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Grosvenor, the Duke of Westminster’s property company, has sold a £306mn stake in London’s historic Mayfair estate to a Norwegian oil fund as the landlord looks to reinvest in development and lending.

The $1.7tn Norwegian sovereign wealth fund is to take a 25 per cent stake in a new joint venture worth almost £1.2bn, adding to its big bets on London’s West End properties.

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 supervision of the Grosvenor family beginning in the 1720s.

“This is incredibly important for us,” said James Raynor, chief executive of Grosvenor’s UK property division. “We thought a lot about it. Ongoing supervision and control is essential. ”

It also marks the first major new investment in Norwegian oil fund in London since 2018. The fund already owns a stake in Regent Street next to the Crown Estate, and last year increased its stake in the Pollen Estate, located near Savile Row, where it first invested in 2014.

The fund last year also took full ownership of Meadowhall shopping center in Sheffield, paying £360mn for a 50 per cent stake in British Land, and is a major investor in listed landlords in London like 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 comprises its large properties in the neighborhoods of Mayfair and Belgravia. Grosvenor will retain freehold ownership of the buildings, while the joint venture will have the long lease.

Although prestigious and highly valued, the core portfolio provides a lower return than risky ventures. Grosvenor, which also has a large agricultural business and overseas investments, said it would invest some of the profits in its UK expansion. residential development lending businesswhich finances settlement projects across the country.

“It gives a different kind of return for us. It is higher yield than land. That’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 long-term business. We always think in generations. So our approach to debt is very conservative,” added Raynor.

Grosvenor chose the joint venture portfolio to represent a mixed use, with about 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 Scott’s, while Grosvenor Street has many office buildings.

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