Norway’s oil fund places £306mn bet on Mayfair property

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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 a Norwegian oil fund as the landlord looks to reinvest in 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 big bet on the fortunes of London’s West End.

Grosvenor will retain control and continue to operate a portfolio of 175 buildings around Mount Street and Grosvenor Street, including The Connaught Hotel.

The deal is the largest sale to outside investors of the Mayfair estate, which was built under the stewardship of the Grosvenor family beginning in the 1720s.

“This is incredibly significant for us,” said James Raynor, chief executive of Grosvenor’s UK property division. “We have thought long and hard about this. Ongoing management and control was crucial.”

This marked the first major new investment Norwegian Oil Fund In London since 2018. The fund already owns a stake in the Crown Estate as well as Regent Street, and last year increased its ownership stake in the Pollen Estate, off Savile Row, where it first invested in 2014.

The fund also took full ownership of Sheffield’s Meadowhall shopping center last year, paying £360mn for a 50 per cent stake in British Land, 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, 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 its large holdings in the Mayfair and Belgravia neighbourhoods. Grosvenor will retain freehold ownership of the buildings, while the joint venture holds the long lease.

Although prestigious and highly valued, core portfolios offer lower returns than riskier ventures. Grosvenor, which has a large agribusiness and overseas investments, said it would invest some of the proceeds in its expanding UK Residential development loan businesswhich finances residential projects across the country.

“It provides a different kind of return for us. It is much more productive than estate. It’s a good balance for us,” Raynor said.

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 long-term business. We’re constantly thinking in generations. So our approach to debt is very conservative,” added Raynor.

Grosvenor selected the joint venture’s portfolio to represent a mix of uses, including approximately 45 percent office space, 30 percent retail and 10 percent residential.

Mount Street is known for its luxury shops and some of Mayfair’s most famous restaurants, such as Scots, while Grosvenor Street has more office buildings.

The company will use the money to help fund its £1.3bn 10-year development pipeline, which includes an overhaul of Grosvenor Square and a £500mn redevelopment centered around South Moulton Street near Bond Street station. Grosvenor has partnered with Mitsui Fudosan on the South Molton scheme.