28 June 2018
The Crown Estate announces £329.4m income returned for the public finances
Leading UK real estate business, The Crown Estate, has today (28 June 2018) announced another strong financial performance, with income returned to Treasury of £329.4m, up 4.0% from £316.7m in 2016/17 on a like-for-like basis*.
Overall performance was ahead of the market, with a total return of 11.0% against the annual bespoke benchmark of 8.2%. Total return outperformance was driven primarily by the growing offshore wind portfolio and flagship retail lettings in Central London.
Results summary for the year to 31 March 2018
- Income returned to Treasury for the public finances: £329.4m and totalling £2.7bn over ten years.
- Capital value: up 7.3% to £14.1bn, with property value up 6.8% to £13.3bn.
- Market beating total return on a three year rolling basis: 12% against a bespoke benchmark of 9%.
- Capital activity: totalled nearly £800m, including over £400m of sales at almost 10% above book value and purchases totalling £136m, which saw the business extend its interests in strategic areas, including at Oxford Circus in London and Fosse Shopping Park in Leicester.
- Lettings activity: Over 700,000 sq ft of new lettings secured across the business, with agreed rents totalling £41.5m per annum.
- Central London retail: An improved rental tone drove strong returns from West End retail, with lettings totalling 80,000 sq ft at £12.4m per annum and at 14% above ERV.
- Offshore wind: offshore wind benefited from a 2.3GW increase in UK operational capacity. This brought the total capacity to 7.4 GW, enough to power five million homes, and delivered a 20% increase to the income from the Energy, Minerals & Infrastructure portfolio.
*Income returned to Treasury last year (2016/17) was £328.8m, which included income from operations devolved to Scottish Ministers on 1 April 2017. Annual results for 2017/18 are for continuing operations in England, Wales and Northern Ireland and net income growth of 4% this year is reported on a like-for-like basis. The management and future returns from these holdings now sits with Scottish Government in line with the provisions of the Scotland Act 2016.
Alison Nimmo, Chief Executive of The Crown Estate said: “Our highly skilled team has delivered another great set of results this year, against a backdrop of a challenging and uncertain market. This success has been built on a disciplined focus on creating high-quality service and experiences for our customers in the best locations, and an approach to business that looks beyond short-term volatility to deliver long term, sustainable outperformance.”
Robin Budenberg, Chairman of The Crown Estate said: “Once again the business has delivered strong returns for the nation’s finances. It has been an exciting year and we have begun to pivot the business away from a traditional bricks and mortar approach towards a more customer-focused, services-based model, so we are preparing to take advantage of the trends that are transforming how people want to work, live and socialise in the future.”
Key performance drivers and highlights
The strongest performance came from offshore wind, with the equivalent of one offshore wind turbine built every day in 2017, driving a 20% increase in income from the Energy, Minerals & Infrastructure portfolio.
The business continued to benefit from years of disciplined investment in high quality assets in great locations with the Central London and Regional portfolios both outperforming their respective market benchmarks to deliver strong returns, against a wider slowdown in these sectors.
Creating brilliant places, lettings and asset management
- The Central London portfolio welcomed over 50 new office, retail and restaurant customers, taking nearly 260,000 sq ft of space, at a total headline rent of over £30 million per annum.
- 180,000 sq ft of new central London office lettings were concluded, including office space at St James’s Market, fully let by May 2018.
- New retail lettings continue to enhance the world-class shopping and leisure experience for visitors to the West End of London and included flagship stores for Microsoft, Asics, L’Occitane and Aspinal of London. H&M Group launched a global flagship on Regent Street for the third time with the opening of Arket, followed by the first UK opening of its Weekday brand.
- The business continued to build its world-class food and dining offer across Regent Street and St James’s, adding new restaurants including Magpie, Sabor, San Carlo and Scully.
- The Regional portfolio’s 13 retail and leisure destinations welcomed 100 million visitors. Set against a challenging year for the retail sector, the portfolio completed over 470,000 sq ft of lettings and over 280,000 sq ft of rent reviews concluded at 4% above previous passing rent.
- Westgate shopping centre in Oxford, which opened this year in partnership with Landsec, is now 96% let or in solicitors’ hands and has already welcomed eleven million visitors since launch in October.
- The first phase of Rushden Lakes, the ground-breaking £140m retail and leisure destination in Northamptonshire, opened this year, and funding was agreed for three further phases at the scheme, comprising another 220,000 sq ft of space. The centre offers big name fashion and boutique brands with lakeside dining and leisure activities, set alongside a 200-acre Site of Special Scientific Interest.
- Windsor Great Park achieved a third year of profitable operations, welcoming over six million visitors, and launching the newly refurbished Savill Building.
Sales and acquisitions
- The business strengthened its partnership with Norges Bank Real Estate Management (NBREM) with a joint £113.6m purchase of assets adjacent to Oxford Circus, at the heart of the partnership’s strategic holdings and the sale to NBREM of a further 25% interest at 20 Air Street for £112.5m.
- The sale of Altrincham Retail Park for £63m to Orchard Street Investment Management raised capital for reinvestment.
- Ongoing sales of assets from the Rural portfolio released £97m, at 26% above book value, from holdings in areas where opportunities for further growth are limited.
- The acquisition of the Everards Brewery Site to facilitate the £135m extension to Fosse Shopping Park in Leicester is currently onsite and due to complete in 2020. The extension is already 66% pre-let.
- Having delivered nearly 1.5 million sq ft in central London over the last 15 years, the business is now preparing the next phase of its development pipeline and has identified as much potential for the next decade as it delivered in the last. This year the business started two projects in Central London: Morley House on Regent Street and The Marq in St James’s.
- The £100m redevelopment of Morley House, north of Oxford Circus, commenced in December 2017, with completion anticipated in 2020.
- The Marq, a £100m mixed retail and office development, is part of ongoing investment in St James’s which builds on the success of the landmark St James’s Market.
- The active promotion of land for residential and commercial development continued: 35 acres were acquired adjacent to rural holdings at Hemel Hempstead for £8m, to augment strategic interests in the area; planning approvals were secured for 940 new homes across the UK, including 600 homes at Hemel Hempstead.
Offshore wind and Infrastructure
- Across the seabed holdings, an equivalent of one offshore wind turbine was built every day in 2017, delivering over half of all new capacity in Europe last year. The sector is on course to deliver 10% of the UK’s electricity demand by 2020.
- The infrastructure portfolio saw the 1GW Nemo interconnector laid, connecting the UK and Belgian electricity markets; options were exercised for two more interconnectors, with France, and Norway.
A progressive approach to creating brilliant places for the long-term
- For the fifth year running, the business achieved GRESB ‘Green Star’ rating for sustainability performance across its Central London and Regional Retail portfolios. It launched and furthered a number of initiatives to promote sustainability and embed resilience:
- A waste consolidation scheme was introduced in St James’s and is now used by 50 customers in the area.
- A partnership with The Wildlife Trusts is supporting biodiversity in locations such as Rushden Lakes, London’s West End and the Windsor Estate.
- The business completed roll out of electric vehicle charging points across nine retail and shopping parks.
- Recruit London, the employment and training programme run with the Cross River Partnership, continued to support local people seeking employment and has placed over 1,700 into work since 2009; this year the programme was expanded across the Regional Retail portfolio.
- In London, the business continue its support for ReStart, which offers intensive support to help unemployed people in Westminster who are homeless or at risk of homelessness to get back into employment, placing 36 candidates since autumn 2016.