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Grosvenor, the Duke of Westminster’s property company, has sold a £306 million stake in its historic Mayfair estate in London to the Norwegian oil fund as the owner seeks to reinvest in development and lending.
Norway’s $1.7 billion sovereign wealth fund will take a 25 per cent stake in a new joint venture worth around £1.2 billion, strengthening 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.
It is the largest sale to outside investors of the Mayfair estate, developed under the management of the Grosvenor family from the 1720s.
“This is hugely important to us,” said James Raynor, managing director of Grosvenor’s UK property division. “We thought about it for a long time. Ongoing management and monitoring were crucial.
It is also the Norwegian oil fund’s first significant new investment in London since 2018. The fund already holds a stake in Regent Street alongside the Crown Estate and last year increased its ownership stake in the Pollen Estate, located near Savile Row, where he first invested in 2014.
The fund also took full ownership of Meadowhall shopping center in Sheffield last year, paying £360m for British Land’s 50 per cent stake, and is a major investor in listed London landlords such as Great Portland Estates.
“We are confident in the long-term value creation inherent in the West End,” said Jayesh Patel, the fund’s head of UK real estate.
The £1.2 billion joint venture represents only part of Grosvenor’s £4.8 billion UK property portfolio, the bulk of which is made up of its significant holdings in Mayfair and Belgravia. Grosvenor will retain full ownership of the buildings, while the joint venture holds a long lease.
Although prestigious and highly regarded, the core portfolio generates a lower return than riskier companies. Grosvenor, who also has a major agricultural business and overseas investments, said he would invest part of the proceeds in his expanding UK residential development lending business, which finances residential projects across the country.
“It gives us a different type of return. Its yield is much higher than that of the estate. It’s a good balance for us,” Raynor said.
He said Grosvenor had made a strategic decision to bring in a partner to help it “free up capital”, which was more attractive than other options such as borrowing. “We are a very long-term business. We constantly think in generations. Our approach to debt is therefore very conservative,” added Raynor.
Grosvenor selected the joint venture portfolio to represent a mix of uses, with approximately 45 per cent office space, 30 per cent retail and 10 per cent residential.
Mount Street is known for its luxury boutiques 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 fund its 10-year £1.3bn development pipeline, which includes an overhaul of Grosvenor Square and a £500m redevelopment centered around South Molton Street, near the Bond Street station. Grosvenor partnered with Mitsui Fudosan on the South Molton project.
