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Grosvenor Properties, owned by the Duke of Westminster, has sold a £306m stake in its historic Mayfair estate in London to a Norwegian oil fund, as the owner looks to reinvest in development and lending.
Norway’s $1.7 trillion sovereign wealth fund will take a 25 per cent stake in a new joint venture worth around £1.2 billion, adding to its big bets on the fortunes of London’s West End.
Grosvenor will retain 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 of the Mayfair estate, which was developed under the Grosvenor family beginning in the 1720s.
“It’s very important to us,” said James Raynor, chief executive of Grosvenor’s UK property division. “We thought long and hard about this. Constant management and control was critical.
This also represents the first major 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 stake in the Bullen Estate, located near Savile Row, where it made its first investment. Once in 2014.
The fund also last year took full ownership of the Meadowhall shopping center in Sheffield, paying £360m for the 50 per cent stake of British Land, a major investor in listed London property owners such as Great Portland Estates.
“We have confidence in the long-term value creation inherent in the West End,” said Jayesh Patel, head of UK real estate at the fund.
The £1.2bn joint venture is just one part of Grosvenor’s £4.8bn UK property portfolio, the bulk of which consists of its large properties in the Mayfair and Belgravia neighbourhoods. Grosvenor will retain freehold ownership of the buildings, while the joint venture holds a long-term lease.
Despite its prestige and high value, the core portfolio yields a lower return than riskier projects. Grosvenor, which also 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 finances residential projects across the country.
“It gives us a different kind of return. It’s much higher than the return from an estate. That’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 very long-term business. We’re constantly thinking generationally. So our approach to debt is very conservative,” Raynor added.
Grosvenor selected the joint venture portfolio to represent a mix of uses, with approximately 45 percent office space, 30 percent retail, and 10 percent residential.
Mount Street is known for its upscale shops and some of Mayfair’s most popular 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 £500m redevelopment centered around South Molton Street, near Bond Street station. Grosvenor has partnered with Mitsui Fudosan on the South Molton scheme.