Report and Accounts of the Duchy of Lancaster for the Year Ended 31 March 2012
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2012 REPORT AND ACCOUNTS OF THE DUCHY OF LANCASTER This Report & Accounts is printed by Witherbys Print London which holds the ISO 14001 Environmental Management certification. FOR THE YEAR ENDED 31 MARCH 2012 The printing inks are made using vegetable-based oils. 95% of the cleaning solvents are recycled for further use, and 94% of the waste associated with this product will be recycled. The paper used for this publication is 9 lives 55 Silk made from 55% recovered fibres including a minimum of 25% post consumer waste and 45% ECF virgin fibre. Duchy of Lancaster Report and accounts of the Duchy of Lancaster for the year ended 31 March 2012 Presented to Parliament pursuant to Section 2 of the Duchies of Lancaster and Cornwall (Accounts) Act 1838 1 Duchy of Lancaster Financial Highlights for the year to 31 March 2012 Revenue 2012 2011 Change £m £m % • Total gross income 18.06 18.48 -2.2% • Net operating income 12.68 13.87 -8.6% • Surplus payable to the Keeper 12.87 13.28 -3.1% of the Privy Purse Capital 2012 2011 Change £m £m % • Total capital value 405.34 383.19 +5.8% Surplus Payable (£m) Total Capital Value (£m) Change over previous year (%) Change over previous year (%) £m £m 15 450 14 6.1% 0.0% 0.1% 13 -3.1% 5.8% 7.6% 400 0.2% 12 10.0% 11 350 7.9% 10 -19.1% 9 300 8 7 250 6 5 200 2008 2009 2010 2011 2012 20012008 2002 2009 2003 2010 2004 2011 2005 2012 2 Duchy of Lancaster Report of Council Operating Review His Honour Mr Justice Richards relinquished his role as Vice Chancellor to be replaced by His Honour Mr Introduction Justice Briggs, a former Attorney General to the As anticipated last year, 2012 has not been an easy Duchy, while our Attorney General, Mr Robert year for occupiers or the Duchy, but notwithstanding Hildyard has been appointed a High Court Judge. We this, the results for the year have shown the resilience have subsequently appointed Mr Robert Miles as our of the Duchy portfolio in adverse financial markets new Attorney General. We would like to record our and the benefits to be gained from the continued thanks to both retiring Duchy Officers and to all drive to improve the quality of the assets within the those who have provided support and advice to the portfolio. With the refurbishment of Wellington Duchy and its management, both past and present. House, the purchase of a new agricultural estat e in Lincolnshire and the consolidation of our ownership Financial performance on the Tower Bridge Business Park we believe that we The financial statements have been prepared for the are placing ourselves in a stronger position with these first time in accordance with International Financial prime assets while continuing to work on new Reporting Standar ds (IFRS). Further information schemes and initiatives within the existing portfolio. regarding the impact of this can be found on page 16. Our environmental effort was highlighted by our new Diamond Jubilee Woods at Needwood. This Net Operating Income has reduced in the year by plantation has been designated into the Woodland 8.6% to £12.7m (2011: £13.9m). The Net Surplus Trust’s Jubilee Woods scheme to commemorate Her delivered to the Keeper of the Privy Purse Majesty’s Diamond Jubilee. The site includes the consequently decreased by 3.1% to £12.9m (2011: planting of over 5,000 trees, 830 metres of new £13.3m). The most significant impact on performance hedgerow creation and 320 metres of hedgerow was the loss of income in the year arising from the restoration and was marked by a ceremonial planting decision to refurbish the office space within of an oak tree in May 2011. Wellington House. In addition, the Duchy has not been immune from the economic slowdown with the failure of a significant tenant within one of our largest industrial units at Centenary Park, Manchester and other smaller failures, resulting in debt write-offs in the year of £0.2m. This has resulted in a reduction in the commercial income for the year, but there has been encouraging and consistent income growth from the other asset classes within the Duchy. Capital has performed well, with an increase in Net Asset Value of 5.8% to £405.3m (2011: £383.2m) which is the first time that the Duchy has passed through the £400m barrier. The continued recovery The ceremonial planting of the Diamond Jubilee from 2009 has been shared across all parts of the Woods, Needwood portfolio but again with particularly strong contributions from both the agricultural and The Duchy has added to the strength of its team commercial portfolios. through the appointment of Mr Tim Crow to the newly created post of Head of Legal Services. Day to Despite the decrease in Net Operating Income in the day management of individual Rural Surveys is year, the performance over the last ten years has seen undertaken by Smiths Gor e, Savills and Bidwells and Net Surplus grow by 67%, delivering over £121m to at the end of the year we were delighted to welcome the Keeper of The Privy Purse over that period. In Mr Philip Coles on a part-time secondment from addition, capital has grown by £184m or 84% over Smiths Gore to act as the Duchy’s Rural Surveyor of the same ten year timeframe. Lands. He will oversee the management and strategic direction of the rural assets and brings many years of experience to the Duchy Office. 3 Duchy of Lancaster Report of Council (continued) Compound % change in Surplus payable 100% 75% 50% Compound % growth 25% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Paid to Privy Purse RPIX 68 Willow Walk, South London Compound % change in Capital Value On the Urban Survey the opportunity arose to 100% purchase 68 Willow Walk, the one commercial unit on the Tower Bridge Business Park, London which we did 75% not own. The unit is let to City Link and, together with the two units let to the Metropolitan Police and the Royal Mail, represents a good long term income 50% investment in a prime area with considerable growth potential. Compound % growth 25% Sales for the year totalled £12.4m while purchases were slightly in excess of this at £14.6m. 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Harrogate Ladies College has been part of the Capital Value RPIX Duchy’s Harrogate estate for many years and negotiations continue for the surrender and re-grant Asset Management of a new modern form of lease which provides both 2012 will be marked as a year of substantial activity parties with security for the future. The balance of within the agricultural sector of our portfolio as the the Harrogate estate and the Stray are “ancient Winmarleigh Estate (Lancashire) was sold with the inheritance” and located within an affluent regional majority of our tenants taking the opportunity to town. With the predominantly res idential holding purchase their farms. The sales programme was having been diminished in the seventies and eighties initiated to achieve a rebalancing of the land holding as a result of leasehold enfranchisement, a core away from our dominance in the dairy sector towards holding remains which the Duchy will seek to a greater exposure to the arable sector, resulting in improve in the medium term. the purchase of 1,000 acres in Donington, Lincolnshire. This land is grade 1 and 2 and superior to the majority of our current agricultural holdings. At the same time, an outlying farm in Midville, Lincolnshire was sold as was New Lodge, Needwood, where the Duchy secured planning consent for redevelopment as new houses. These sales, together with other residential sales, continue the policy of reducing the number of peripheral and non-core properties so managemen t can concentrate upon the enhancement of the underlying quality of assets on core estates. Harrogate Ladies College 4 Duchy of Lancaster Report of Council (continued) The City of Lancaster is another conurbation where to the North of Scarborough. These are early days the Duchy has an opportunity to make a contribution but the initial results from their investigations are to the local environment by identifying a new use for positive, identifying a substantial reserve of potash at Lancaster Castle following the surrender of the lease a deep level.S irius will continue their investigations as a prison by the Ministry of Justice. A team of over the next year and will be consulting with major consultants has been appointed to undertake this stakeholders throughout the project, including work and it is hoped that the initial investigations as seeking planning permission for a mine head and to potential future uses will be concluded by the extraction at a location to be identified. autumn of 2012. This is a 75,000 square foot building with a fascinating history and a considerable Mineral interests are a relatively small element of potential for both the Duchy and the City of the Duchy portfolio but windfall opportunities do Lancaster. However, we do not underestimate the emphasise the importance of protecting those challenges that this presents. interests. The Land Registration Act has necessitated mineral owners to register their titles with the Land Registry and the Duchy has been doing this in respect of both its surface and mineral ownership. The exercise was completed for the Lancashire foreshore holding in 2010/11 and has greatly simplified the identification of opportunities while equally informing all adjoining owners and operators of the precise Duchy ownership.