The Crown Estate has posted a 7% drop in profits to £210.7m as a result of low interest rates on its substantial capital reserves.
In the year to 31 March 2010 the organisation, which manages properties formerly owned by the Queen, received just £6.2m in interest compared with £22.5m in 2009.
The interest was accrued on inflated cash reserves of around £500m which are being held to fund the company’s development programme and in preparation for a £120m investment in to its marine estate.
The Crown has to hold its money in an overnight deposit account which has low interest rates – currently hovering at around 1%.
It also reported increased direct costs – up by more than £13m – as a result of an increase in managing agent’s fees which were reviewed during the year, and a provision for bad debt from previous tenant, Icelandic bank Kaupthing.
Chief executive Roger Bright, said the Crown had delivered a good set of result that “should be read in the context of our obligation not to chase short term income returns, and our statutory restrictions on borrowing, which increases our exposure to low interest rates”.
The value of the company’s property portfolio, which last year fell by 20% to £6bn, has recovered across the board climbing back to £6.6bn.
Its urban estate – largely made up of the group’s
The commercial portfolio outperformed the IPD Quarterly benchmark by 2.6% delivering a total return of 20.4%.
The value of the organisation’s marine holdings, which includes most of the seabed around the British coast, also rose by 8.4% to £443.7m. Revenue dropped by 6.2% to £46.6m.
Capital values in the rural estate also rose by 5.7% to £972m although revenue fell by 6% to £25.1m.
Total returns across the whole portfolio over the period were 17.1%, outperforming the IPD benchmark of 16.4%. Turnover rose from £312m to £341m.
bridget.oconnell@estatesgazette.com
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