Norway wealth fund boosts London holdings with Pollen Estate deal

Norway's sovereign wealth fund, the world's largest, bought a stake in an estate in London's Mayfair district for £343 million (HK$4.5 billion), expanding its property holdings in the British capital.

The fund bought a 57.8 per cent share in the 1.6-hectare Pollen Estate between Regent Street and Bond Street from the Church Commissioners for England, Norges Bank Investment Management said on Monday. The Crown Estate acquired a 6.4 per cent stake for £38 million.

"The purchase is according to the fund's strategy to build a global, but concentrated, real estate portfolio," spokesman Thomas Sevang said. "Our strategy is to focus our investments on a limited number of large global cities, where we invest in core retail and office properties."

The deal expands Norway's holdings in London after it agreed in 2010 to buy a US$772 million stake in Regent Street from the Crown Estate.

The Pollen Estate's 43 properties include office and retail space in a square also bordered by Conduit Street and Burlington Gardens that includes Savile Row. The properties will continue to be managed by the trustee company. The British Secretary of Defence-Greenwich Hospital also owns 10 per cent, while the Pollen family holds 25.8 per cent.

The estate was established in 1622 with 14 hectares of land including what is now Great Marlborough Street and Hanover Street in Mayfair.

Norway's US$890 billion wealth fund formed a real estate group last month to speed up property investments and is seeking to invest almost US$10 billion annually over the next three years. The fund owns properties on Times Square in New York and the avenue des Champs-Elysees in Paris, as well as in Boston, San Francisco and Zurich.

The Crown Estate in June reported record annual earnings as the value of its real estate reached £9.4 billion. British commercial property values have been climbing as an improving economy boosts demand for stores and office space. The Crown Estate said in June that every shop it owned in London's West End district was occupied.

Investors have been competing to buy London office buildings to gain from rising values and rents. The value of workspace in central London climbed 1.8 per cent in May from a month earlier, according to Investment Property Databank. Rents for the best office buildings in the City of London increased more than 9 per cent to £60 per square foot in 2013 and would rise to £65 this year, broker Knight Frank said.

Norway, Western Europe's biggest oil and gas producer, puts most of its petroleum revenue into the fund to shield the economy from overheating.

The fund returned 1.7 per cent in the first quarter and its real estate holding returned 2 per cent. It had 1.2 per cent of assets in real estate at the end of March.