The Crown Estate: Landmark Year for Offshore Wind Industry

The Crown Estate, an independent commercial business, created by Act of Parliament, has today announced another record return for the benefit of the public finances and an overall performance which is significantly ahead of the market, as its portfolio value hits an all-time high.

Results summary

• Record return to Treasury for the benefit of the public finances:£267.1 million, up 5.7%
• Capital value at a historic high: £9.9 billion, up 14.6%
• Property value: £9.4 billion, up 15.7%
• Market beating total return: 20%, against a 17.3% benchmark
• 3 year total return: 15.9% against 13% market benchmark
• Third party assets managed in joint ventures: £968m, up 59%.

Sir Stuart Hampson, Chairman of The Crown Estate said: “This year’s record profits as well as our outperformance of the market over the last three years prove that through our long term approach to investment and steadfast focus on our core sectors, The Crown Estate continues to be a remarkable UK success story.”

Alison Nimmo, Chief Executive of The Crown Estate said: “It’s been another fantastic year for The Crown Estate and with a portfolio now valued at close to £10 billion, this record performance shows that from the heartlands of our real estate business to our investment offshore, we’re truly at our best when we’re actively managing.”

Lord Deighton, Commercial Secretary to the Treasury said: “The long-term view taken by The Crown Estate has yielded another year of strong growth. This is a great British institution demonstrating careful stewardship and also creating value that goes beyond financial return.”

A strong asset base and business model

Capital market activity, the strategic use of partnerships, and a focus on key sectors are at the heart of The Crown Estate’s business model and investment strategy. Astute purchases have, in particular, strengthened the regional retail and rural portfolios, whilst the establishment and extension of strategic West End partnerships, together with the sale of non-core assets into strong investment markets, have been a key driver of total return outperformance.

Nearly £1 billion of capital activity comprised: £248 million of capital expenditure including development; £264 million of acquisitions; disposals totalling £457 million. Key acquisitions included:

• The Banbury Shopping Park and MK Leisure development opportunities
• Coliseum and Silverlink Shopping Parks, in Cheshire and Newcastle, respectively
• A 3,500 acre agricultural land portfolio, the Ellington Estate, in Northumberland

Disposals included:

• The establishment of a new partnership with Oxford Properties, a major Canadian real estate investor, to help realise The Crown Esdtate’s flagship £320 million St James’s Market development in St James’s
• The sale of a 25% interest in the award winning Quadrant 3 building extended the Regent Street Partnership with Norges Bank Investment Management
• Non-core assets such as the Intercontinental Hotel on Park Lane, industrial estates in Basildon and Avonmouth, and the Cranwell and Roxholme rural holdings in Lincolnshire
• Strategic land site sales completed, or in progress, totalled £25 million.

Active asset management grounded in place-making at its best

Active asset management and place-making underpin The Crown Estate’s strategy, driving capital values and rental growth. This has not only generated strong returns but also created world-renowned mixed use destinations for shopping, leisure and business, across the UK.

• Development: the West End development pipeline has never been more active and long-term investment in The Crown Estate’s development pipeline throughout the downturn is now reaping the rewards presented by substantially improved occupier market dynamics. 275,000 sq ft of new space has been brought to the market in the West End this year, with 615,000 sq ft currently on site over eight projects.
• Office: structural undersupply in the West End office market, matched by the high-quality space The Crown Estate delivered in Regent Street and St James’s, secured 165,000 sq ft (including since April 2014) of lettings at new developments, including to Twitter, Ares Asset Management, Tudor Capital and Virgin Money.
• Retail: West End voids remained at 0%, with flagship lettings concluded with iconic brands including Tiger of Sweden, Osprey, Sunspel, Hunter, J. Crew, and Watches of Switzerland.
• Regional retail: now the fifth largest owner of prime retail parks outside of London with a £1.2 billion portfolio, The Crown Estate is bringing the same focus and progressive approach to management in this sector as we are known for in the West End.
• Strategic land: consents were secured during the year for 1,200 homes in five locations.
• Aggregates: the extraction of 16 million tonnes of marine aggregate within Crown Estate licensed areas generated returns of £15.6 million, reflecting a robust recovery in UK construction.

A landmark year for the offshore wind industry

The Crown Estate’s long-term investment and enabling role have helped ensure the UK remains the most attractive place to invest in offshore wind globally. Sector milestones included the opening of the world’s largest offshore wind farm, London Array, through to landmark investments from Siemens and AB Ports in manufacturing facilities on the Humber. As manager of the UK seabed, The Crown Estate is co-investing up to £100 million with developers, to de-risk projects by addressing technical, physical and environmental constraints. Key highlights for offshore wind in 2013/14 included:

• The operational offshore wind portfolio generated over £15 million of revenue, up 46% from £10.6 million last year
• Strong winds were complemented by strong capacity growth with installed capacity now totalling 4.3 GW
• Offshore wind is on course to deliver 5% of UK electricity demand by end of 2015 and 10% by 2020
• Consent from Scottish Government for the Beatrice and MORL offshore wind projects in the Moray Firth off the north east coast of Scotland totalling 1,866 MW
• Looking beyond 2020 – The Crown Estate reached an agreement with Statoil which will allow them to progress the UK’s first floating wind farm off the coast of Peterhead, Aberdeenshire