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Grosvenor, the Duke of Westminster’s property company, has sold a £306mn stake in its historic Mayfair estate in London to the Norwegian oil fund as the landlord looks to reinvest into development and lending.
The $1.7tn Norwegian sovereign wealth fund will take a 25 per cent stake in a new joint venture worth roughly £1.2bn, adding to its large bets on the fortunes of London’s West End.
Grosvenor will maintain control and continue to manage the portfolio of 175 buildings around Mount Street and Grosvenor Street, including The Connaught hotel.
The deal is the largest sale to outside investors from the Mayfair estate, which was developed under the stewardship of the Grosvenor family beginning in the 1720s.
“It is incredibly significant for us,” said James Raynor, chief executive of Grosvenor’s UK property division. “We thought long and hard about this. The ongoing management and control was crucial.”
It also marks the first big new investment by the Norwegian oil fund in London since 2018. The fund already owns a stake in Regent Street alongside the Crown Estate, and last year boosted its ownership share of the Pollen Estate, located near Savile Row, where it first invested in 2014.
The fund last year also took full ownership of the Meadowhall shopping centre in Sheffield, paying £360mn for British Land’s 50 per cent stake, and is a major investor in listed London landlords such as Great Portland Estates.
“We have confidence in the long-term value creation inherent in the West End,” said Jayesh Patel, head of the fund’s UK real estate.
The £1.2bn joint venture is only one part of Grosvenor’s £4.8bn UK property portfolio, the bulk of which consists of its large holdings in the Mayfair and Belgravia neighbourhoods. Grosvenor will keep the freehold ownership of the buildings, while the joint venture holds a long lease.
Although prestigious and highly valued, the core portfolio yields a lower return than riskier ventures. Grosvenor, which also has a large agricultural business and overseas investments, said it would invest some of the proceeds into its expanding UK residential development lending business, which finances residential projects across the country.
“It provides a different kind of return for us. It is much higher yielding than the estate. That is a good balance for us,” said Raynor.
He said Grosvenor made a strategic decision to bring in a partner to help “release some capital”, which was more attractive than other options such as borrowing. “We’re a very long-term business. We’re constantly thinking in generations. So our approach to debt is very conservative,” added Raynor.
Grosvenor selected the joint venture portfolio to represent a mix of uses, with about 45 per cent office space, 30 per cent retail and 10 per cent residential.
Mount Street is known for its luxury shops and some of Mayfair’s best-known restaurants, such as Scott’s, while Grosvenor Street has more office buildings.
The company will also use the money to help fund its £1.3bn 10-year development pipeline, which includes an overhaul of Grosvenor Square and a £500mn redevelopment centred around South Molton Street, near Bond Street station. Grosvenor has partnered with Mitsui Fudosan on the South Molton scheme.
