Norges Bank Investment Management, the investment arm of the Norwegian sovereign wealth fund, has formed a long-term partnership with Shaftesbury Capital that sees it buy a 25% stake in the latter's £2.7 billion Covent Garden estate in London.
In a stock market announcement, Shaftesbury Capital said it has exchanged contracts for the sale of a 25% non-controlling interest in the estate to NBIM with Shaftesbury Capital retaining 75% ownership and management control. The transaction values the Covent Garden estate at £2.7 billion, in line with its independent property valuation by CBRE as at 31 December 2024, with expected gross cash proceeds of approximately £570 million. Completion of the transaction is expected to take place in early April 2025.
Covent Garden is centred around the iconic piazza in London's West End, the Market Building and surrounding streets, together with Seven Dials. It is a mixed-use portfolio of assets, with 74% of the property value represented by retail, and food and beverage and 26 per cent by office and residential.
The portfolio has a net initial yield of 3.6%, annualised gross income of £104 million and an estimated rental value of £134 million as at 31 December 2024. The portfolio covers some 220 buildings and over 850 units, across 1.4 million square feet (excluding 100,000 square feet of long-leasehold residential interests).
Shaftesbury Capital said the strategic and financial benefits of the-tie up include the creation of a strategic partnership with a leading global investor with a long-term investment horizon and knowledge of and established presence in London’s West End.
It also positions the business for "enhanced investment and expansion opportunities both within the Partnership and the broader group", and strengthens its balance sheet and financial flexibility.
Ian Hawksworth, chief executive of Shaftesbury Capital, said in a statement: “This investment by a leading global real estate investor demonstrates the quality of our portfolio. This partnership brings together two long-term investors who have a shared confidence in and ambitions for the growth prospects of the Covent Garden estate and the West End. "
Jayesh Patel, head of UK real estate at NBIM, said: “We are delighted to announce our investment into the Covent Garden estate, creating a long-term partnership with Shaftesbury Capital. This investment underscores our belief in the strength of London with the portfolio complementing our other high quality West End investments. Covent Garden is one of the world’s most recognised retail, leisure and cultural destinations and we look forward to supporting Shaftesbury Capital’s management team, with their strong track record of delivering the growth potential of this prime West End estate.”
Shaftesbury Capital confirmed the talks were in advanced state in a stock market announcement yesterday evening (19 March), as reported.
Shaftesbury Capital was created in 2023 via the merger of two of central London's largest landlords – Capco, which owned the Covent Garden estate, and Shaftesbury, which owned assets across Soho and Carnaby Street in the West End.
In full year results published in February, it said its portfolio value had increased to £5 billion. The FTSE-250 group’s property portfolio takes in 2.7 million square feet in Covent Garden, Carnaby, Soho, and Chinatown.
NBIM is the investment fund for Norges, Norway's £1.3 trillion sovereign wealth fund, and is focused on the long-term management of revenue from Norway's oil and gas resources.
It already owns a 23.5% stake in Shaftesbury Capital and has been on a major investment drive again in London real estate recently.
In January it signed a joint venture with Grosvenor to acquire a 25% stake in a mixed-use portfolio of predominately office and retail assets, around Grosvenor Street and Mount Street, Mayfair, as reported.
Analysts at Panmure Liberum responded positively to the announcement: "We view this as a positive step to de-leveraging the balance sheet, as [Shaftesbury] faced down a significant refinancing drag requiring it to grow EBITDA by 7% per annum to remain flat. We have consistently maintained that sector debt is not a balance sheet problem, but rather an income statement issue. This was particularly the case for [Shaftesbury Capital] as a result of its low yielding assets. We anticipate a positive market response to the announcement as net debt to EBITDA reduces from 11x to 7x."