retail and Offshore Wind. It also has a substantial Rural portfolio. Highlights from these sectors included:

Central London

Our Central London Portfolio includes the whole of Regent Street and much of St James’s, and we are delivering a £1.5 billion investment and redevelopment plan.

  • The business continued to benefit from its ongoing regeneration of Regent Street and St James’s across its £7bn Central London portfolio delivering high-quality office and retail space alongside award-winning place-making.
  • Strong demand for retail space in the West End continued, with Regent Street alone concluding 35 new lettings, including new flagship stores from Polo Ralph Lauren; lululemon; and Innovation by SpaceNK. 
  • This year, The Crown Estate completed its most significant development pipeline in London’s West End, with the completion of the £450m St James’s Market in partnership with Oxford Properties. This is now three-quarters let to a mix of best-in-class fashion, lifestyle and restaurant brands: Smeg, ASSOS, Paul and Shark, Jigsaw, Aquavit, Anzu, Veneta, Urban Tea Rooms, Ole and Steen, Ikoyi and Duck and Waffle Local. It has also attracted a range of prestigious office occupiers, including new headquarters for The Carlyle Group and Formula One.
  • Between 2013 and 2016, the business has delivered around 900,000 sq ft of new space into the core West End. It is now actively preparing for the next phase of development across its Central London portfolio, including two mixed-use schemes: the £100m Duke’s Court redevelopment in St James’s which is already under construction, and Morley House, which has planning permission.   

Regional retail

Over the last few years, we've been reshaping our Regional Retail portfolio around the best schemes in great locations.

  • This £2.4bn portfolio of 19 retail and leisure destinations has benefited from continued demand for high quality space in dominant schemes, attracting 100m visitors per year.
  • Void rates remained low at just under 1.9%, with 39 new lettings totalling over 240,000 sq ft at nearly 3% ahead of ERV. 
  • The business continues to extend its track-record of successful place-making in central London to the Regional Retail portfolio, such as the Silverlink Point extension to an existing scheme in North Tyneside. This has delivered 56,000 sq ft of space, with Next Home and Garden as anchor, and a developer’s profit of 75%. 
  • This year, it will deliver over 1m sq ft of development with the launch of two schemes that reflect consumer trends for more experiential shopping at Rushden Lakes in Northamptonshire and Westgate in Oxford City centre.  
  • Rushden Lakes in Northamptonshire will deliver a ground-breaking £140m retail and leisure destination in beautiful natural surroundings. The 240,000 sq ft scheme is over 90% pre-let and will transform the out of town shopping experience through a mix of high quality retailers who have not traded at a retail park before, such as Hobbs, Jigsaw and Phase 8, as well as offering recreational activities on and around the surrounding lake and countryside.
  • Westgate in Oxford is a joint venture with Landsec for an 840,000 sq ft redevelopment that will provide a major enhancement to the retail offer in this historic city. With over 100 new stores and 25 restaurants and cafes, the scheme is 80% pre-let or in solicitor’s hands, including to major brands John Lewis, Michael Kors and Curzon Cinemas.

Offshore wind

The offshore wind sector is now meeting over 5% of the UK's electricity demand and on-course to meet 10% by 2020.

  • The UK is one of the most attractive places globally to invest in offshore wind and it continues to be a key driver of commercial success for the business. Operational offshore wind assets generated £27.7m for the business.
  • There are 30 wind farms with a total of 5.1GW of operational offshore wind and a development pipeline into the 2020s. Asset management activity included signing over 2.6GW of leases in 2016/17 for four projects. This included agreeing the lease for the 1.2GW Hornsea One offshore wind farm with DONG Energy, which once complete will provide enough electricity for one million homes.
  • The sector continues to see a significant reduction in the cost of energy, with a fall of 32% over the last three years. The results of the current Contracts for Difference (CfD) auction are also expected to further demonstrate the competitiveness of the UK’s offshore wind resource.

Rural and strategic land

This year we have continued to reshape our portfolio, focussing on high-quality, larger and more modern tenancies.

  • The rural business has continued to focus on the sale of non-core assets to reshape it towards a high quality portfolio with larger lot sizes and modern tenancies. These offer the best opportunity to deliver a sustainable performance over the long term.
  • It has also continued to acquire and progress strategic land sites, with purchases totalling £14m and planning applications submitted for over 1,400 homes this year.  
  • The sale of strategic land sites and non-core rural land in Dorset and Marlborough continued to provide an important source of capital, raising £209m at 13.2% above book value.