Union Investment has marked its entry into the Italian office market with the acquisition of a building in Milan from the Qatar Investment Authority (QIA).

The German real estate investor, on behalf of its open-ended Unilmmo Deutschland real estate fund, has bought the Piazza San Fedele 1-3 office asset from the Coima-managed QIA Italian Property Fund, without disclosing any financial details.

IPE Real Asset understands that the Piazza San Fedele building was sold for just over €200m.

Piazza San Fedele, which dates to 1872, was originally home to the famous Teatro Manzoni theatre. The historic building located in the Duomo area, close to Milan Cathedral and La Scala opera house, is undergoing a refurbishment and will be leased to luxury goods brand Bottega Veneta upon completion of the redevelopment in the fourth quarter of the year.

Following the completion of the Piazza San Fedele transaction, Coima will continue to manage the asset for Union Investment through a new investment vehicle created to invest in ”prime sustainable assets” in Italy.

Gabriele Bonfiglioli, Coima’s CIO, said: “The sale of this historic office building following a sustainable refurbishment represents the most significant transaction in the Milan office market this year.

“The deal confirms the continued strong demand from international tenants and investors for future-proofed sustainable buildings in central locations with strong amenity offerings.”

The QIA Italian Property Fund bought Piazza San Fedele 1-3 in 2018. The fund currently holds a portfolio of six properties in Milan.

Bonfiglioli said that the acquisition represents the conclusion of its business plan for the asset, with an internal rate of return of more than 18%.

“The transaction also represents Union Investment’s first move into the Italian office sector and the start of a partnership with Coima aimed at expanding the portfolio with additional acquisitions.”

Martin Schellein, the head of investment management Europe at Union Investment, said: “As Italy’s main commercial centre and one of the world’s leading fashion and design capitals, Milan offers excellent conditions for investments in the office sector.

“With its prestigious location in the historic city centre, high sustainability standards and long-term lease to Bottega Veneta, Piazza San Fedele 1–3 is the perfect first investment for our anticyclical entry into the Milan office market.”

Union Investment said the acquisition is part of the international diversification of the UniImmo Deutschland fund’s real estate portfolio. 

Coima was advised by Shearman & Sterling and Maisto & Associati, while Union Investment was advised by DILS, DLA Piper, McDermott and Aecom.

To read the latest edition of the latest IPE Real Assets magazine click here.