Crown Estate Outperforms Sector

The entire portfolio reflected an 8.7% increase in capital value to €6.9 billion ($8.6 billion) compared to a 1% increase last year. The growth in capital values was due largely to a strong residential market and a 7.1% improvement in the urban portfolio, mainly in the West End. The city office market continued to disappoint.

"Last year, we were suffering the effects of the downturn in the Central London market," says chief executive Roger Bright. "This year we have enjoyed the benefits of an improvement in conditions."

Despite these improvements, the market remained tough elsewhere. "These are excellent results in a year when we faced uncertainties across a wide range of UK and world markets," says chairman Ian Grant. Those uncertainties "have continued to apply pressure on returns in our urban, rural and marine estates."

The Crown Estate continues to have one of the most diverse and challenging portfolios in the UK. It includes 300,000 acres of tenanted farmland and forests, €4.8 billion ($5.9 billion) of commercial property, housing and a marine estate. While the property market for the marine estate remained tough, the company was able to boost its value by 13.1%.

"The rise was attributable to offshore windfarms", says Bright. "We granted options to lease 15 sites around the coast, which was reflected in the capital value."

Although the Crown Estate may be one of the best performing property developer/investors in the UK, its existence is a quirk of history. King George III, who needed to fund foreign wars, handed over his entire estate to the government in 1760. So the state effectively owns the freeholds and manages the estate, but any surplus revenue goes to the Treasury. The Queen is then paid an income from the government through the Civil List to finance her duties and the running of the Royal Household.