Pirelli to launch EUR 1b European fund

Italian property giant Pirelli Real Estate plans to launch a EUR 1bn opportunistic fund for Europe. CEO Carlo Puri Negri said on Thursday that the company will start fundraising in the coming months. He added that the firm also intends to strengthen the management structure of its Non Performing Loans portfolios with a view to obtain an up-grade from the main rating agencies. Pirelli RE is already implementing a restructuring plan to improve profitability and boost operational efficiency, with the goal of saving up to EUR 40mln in costs.

'The European real estate industry - said the CEO of Pirelli RE - is going through a process of consolidation; thanks to our recognized expertise we believe we can benefit from the current flight-to-quality in which investment opportunities with the best risk/return profile are the favourites.'

Italy's largest property group said it expects weak first-half results in line with the general sector downturn, but added it is confident of an improvement in the second part of the year. The company forecast a flat Earnings before interest and taxes (EBIT) in 2008 compared to last year.

'Our strategy for 2008 foresees a focus on the core-core plus portfolios in Italy, and on residential in Germany and on development projects in large Italian and Eastern European urban centers,' Puri Negri said. The company expects assets under management to increase from EUR 13bn at present to EUR 17-18bn by the end of the year. It added that fund raising for the European fund and third-party portfolio mergers will bring in a total of EUR 6-7bn, of which EUR 4.6bn already in the process of being finalized. The company expects to carry out sales this year of up to EUR 2.5bn.

Rating firm Chevreux slashed its rating on Pirelli RE to underperform after the company decided to postpone the presentation of its three-year plan, scheduled for May 8, on the back of tightening credit conditions.