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Crown Estate, Queen’s Future Income Source, Has a Record Profit

Crown Estate Reports Record Annual Profit
Proceeds from the 443 million-pound sale of a 25 percent stake in Regent Street to Norway's sovereign wealth fund weren't included in the fiscal 2011 results because the transaction completed the day after the fiscal year ended. Photographer: Simon Dawson/Bloomberg

The Crown Estate, which will provide most of Queen Elizabeth II’s income under planned changes to royal finances, reported a record profit for the fiscal year ended March 31 as rent revenue and interest income rose.

Profit increased to 230.9 million pounds ($370 million) from 210.7 million pounds in fiscal 2010, according to a statement today. The London-based corporation oversees real estate surrendered in 1760 by the U.K. monarchy in exchange for annual payments. The Treasury receives all the untaxed profits from rents and other income generated by Crown Estate.

“This has in many ways been a landmark year,” said Chief Executive Officer Roger Bright, who retires at the end of the year. It will be “business as usual” with the proposed changes to royal finances, since profits will continue to pass to the Treasury, Crown Estate said in the statement.

The government will pay 15 percent of profits generated by Crown Estate to Britain’s monarch under a draft law presented by Chancellor of the Exchequer George Osborne last week. This simplifies a system of three payments that currently help fund the Queen’s expenses as head of state, totaling about 35 million pounds a year. Lawmakers are scheduled to pass the Sovereign Grant legislation later this year. It would begin in March 2013.

Crown Estate’s higher profits stemmed from an increase in the interest income from the 300 million pounds of cash that Crown Estate raised from the sale of assets. These included the disposal of four affordable-housing projects in London to the Peabody Trust for about 140 million pounds. Crown Estate is only permitted to invest in U.K. government bonds and real estate.

Regent Street

Proceeds from the 443 million-pound sale of a 25 percent stake in London’s Regent Street to Norway’s sovereign wealth fund weren’t included in the fiscal 2011 results because the transaction completed the day after the fiscal year ended.

Any profit from asset sales is kept by Crown Estate and reinvested. In the past year, Bright purchased mostly “big box” retail parks and shopping centers in Oxford, Nottingham, Liverpool and Portsmouth, which also boosted rental income.

“Further major rebalancing between London and outside London isn’t really an objective now,” Bright said in an interview. Crown Estate’s investment outside London may be reorganized, he said, without being more specific.

Crown Estate is prohibited from borrowing, so asset-sale proceeds will help fund the 1 billion-pound program to turn Regent Street into one of the West End’s dominant shopping strips. Tenants include Apple Inc., Burberry Group Plc and fashion designer Michael Kors.

St. James’s

Crown Estate earlier this year started a 500 million-pound revamp of its properties in central London’s St. James’s neighborhood, home to some of the world’s most expensive office space.

Crown Estate won’t copy the Regent Street deal with Norway for this neighborhood because its properties are too dispersed, Bright said. Instead, it’s forming partnerships for blocks of properties, such as its alliance with Healthcare of Ontario Pension Plan for its Gateway project near Piccadilly Circus.

Overseas demand for prime properties in central London helped increase the value of Crown Estate’s real estate by 9.2 percent in the 12 months through March 31 to a record 7 billion pounds.

There was also a 32 percent increase in the value of its 587 million-pound marine estate, which covers half the foreshore, the seabed stretching out 12 nautical miles from Britain’s coastline and sites of wind farms outside U.K. territorial waters.

Buckingham Palace and Windsor Castle, the palaces occupied by the Queen, are managed by the royal household and Crown Estate isn’t involved. The Historic Royal Palaces, a charity, runs the Tower of London, Hampton Court Palace, Kew Palace, Kensington Palace and the Banqueting Hall. The Queen’s administrators manage the Sandringham and Balmoral private estates.

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