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Grosvenor, the Duke of Westminster’s property company, has sold a £306m stake in its historic Mayfair estate in London to a Norwegian oil fund as the landlord looks to reinvest in development and lending.
Norway’s $1.7 trillion sovereign wealth fund will take a 25 percent stake in a new joint venture worth roughly £1.2 billion, adding to its big bets on the fortunes of London’s West End.
Grosvenor will retain control and continue to manage 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 developed under the leadership of the Grosvenor family in the early 1720s.
“It’s incredibly significant for us,” said James Raynor, chief executive of Grosvenor’s UK property division. “We thought about this for a long time. Constant management and control were key.”
It also marks the first major new investment by Norwegian Petroleum Fund in London since 2018. The fund already owns a stake in Regent Street next to the Crown Estate, and last year increased its ownership stake in the Pollen Estate, located near Savile Row, where it first invested in 2014.
The fund also took full ownership of Sheffield’s Meadowhall shopping center last year, paying £360m 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, head of the UK property fund.
The £1.2 billion joint venture is just one part of Grosvenor’s £4.8 billion UK property portfolio, the bulk of which consists of its large properties in the Mayfair and Belgravia districts. Grosvenor will retain the freehold of the buildings, while the joint venture has a long-term lease.
Although prestigious and highly valued, the core portfolio yields lower returns than riskier ventures. Grosvenor, which also has a major agricultural business and overseas investments, said it would invest some of the proceeds in its UK expansion residential construction lending operationswhich finances housing projects across the country.
“It gives us a different kind of return. It is much more profitable than 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 “free up some capital”, which was more attractive than other options such as borrowing. “We are a very long-term company. We constantly think about generations. So our approach to debt is very conservative,” Raynor added.
Grosvenor has selected a joint venture portfolio that will represent a mix of uses, with around 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 most famous restaurants, such as Scott’s, while Grosvenor Street is home to more office buildings.
The company will also use the money to help fund its £1.3bn 10-year development plan, which includes an overhaul of Grosvenor Square and a £500m redevelopment around South Molton Street, near Bond Street station. Grosvenor has partnered with Mitsui Fudosan on the South Molton project.
