Norway’s oil fund has placed a £306mn bet on Mayfair assets
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Grosvenor, the Westminster property company, has sold a £306m stake in London’s historic Mayfair Estate to a Norwegian oil fund, with the landlord looking to reinvest it into development and lending.
A $1.7tn Norwegian sovereign wealth fund will take a 25 per cent stake in a new £1.2bn joint venture, adding to its big bet on the fortunes of London’s West End.
Grosvenor retains control and manages a portfolio of 175 buildings around Mount Street and Grosvenor Street, including The Connaught Hotel.
The deal is the largest sale to foreign investors of the Mayfair estate, built by the Grosvenor family since the 1720s.
James Raynor, chief executive of Grosvenor’s UK property division, said: “It’s incredibly valuable for us.” “We thought long and hard about this. The management and control that was going on was critical.
It marks Norwegian Oil Fund’s first major new investment in London since 2018. The fund already has a stake in Regent Street, next to the Crown Estate, and last year increased its ownership stake in the Pollen Estate, near Savile Row. He made his first investment in 2014.
The fund last year took full control of the Meadowhall shopping center in Sheffield, paying £360mn for a 50 per cent stake in British Land, and is also a major investor in listed London landlords such as Great Portland Estates.
“We are confident in the long-term value creation in the West End,” said Jayesh Patel, the fund’s head of UK real estate.
The £1.2bn joint venture is just one part of Grosvenor’s £4.8bn UK property portfolio, the majority of which comprises large holdings in the suburbs of Mayfair and Belgravia. Grosvenor will retain freehold ownership of the buildings, while the joint venture will hold long leases.
Although respected and highly valued, the core portfolio yields lower returns than riskier ventures. Grosvenor, which has a large agricultural business and overseas investments, said it would invest some of the proceeds in its expanding UK residential development lending business, which is developing residential projects across the country.
“It gives us a different return. It’s a much higher yield than the property. It’s a good balance for us,” Raynor said.
He said Grosvenor had made a strategic decision to bring in a partner to help “release some capital”, which was more attractive than other options such as loans. We are a very long term business. We are constantly thinking across generations. So our approach to debt is very conservative,” Raynor added.
Grosvenor chose to represent a mix of uses for the joint venture’s portfolio, with 45 per cent office space, 30 per cent retail and 10 per cent residential.
Mount Street is known for luxury shops and some of Mayfair’s most famous restaurants such as Scott’s, while Grosvenor Street has more office buildings.
The company will use the money to fund a £1.3bn 10-year development pipeline, which includes the maintenance of Grosvenor Square and a £500m redevelopment around South Moulton Street, near Bond Street station. Grosvenor partnered with Mitsu Fudosan on the South Moulton scheme.
