Norges Bank acquires 25% stake in London’s Regent Street

Norges Bank Investment Management, on behalf of the Norwegian Government Pension Fund Global, has acquired a 25 percent stake in London’s Regent Street for £448 million from The Crown Estate, the property portfolio of the UK government. Norges Bank beat out three other overseas funds, which reportedly included Australia’s Future Fund, to land the trophy investment.

The new partnership, which is valued at £1.8 billion in total, incorporates all of The Crown Estate’s Regent Street properties. Norway's stake will be structured as a “layered” leasehold agreement on a 150-year lease, while The Crown will continue management of Regent Street and retain the freehold. The transaction represents an initial yield of around 4.5 percent, according to one analyst.

The Regent Street partnership is the Norwegian sovereign wealth fund’s first major transaction since being allowed to invest in real estate. In March, it was given the green light to invest up to $20 billion in real estate through direct property, equities and joint ventures, as well as investments in real estate fund partnerships.

Regent Street, London

There has hope among the investment management community that a good portion of the capital from large institutional players like Norway would flow to opportunity funds, but much of that capital instead seems to be going toward core assets through direct investments or club deals. 

Since 2002, The Crown Estate has been implementing a comprehensive £750 million regeneration programme on Regent Street to transform it into an international destination for business and retail, and thereby making it more attractive to potential partners. The Crown had been searching for an investment partner in order to rebalance its portfolio and reduce its exposure to central London.

In addition, the Crown Estate is not allowed to borrow so the deal is designed to free up capital for reinvestment. Indeed, as part of the partnership, Norges Bank has agreed to help The Crown fund a new £200 million retail and office development on the west side of Regent Street, known as W4. Planning on that project has begun and was approved by the local planning commission over the summer.