Monday, May 27, 2024

Wind farms help drive record profit for Crown Estate

The Crown Estate enjoyed its most profitable year ever last year, with the King’s coffers boosted by the signing of six lucrative offshore wind farm leases.

Profits at the King’s property group jumped by 42 per cent to a record £442.6 million in the 12 months to the end of March, up from £312.7 million in its previous financial year.

The bulk of the near-£130 million increase in profits came from the fees paid by the developers who won the rights to build six new offshore wind farms in January.

The wind farms, three of which are in the North Sea and the others off the coasts of Cumbria, Lancashire and North Wales, have the potential to power seven million homes.

The winning developers are required to pay option fees every year until they are ready to sign a formal lease. Once signed, the six projects are set to earn the Crown Estate about £1 billion in rental income each year. The King has promised to pass the profits from those new leases back to the UK.

The Crown Estate pays its profits to the Treasury, which gives a cut to the royal family in the form of a sovereign grant. Usually that cut would be 15 per cent, but the Treasury has agreed to pay out 25 per cent of profits for a decade until 2028 to help to fund the refurbishment of Buckingham Palace.

The payment to the King is based on the group’s performance from two years earlier, when the coronavirus first ripped through the property markets, denting the estate’s profits. However, the royal family will be insulated from that decline as the sovereign grant is not allowed to fall, meaning that the King will receive £86.3 million, the same amount that was paid last year.

The Crown Estate owns parts of the West End of London, including much of Regent Street, as well as regional shopping centres, a rural portfolio and the Windsor Estate.

In recent years, its ownership of the seabed surrounding the UK has taken on greater importance within its overall portfolio as energy companies have paid more for the rights to develop offshore wind farms.

The estate dates back to 1760, when George III agreed to pass all profits from the royal landholdings to parliament in return for a fixed annual payment. Over the past ten years, the Crown Estate has returned £3.2 billion to the Treasury.

The value of the group’s total portfolio edged up by 1.3 per cent to £15.8 billion in its latest financial year, compared with £15.6 billion 12 months before.

A marked rise in the value of its seabeds more than offset declines in the values of its property holdings. The Crown Estate’s marine portfolio increased in value by 14 per cent to £5.7 billion after the latest round of wind farm leases.

The valuation of its properties in central London fell 6.5 per cent to £7.2 billion as higher interest rates hit property prices. The regional property portfolio, which includes the Princesshay shopping centre in Exeter, declined by 11.8 per cent to £1.5 billion.

Reflecting the rise in prices of agricultural land, seen as a “safe haven” in times of uncertainty, the Crown Estate’s 200,000-acre rural portfolio, which includes the Windsor estate, rose in value by 16.7 per cent to £1.4 billion.

“It’s been another year of change, disruption and uncertainty,” Dan Labbad, chief executive of the Crown Estate, said. “As you would expect, this uncertainty is reflected in our results with variations in performance across our diverse portfolio. However, I am pleased to be able to share that a record net profit has been generated for the nation’s finances. This performance is a testimony to the underlying strength and resilience of our diverse portfolio.”