EUROPE - Pirelli Real Estate is targeting international pension funds with an opportunistic pan-European property fund it plans to launch early next year.

The Italian firm's €1bn fund will exploit the fall-out from consolidation within the real estate sector, notably the flight to quality, when it launches its acquisition drive in Q1 2009.

The fund will invest mainly in office and retail assets in Europe, largely covering Italy, Germany, and Eastern European countries, according to spokesman Pierangelo Bellini.

Fundraising for the vehicle will begin the second half of 2008.

Opportunistic funds focused on the Italian market have attempted to exploit a relative lack of transparency, by placing a focus on off-market deals, and supply-side constraints.

Cordea Savills justified the 20% target return on an Italian opportunistic fund it launched last year by arguing sellers are often public sector or corporates, rather than investors.

According to disappointing interim results published last week, Pirelli will increase its assets under management from €13bn to €18bn by the end of the year. But net income for Q1 was €11.6m, compared with €19m for the same period in 2007.

Leaving aside the opportunistic fund, the firm said it would focus on its core/core plus Italian portfolio, German residential, and domestic and Eastern European development projects for the remainder of 2008.

The firm claims the result will be an increase in assets under management from the current €13bn to €13-€14bn by the end of the year.

As it launched fundraising for the vehicle, Pirelli also said it would boost the management of its non-performing loans portfolio - a sideline to its real estate business - in a bid to improve its grading with credit agencies after it postponed the announcement of its three-year plan, citing the credit crunch. The firm is undergoing restructuring aimed at cutting costs by €40m.

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