The Crown Estate produced its best ever out-performance last year, driven by the performance of its rural estate.

The Crown Estate, which is made up of urban, rural, and marine estates, as well as a separate Windsor estate, produced a total return of 7.7%, outperforming the Investment Property Databank quarterly index Benchmark by almost 1,700 basis points.

The Crown Estate, which published its annual report today, saw turnover increase 1% to £264.8m. It’s net revenue surplus, which is paid to the Treasury for the benefit of the UK taxpayer, increased by 5.6% to £211.4m.

Commodities boom

As food and commodities prices have increased, the value of agricultural land has gone up sharply. In the year to 31 March, the property value of the Crown’s rural estate, which is made up of 780 agricultural tenancies, 730 residential tenancies as well as forestry and natural mineral resources, rose 27% to £903m. Turnover increased by 1% to £22.5m.

‘That reflects the general rural market,’ Roger Bright, chief executive of the Crown Estate, said. ‘As commodity prices have been rapidly increasing its becoming increasingly attractive and viable for farmers to buy land again.'

The capital value of its portfolio increased by 3.3% to £7.3bn. This is made of around £6.6bn of property and £700m in cash, and increase in the cash balance from last year. Bright said this was because, as part of a 10-year restructuring of the portfolio, it had sold almost £500m of property before September last year.

Buying opportunity

Bright said that the current market gloom would allow the crown to use this cash to add to the portfolio. ‘There may be opportunities for someone like us because we are a cash buyer.’

Overall, the value of the urban estate, which also includes Regent Street as well as retail park joint ventures, held up well, falling 0.2% to £5.4bn.

The value of the Regent Street estate rose from £1.7bn to £2.2bn last year, on the back of asset management, including winning planning consent for the Quadrant redevelopment scheme.

Bright said that the Crown Estate was still on course to report the findings at the beginning of 2009 of its examination into the creation of a vehicle to bring outside investors into its Regent Street estate, its largest single asset. It is being advised by CB Richard Ellis, SJ Berwin and PricewaterhouseCoopers.