The Crown Estate is having to pay its profits to the Treasury in instalments after a fall in rental receipts following the coronavirus outbreak, annual accounts have revealed.
Dan Labbad, chief executive of the Crown Estate – a multi-billion pound property, land and rights portfolio – said that while it was too early to forecast the business’s performance next year he expected “profit and property valuations to be significantly down”.
Profits from the business – whose portfolio ranges from London’s Regent Street to regional shopping malls and rights to seabeds – rose 0.4% to £345 million, compared to the previous financial year’s profits of £343.5 million.
These funds are payed to the Treasury each year but the report said: “The current economic and market disruption has led the Crown Estate to take the precaution, with the agreement of the Treasury, of implementing a staged process for the payment of the whole of its net revenue profit for the year 2019/20.
“As it cannot draw on its capital account to cover operating expenses, this step has been taken to ensure that it has sufficient revenue reserves given the current reduction in rental receipts.”
The Crown Estate’s profits are used to pay for the official duties of the monarchy via the Sovereign Grant which receives a quarter of the funds, but allocated two years in arrears.
The grant for 2021/22 is expected to be £86.2 million.
The accounts revealed the value of the Crown Estate’s property holdings fell by 1.2% to £13.4 billion.
The report said: “This is mostly as a result of a revaluation loss of £552.5 million or 17.0% in the Regional portfolio, reflecting the challenging retail market.”
The Crown Estate has seen its retail and office tenants across the country struggling during the challenging financial situation caused by the coronavirus and the subsequent lockdown which brought much of society to a standstill earlier this year.
The chief executive said: “Over the 2019/20 financial year, many of our real estate markets were already facing long-term structural challenges, which have now been accelerated as a result of Covid-19.
“Against this backdrop, and the ongoing economic uncertainty, we have delivered a result for the year which reflects the underlying strength of our portfolio and the active approach of our team.
“Nonetheless, as we look ahead we are under no illusions about the challenges we face. Whilst it is too early to accurately forecast our performance for next year, we do expect our net revenue profit and property valuations to be significantly down.
“However, our resilient structure, established to operate in perpetuity and with no debt, coupled with our diverse portfolio, provides us with the means to navigate this current crisis, while continuing to invest for the long-term.”