Partners Group acquires prime Milan offices for €233m

Swiss-based asset manager Partners Group has bought two prime Milan office properties for €233 mln.

The vendor of the two-asset Milan Prime Offices (MPO) fund was Italian close-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.’

It is the second six-figure deal conclude by Partners Group in a month, following its purchase of the bulk of the BPT Optima portfolio across five Baltic cities for €163 mln.

Viale Sarca 222 is a converted industrial property that serves as the headquarters of tyre manufacturer Pirelli, while Via Monte Rosa 91, designed by Renzo Piano, is home to Italian publishing company Il Sole 24 Ore and PWC. The assets had a total market value of ?237 mln at end-June 2014.

Built in 2001-2003, the Pirelli head office provides 28,700 m2 of office space leased through the end of 2018 with an option to renew for a further nine years. The asset generates rents of ?€4.2 mln a year. The 86,000 m2 Monte Rosa complex is multi-let with Il Sole 24 Ore and PwC as main tenants and generates rents of ?€13.5 mln a year.

Asset manager Torre Sgr has been managing MPO since April 2009. It began seeking a buyer for the fund last November to benefit from a surge of investor interest in Italy.

It was believed the sale would attract a wide range of opportunistic investors looking for a bargain. Listed closed-end funds in Italy are highly illiquid and trade at an average discount of 38% to net asset value.

In UIU?'s case, the units were trading at a discount of roughly 43% at year-end 2013, an improvement compared to 2012 when they were trading at a discount of 54%. The fund, which counts over 25,000 unit-holders, was due to liquidate its assets by the end of this year, but has recently extended its life period for a further three years to end-2017

UIU was the target of a voluntary takeover offer in early 2014. International investment firm GWM and Eurocastle, the listed commercial real estate group controlled by New York-based Fortress Investment, launched a ?€120 mln bid for 40% of the company, representing a 13.1% premium over the prior closing price. By the end of the offer period in March, the two partners were able to take control of 18.3% of the fund?s units.

Torre is majority owned by US private equity group Fortress, with a 62.5% stake. Unicredit Group owns the remaining 37.5%.