Milan makes its mark on investor map

Milan has smashed last year's real estate investment volume in the first two months of 2015 thanks mainly to two big-ticket transactions.

The Northern Italian city saw €1.3 bn of commercial property trade last year, down from €1.7 bn in 2013, according to figures provided by RCA for PropertyEU's Top 100 Investors, Dealmakers & Investment Locations which was published in March this year.

Last year's volume is well and truly history as Milan basks in the attentions of foreign capital in the first few months of 2015, transaction data compiled by PropertyEU shows.

The largest transaction by far involved Qatar Investment Authority (QIA) taking full control of Milan's €2 bn Porta Nuova - one of the largest city regeneration projects in Europe. QIA already owned 40% of the scheme in central Milan and in February 2015 acquired the other 60% interest for an estimated €1.2 bn.

Porta Nuova is a mixed-use development in downtown Milan combining offices, retail and residential. It provides a total of 290,000 m2 of space across three sections, Varesine, Isola and Garibaldi, located near Milan's central station. The office element was 80% let at the time of QIA taking control.

The vendor was a consortium made up of asset manager Hines Italia sgr's European Development Fund, Italia Core Opportunity Fund and MontePaschi Hines Real Estate Crescita funds, as well as Italian insurance company Unipol Sai and property companies Coima and Galotti.

The mega transaction came as QIA and US-Canadian investor Brookfield won the long-running battle to control the Canary Wharf office estate in London.

Also in February, Swiss-based asset manager Partners Group bought two prime office properties in Milan for €233 mln. The vendor of the two-asset Milan Prime Offices (MPO) fund was Italian closed-end real estate vehicle Unicredito Immobiliare Uno. Partners Group said the two buildings in Via Monte Rosa and Viale Sarca would provide high-quality cash flows through long-term lease contracts with ‘excellent’ tenants.

Fabian Neuenschwander, senior real estate professional at Partners Group, said: ‘This acquisition perfectly suits our investment strategy to structure non-standard liquidity solutions to satisfy investors’ desire for liquidity and to buy high quality assets below replacement costs in markets with strong fundamentals.’

Deal flow
Investor interest in Milan extends beyond QIA and Partners Group. In March, Hines Italia SGR - which is involved in many of the largest deals in the city - acquired the Energy office campus from UK industrial REIT Segro. Energy Park is a fully let, 61,400 m2 suburban office park located around 20 kilometres from the centre of Milan. The investment volume of €119 mln reflected a 5% premium to the book value of the asset at end-2014 and a net initial yield of 7.3%.

PropertyEU's Southern European correspondent Virna Asara broke the news in mid-March that Allianz Real Estate was selling a portfolio of 144 residential assets in Italy and was on the verge of inking the €50 mln acquisition of a 4,000 m2 prime retail asset in Milan.

Commenting on the group's strategy in the country, Allianz's Italian head Mauro Montagner said last week during the Mipim fair: 'To increase the performance of our portfolio, we have initiated the disposal of our residential assets in the country and we are currently in advanced procedures.' Nevertheless, the group has a 'clear strategy to grow in Italy', he added. 'The priority for us is to invest in the retail sector, either on the equity or the debt side,' he noted.

PropertyEU has estimated that M&G Real Estate – part of a UK insurance group – paid a similar amount to acquire high-street asset at Via Torino in Milan in its first deal in Italy for 10 years.

Unicredit HQ
The big deal everyone is waiting for is the sale of the Milan headquarters of Italian banking group Unicredit for an estimated €350 mln. Again, the ubiquitous Hines Sgr is believed to have tabled the highest bid.