- Norwegian state pension fund in latest swoop for London real estate
- Implied price for 25% stake in Shaftesbury Capital’s Covent Garden assets meets last December’s valuation, despite ongoing investor scepticism
- Norges remains a major shareholder in several London-focused REITs
“Economic uncertainty, working from home and the ongoing online shift in retail sales all continue to work against the Real Estate Investment Trust (REITs) sector, which, over the past year, is the ninth-worst performer within 39 groupings that make up the FTSE 350,” says AJ Bell investment director Russ Mould.
“However, unloved can mean undervalued and Norges Bank Investment Management seems to agree, judging by its purchase of a 25% stake in the Covent Garden assets of Shaftesbury Capital, whose shares are on the rise as a result.
“The transaction looks interesting for three reasons. First, Norges has already struck a similar deal in 2025, with its £1.2 billion purchase of a one-quarter stake in Grosvenor’s portfolio centred around Mayfair and the West End of London. The second such swoop could be seen a long-term show of faith in London as a global city and the scarcity value of its prime real estate.
“Second, Norges is already the biggest investor in Shaftesbury Capital and is also a top ten shareholder in Great Portland, Derwent London, British Land, Land Securities and LondonMetric Property. Shaftesbury Capital was created in 2023 through the merger of Shaftesbury and Capital & Counties, and it is tempting to think that Norges has the potential to have a say in, or even drive, further merger and acquisition activity within the sector.
“Finally, the Norwegian sovereign wealth fund is paying £570 million for the 25% stake. This is in line with the £2.7 billion for the valuation of Shaftesbury’s entire Covent Garden portfolio provided by independent audit for December 2024. Covent Garden represented just over half of Shaftesbury’s £5 billion property portfolio, which carried a net valuation of £3.7 billion, or 200p a share, on a tangible basis, net of liabilities.
Source: Company accounts
“At the very least the Norges deal could help to put a floor under that valuation and flag up how the shares of major London commercial real estate developers and managers still trade at big discounts to NAV.”
Source: Company accounts, LSEG Refinitiv data
