By Jack Sidders (Bloomberg) —
Forget the glitzy stores of Regent Street, Britain’s seabeds are increasingly powering the property company that helps support the British monarchy.
The Crown Estate, whose profits in part fund the royal family’s costs including palace upkeep and payroll, reported a 16% jump in earnings, boosted by the soaring demand for offshore wind. The company, which manages nearly all the seabeds around England, Wales and Northern Ireland, generated net revenue profit of £313 million ($379 million) in the year through March, according to a statement.
The landlord’s marine portfolio jumped in value by 22% to £5 billion over the same period even as its London properties remained flat. That means it now accounts for almost a third of the Crown’s £15.6 billion portfolio, compared to about half for the landlord’s trophy London holdings, which have been battered in the pandemic.
The climate crisis have caused a boom in investment in sustainable power sources such as offshore wind turbines. That’s seen the seabed, long an overlooked asset in the Crown Estate’s portfolio when compared to its trophy West End properties, become the main engine of growth for the company.
The Crown Estate, while it belongs to the reigning monarch for the duration of their reign, isn’t their private property and cannot be sold by them. Instead it is managed by an independent organisation with surplus revenue paid each year to the Treasury and a portion of that — the sovereign grant — is paid over to the Queen each year.
The company, established by an act of parliament, is banned from borrowing money. That means investing in the marine portfolio to capture more future growth brings with it questions about how to allocate capital across the business, which also owns portfolios of rural land and regional retail properties.
Historically, the marine portfolio has received less investment “relative to the rest of the portfolio, so I think we will see a proportionate amount going into that,” Chief Executive Officer Dan Labbad said on a briefing with reporters. “We won’t have one part of the businesses subsidizing another.”
The desire to cash in on that growth will be offset against the company’s competing interests and obligations, chief financial officer Robert Allen said. Those include protecting biodiversity in the rural portfolio, developing projects to help stimulate economic growth in the regional portfolio and updating the historic central London properties to make them more environmentally friendly.
Offshore wind generated on the Crown’s seabed powers about 8.6 million homes, equivalent to about 12% of the UK’s total electricity needs. That’s helped make the UK one of the world’s biggest generators of offshore wind energy.
“There is an awful lot to be done in that marine environment to stay in that position,” Allen said. “Its going to require capital.”
It represents a shift for the Crown Estate which is best known for its stake in assets like London’s Regent Street. The London portfolio is valued at about £7.7 billion pounds, little changed from a year earlier. Footfall in London was down about 38% last year due to the pandemic and shifting work and travel patterns, hitting the landlord’s restaurants, coffee shops, pubs and bars particularly hard, Allen said.
© 2022 Bloomberg L.P.
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