As UK Mourns Queen Elizabeth, Crown’s Property Empire Shines Light On Continuity And Change

On an autumnal September day of sunshine and showers in the British capital, as news of Queen Elizabeth II’s death broke, shoppers on London’s Regent Street strolled in and out of stores and workers bustled to and from the offices that are at the heart of the British monarchy’s extensive and uniquely structured property empire.

Commercial property plays a huge role in how the royal family is funded and the monarchy’s relationship to British public finances. Queen Elizabeth’s 70-year reign saw some changes in how that relationship functions, and her final years saw the establishment of a renewable energy business that will soon become the most valuable part of the crown’s portfolio.

As the UK mourns the Queen, who died Thursday, 8 September, the crown’s portfolio will march on, highlighting the continuity inherent in a relationship between monarch, land and country that can be traced back for almost a thousand years. 

The Crown Estate is a property company like perhaps no other in the world. It is made up of assets that are owned by the reigning British monarch and managed by an independent board; the profit from it goes to the UK Treasury. Until her death the Queen and royal family, now the King and the royal family, then receive a fixed percentage of the profit generated by the estate, called the Sovereign Grant. That figure is currently 25%, meaning that in 2021 the queen received £78M. It was increased from 15% a few years ago to pay for repairs to a pretty famous piece of residential real estate, Buckingham Palace. The payment ratio gets reviewed every five years by the prime minister, the chancellor of the exchequer and the keeper of the privy purse, who manages the monarch’s finances.

The Crown Estate traces the ownership of its portfolio back to the time of William the Conqueror, King of England from 1066 to 1087. Through 700 years of upheaval that included the War of the Roses, the Reformation instigated by Henry VIII and the English Civil War, the British monarch retained ownership of the portfolio, using it to raise revenue to fund the operation of the state and regular wars, or giving away land to buy the support of the nobility.

In 1760, George III decided it would be a better deal if he swapped the income from the estate for a fixed annual payment from Parliament, called the Civil List. This arrangement lasted until 2011, when the Civil List and other public payments to the British monarchy were consolidated into the Sovereign Grant.

George III decided to make the swap partly because the Crown Estate had gradually become smaller and smaller. That is not the case today. A specific company was set up to manage the estate in 1955, three years after Queen Elizabeth became monarch, and at the end of 2021 the company’s portfolio was valued at £15.6B, and it includes the entirety of London’s famous Regent Street, the parkland around Windsor Castle and a portfolio of regional retail assets.

It also owns a huge slug of the UK’s offshore wind sector: The Crown estate owns most of the UK seabed out to a distance of 12 nautical miles. The value of that portfolio was £5B at the end of 2021, growth of 22% on the previous year, making it the fastest-growing portion of the Crown Estate’s holdings. Even if that growth moderates, it will soon overtake the £7.7B London portfolio as its largest division. The marine portfolio created 10.78 gigawatts of renewable energy last year.

Over the past 10 years the company has contributed £3B to the Treasury, and it made a 6% total return last year.

No inheritance tax is paid on the estate; when one monarch dies and the next takes over, the arrangement simply carries on.

The Duchy of Lancaster is the private estate of the British sovereign, i.e. previously the Queen and now the King.

The Duchy was created when Henry III gifted the baronial lands of Simon de Montfort to his son, Edmund, in 1265. Henry then bundled this up with the land of another nobleman, Robert Ferrers, Earl of Derby, and some of his own land.

At the end of March 2022, the Duchy of Lancaster had £652.8M of net assets under its control, delivering net surplus, essentially profit of £24M. These take the form of property and financial assets. Of that portfolio, 57% is  commercial property, 26% agricultural property, with a further 8% in residential property.

Its largest commercial asset is the Savoy Estate, a London block that includes The Savoy hotel, although the Duchy does not own this. The Savoy forms the western boundary of the block, with The Strand to the north, the Embankment to the south and Somerset House to the east.

The Queen owned two private estates, Balmoral in Scotland and Sandringham in Norfolk in the east of England. 

Buckingham Palace is not privately owned, but is occupied by the monarch and held in trust by the Crown so it will always pass from one monarch to the next. The sovereign grant was increased in 2017 in order to pay the £369M refurbishment bill for the palace.

The heir to the throne’s private estate is the Duchy of Cornwall. The Duchy was established by Edward III in 1337 in order to provide income for his son, Edward the Black Prince. It was the first English Duchy to be created, and is traditionally inherited by the Prince of Wales, the monarch’s eldest son. In that way, Prince Charles was Duke of Cornwall and the income from the Duchy was used to fund his life, with the Duchy now likely to pass to Price William. When Charles took on the dukedom in 1973, as part of his feudal dues he received a pair of white gloves, gilt spurs and greyhounds, a pound of pepper and cumin, a bow, 100 silver shillings, wood for his fires and a salmon spear.

Of more use is the £1B of net assets that the Duchy had at the end of March, producing a net surplus Charles could draw on of £23M — he can only receive income from the portfolio, not receipts from asset sales.

The Duchy doesn’t own all of Cornwall, just a lot of it, and not all of its assets are in the county, in fact they are spread across 23 British counties. All told it owns 52,450 hectares of land, 2,830 hectares of woodland, £345M of commercial property, including the Oval cricket ground in London, and £58M of development land.