3 GENERAL PERFORMANCE
Enhancing revenue
26. In their evidence to us and in their 2009 Annual
Report the CEC were, with some reason, bullish about their general
performance. As the chart below shows, surplus revenue to the
Consolidated Fund has increased every year over the last ten years
and by 70.5% over the ten year period.
Figure 1: Net income surplus £m 1999/2000-2008-09
Source: The Crown Estate (Crown Estate Commissioners)
Memorandum
Enhancing capital
27. The capital value of the Crown Estate has also
increased over the last ten years by 66.7%. However, whilst surplus
revenue continued to rise in 2008-09, the total capital value
of the Estate fell by 18% to £6 billion. The Annual Report
attributes this decline to the general downturn in the UK commercial
property sector. In light of this annual decline, we asked the
Chief Executive what was a reasonable number of years to assess
performance in managing his portfolio. He responded that:
Probably a ten year time horizon gives you a
good feel for that. This is a long term business. This is not
a short term business. If you look at our performance over the
last ten years, I think we have produced creditable results.[31]
Benchmarking
28. In their written evidence, the CEC explained
that they benchmark their financial performance against the Investment
Property Databank (IPD) which they described as "the property
industry's recognised benchmark."[32]
As the chart below shows, the CEC have significantly outperformed
the IPD over the last ten years.
Figure 2: Total return v IPD
Source: The Crown Estate (Crown Estate Commissioners)
Memorandum
Mr Bright attributed this result to:
[ ... ] a combination of the fact that a number
of the properties that we own are of a very high quality. They
are prime properties. They are in many instances situated in central
London, in London's West End, which is, as I am sure you are aware,
a very strong performing centre. One of the other reasons is that
our portfolio is very diverse. We have a big commercial property
portfolio but we have a rural portfolio and we have a marine portfolio.
Those portfolios perform in different ways. The rural portfolio
will for example give us capital growth. The marine portfolio
will tend to give us high revenue returns. The combination of
the quality of the assets and the diversity of the estate has
certainly helped us considerably.[33]
It is noteworthy that the CEC benchmarks itself against
the private sector. As we outlined in the previous section, however,
it is arguable that, as a public body, the CEC have a wider set
of responsibilities in the public interest. Accordingly, we asked
Mr Bright whether the standards of good management for a leading
private sector company and a public body such as the CEC are the
same. In his reply he accepted that "there is a particular
expectation on us that we always do the right thing."[34]
29. Judged on their own terms as a commercial
organisation, the CEC run a very successful business operation.
In the next four sections we examine, within each business division,
the devil in the detail. We assess performance in each business
division and look in particular at circumstances where the extent
of the CEC's commercial emphasis appears to rub up against a potential
wider public interest and where, as a consequence, questions may
arise as to whether the CEC "always do the right thing."
31 Q 131 Back
32
Ev 39 Back
33
Q 137 Back
34
Q 148 Back
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