Another record income return of £304.1 million to the public finances

We have today announced another record income return to Treasury for the public finances.

28 June 2016

St James's Market
Banbury Gateway

We have announced another record income return, up 6.7% on 2015, while overall performance was significantly ahead of the market, with a total return of 17.2% against an IPD universe benchmark of 11.3% and a bespoke benchmark of 13.1%.

Results summary

  • Market beating total return: 17.2% against an IPD universe benchmark of 11.3% and a bespoke benchmark of 13.1%; a 3 year total return of 19.3% against a 16.2% bespoke benchmark.
  • Income return to Treasury for the public finances: £304.1m, totalling £2.4bn over ten years.
  • Value: capital value up 12.2% at £12.9bn, with property value up 9.7% to £12bn.
  • Capital activity: totalled £960m and was weighted towards sales and development, rather than purchases.
St James's Market

We have delivered another year of market outperformance, enabling us to contribute a record £304.1 million to HM Treasury.

Key performance drivers

  • Development pipeline: the largest in the business’s history, with £182.1m capital expenditure over the last year and 900,000 sq ft of new space delivered over the last three years in to the West End.
  • Growth of the offshore wind sector: Offshore wind capital value grew by 26% to over £744m from £589.8m, with the sector now meeting around 5% of the UK’s electricity demand.
  • Sales into a strong market of £633.2m of total receipts across all portfolios, in particular from sales of non-core residential assets in central London, two retail parks and rural and strategic land. With markets fully priced, acquisitions were small and strategic, totalling around £72.9m.
  • A progressive approach delivering value beyond financial return: Since 2009, the workplace co-ordinator scheme Recruit London has placed over 1,300 local people into full-time jobs and is now being piloted at retail assets in Exeter and Leicester; long-term approach to investment in place-making, including establishment of a new retail, leisure and business destination through the £400m St James’s Market development.

In our fourth integrated annual report, we have continued to build on the progress made so far.

Sir Stuart Hampson, Chairman of The Crown Estate said: “It is a great pleasure to conclude my final year as Chairman by announcing another record return to the public finances, and to know that I will hand to my successor a business that with its long-term outlook and a strong sense of values, will continue to remain an outstanding UK success story.”

Alison Nimmo, Chief Executive of The Crown Estate said: “This year we’ve continued on the path of success. We have outperformed the market and benefitted from our team’s expertise and disciplined commitment to our core sectors. With markets continuing to be fully priced, we have secured our long-term sustainable growth through the active management of world-class office and retail destinations, the strength and timing of the largest development pipeline in our history, together with the UK’s world leading position in offshore wind.

“Looking ahead we remain cautious about the outlook for the market and are confident that with our focus on progressive management of high quality assets in the best locations, we have prepared the business for the challenges ahead.” 

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

Active asset management and place-making through development have underpinned our resilience and strategy, which has directly let 1m sq ft of commercial space at 12% above estimated rental value (ERV). The business has continued to focus on carefully chosen core sectors where it enjoys critical mass and high levels of expertise. Highlights from these sectors included:

Central London

People outside St James's Market

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 long-term strategy to invest £1.5bn in the regeneration of Regent Street and St James’s to deliver high-quality office and retail space alongside enhanced streets and public realm, creating a world-class location that drives performance.
  • Lettings concluded for 438,654 sq ft of space, for a total rent of £39.1m per annum, 12.2% ahead of ERV.
  • West End retail voids remained at 0% and flagship lettings concluded to leading international brands, including Kate Spade New York; Hugo Boss; Coach; Stefanel; ASSOS; Smeg; and Jo Malone London. Regent Street and St James’s continued to attract the best in international cuisine, including Anzu, Salt Yard and Aquavit in St James’s Market and Sakagura on Heddon Street.
  • Over 212,000 sq ft of new space completed in four schemes, including One New Burlington Place, and a further 260,000 sq ft to be delivered this year through St James’s Market. Key office lettings include 60,000 sq ft at St James’s Market for Carlyle Group’s European headquarters and the arrival of international venture capital firm Accel to One New Burlington Place.

Regional retail

Banbury Gateway

We are one of the largest owners of major retail schemes outside the capital with 14 retail parks, three shopping centres and two leisure destinations.

  • This £2.3bn portfolio of retail and leisure assets has benefited from improving occupier markets. Low voids of below 2% reflect a focus on high quality assets in dominant locations with lettings concluded for 578,902 sq ft at a total rent of £16.4m, 9.3% ahead of ERV.
  • The business has successfully extended its track-record in placemaking to the retail portfolio, including asset management activities that have extended leisure uses, such as cinemas and restaurants, responding to changing consumer demands for experiential shopping.
  • Development on the retail portfolio included a joint venture with Land Securities for the 800,000 sq ft redevelopment of Oxford’s Westgate Centre. The scheme is already over 50% pre-let, including to major brands John Lewis, Michael Kors and Curzon Cinemas.
  • £140m was committed to fund the development of Rushden Lakes shopping and leisure centre in Northamptonshire. The 400,000 sq ft scheme promises to be a unique new concept in out of town retail and leisure and is over 75% pre-let.

Offshore wind

  • As the UK continues to be one of the most attractive places globally to invest in offshore wind, it has continued to be a key driver of commercial success for the business. Operational offshore wind assets generated £22.9m, up nearly 20%.
  • With a total of 5.1GW of operational offshore wind and a development pipeline into the 2020s, asset management activity included signing over 1.5GW of leases in 2015 for four projects. These will start generating electricity in the years ahead, with a combined projected revenue of £6.8m per annum once they are at full capacity.
  • There are 29 offshore wind farms currently meeting around 5% of the UK’s electricity demand, with around the same number of turbines operating in UK waters as there are in the rest of the world put together. By 2020, the sector is on course to meet around 10% of the UK’s electricity demand and bring costs down below £100 per MWh.

Rural and strategic land

Strategic land development

Through our in-house expertise we identify and acquire strategic land sites which are promoted through the planning process and sold to developers.

  • With rural land values plateauing in some parts of the country, the business has continued to focus on the sale of non-core assets, and the progression of strategic land sites through the planning system to secure consent for new homes.
  • During the year, consent was received for 7,000 homes across the portfolio and local plan progress was made for sites with a potential to deliver a further 4,000.
  • The sale of strategic land sites and non-core rural land in Dorset, Yorkshire, Daventry, and Lincolnshire, continued to provide an important source of capital, raising £126.9m at nearly 12% above book value.