Over the centuries, the Crown Estate's philosophy hasn't exactly been that in order to make money you've got to spend it. But this bold new approach has worked in recent years to send its value and income soaring.
Buried in the report presented to Parliament this week is a brief mention of Heddon Street, which until recently was a dismal cul-de-sac behind Regent Street. Hardly anybody went there except to visit the post office or one of a few quiet businesses.
Four years after the Crown Estate bought the entire block and began sprucing it up, Heddon Street has taken off as London's trendiest cafe quartier. Momo is the restaurant of the moment, abuzz night and day since it opened in mid-April. Next month, Sir Terence Conran unveils the first of his Zinc Bar & Grill restaurant chain. In September there will be a new hi-tec theme pub, and the following month possibly a wine bar.
"Everybody thinks this is sort of a secret street that's been revealed, and they're all jealous," says Sadie Coles, who opened a contemporary art gallery on Heddon Street in April.
Heddon Street's astonishing turnaround has made the Crown Estate the envy of commercial real estate managers. This week the Crown Estate announced that its property portfolio, including Heddon Street, rose in value last year by 13 per cent, outperforming the 10.4 per cent industry index of UK investment property. Overall, the Crown's profits rose to a record pounds 102.9m, exceeding its pre-recession peak of pounds 55m in 1990.
With the overhaul of Heddon Street and the long-term redevelopment of Regent Street, the Crown Estate, led by chief executive Christopher Howes, has proved to be one of the canniest commercial property managers in the city, albeit an atypical one, with unusually deep pockets and a uniquely large chunk of property under its control. The Crown Estate owns the freehold on all of Regent Street, from below Piccadilly Circus up to Langham Place, north of Oxford Circus.
Five years ago the Crown Estate bought all of Heddon Street - nine buildings, 80,000 square feet - for pounds 10.2m and spent another pounds 1m fixing it up. First came new paving then a major clean-up, fresh paint, new awnings and new street lamps. Soon there will be flowering baskets and tables with umbrellas on the pavement. "It's all about making it a much more buzzy sort of place," says Russell Brown of Hawkins Brown, architect and lead consultant.
But Heddon Street is only the latest phase of the Crown Estate's property management plan for its Regent Street holdings, designed to lure classier tenants and boost rentals. That plan, in tandem with the property boom, has helped push the value of the Crown's assets to pounds 2.5bn for the year ended 31 March.
Regent Street has a classy name and architecture, but as a retail boulevard it has had its ups and downs. It has always had a few glamorous gems - Gerrards, Hamley's, Burberry's, Dickins & Jones and Aquascutum. But by the late 1980s it had been reduced to a dreary assortment of travel agents, airline offices, banks and tourist boards. By 1991 one-fifth of its storefronts were empty. "Regent Street smells of decay, like a music hall in its declining days," wrote a columnist.
The following year the Crown Estate started spending on decorative public works projects in Regent Street that normally would fall under the aegis of local government: paving, cast iron lamp standards, railings, bus shelters, bollards, junction boxes, and a new entrance to Oxford Circus Tube. The Crown spent pounds 3m, less than 10 per cent of it funded by Westminster City Council. Tenants were given a style book with aesthetic tips.
Gradually the empty spaces filled, and as leases expired less desirable tenants were replaced with stores such as the Warner Brothers Studio Store and The Disney Store and shops like Karen Millen, Benetton, French Connection, Emanuel Schivli.
The idea was to create what's known in the trade as "a total shopping experience". Shopping is not just shopping. "Retail is a leisure industry," says Annie Walker, executive officer of the Regent Street Association. "It's a family thing that you do together. The idea is that if people aren't in such a hurry, they spend more money."
Regent Street needed one missing ingredient: food. Because its buildings are shallow and small, it doesn't lend itself to restaurant use. Aside from dining rooms in Liberty's and Dickins & Jones, some coffee shops and a few high-price establishments like the Cafe Royal, culinary choices were slim.
So when Heddon Street came on the market the Crown Estate bought it. Before the First World War, a bohemian clientele had patronised its cafes and clubs. More recently, it has drawn music fans to the spot where the cover was shot for the David Bowie album Ziggy Stardust.
Given the commercial boom throughout central London, was it necessary for the Crown Estate to invest so much? Rents have rebounded as London has become the capital of cool. In three years, rents on major retail streets - Oxford, Bond, Regent and Sloane - have risen by around 50 per cent, says Nick Wear, a surveyor at Jones Lang Wootton.
Even without the outlay, the Crown would have realised more returns. About 40 per cent of the leases on Regent Street are held long-term, some from as long ago as the 1920s when inflation was unknown.
In the next 15 years many will expire and rents will climb to modern rates.
Heddon Street may not provide ready lessons for other property owners, because the Crown's position is like no other. Virtually no continuous stretch of retail property in London is under the control of a single landowner. Perhaps the best parallel to Regent Street would be an indoor shopping mall.
Given the ineffable nature of street credibility, can a landowner create it? "Yes," says Mr Wear, "but you need complete control."
At Momo, expect a two-week wait for dinner reservations, providing you genuflect. There's no sign out front, and there isn't going to be, says the frosty maitre d'. "It's self-evident."